The Congress accused Divestment Minister Arun Shourie, the Securities and Exchange Board of India and the stock exchanges of "actively misleading" investors, and demanded an inquiry into the overcounting of subscriptions to all book-built public issues.
Referring to a Business Standard report on the issue on Friday, a Congress statement said "this is a case for Section 420 of the IPC."
"We want an inquiry into the matter so that the guilty can be brought to book," said Congress spokesperson Kapil Sibal.
The Congress argued that the hype over the issues being oversubscribed several times led to two things. One, investors felt they would get less shares due to the oversubscription, and so bid for more shares. Second, they were misled into believing the stocks were highly sought after, and so quoted higher prices.
The Congress statement gave the example of a hypothetical book-building exercise to show how the overcounting was done, and showed that the overcounting was of the order of four times.
Overcounting happens when a single shareholder gives multiple options. For instance, a shareholder bids for 3,000 shares at Rs 80 or below, 2,800 shares at Rs 90 or below, 2,600 shares at Rs 100 or below, 2,500 shares at Rs 110 or below, and 2,400 shares at Rs 120 or below.
So, while the stock exchanges simply add up the bids and come up with a figure of 13,300 bids, actually, the maximum number of shares bid for is 3,000.
"Oversubscription figures drive demand in a public issue. Small investors wait to see how the subscriptions are coming in and then place their bids. They are misled on several counts," the Congress said.
The party went on to allege that the "BSE, in connivance with Sebi, has obviously been doing the government's bidding".
The party said this was similar to the situation at the Calcutta Stock Exchange in 2001, when due to the "so-called software bug", broker margins were miscalculated to lower levels.
"It is interesting how each of these so-called bugs is always to the advantage of interested parties," it said.
The Congress also made a dig at the Sebi meeting in which the Intelligence Bureau chief was asked to attend, and added that the "fraudulent oversubscription figures were only part of a systematic campaign to mislead investors."
The party said rumours were floated that Warren Buffett had invested in the Oil and Natural Gas Corporation issue and this was not denied by either the divestment minister or the issue managers "who were specifically asked about it."
The Congress said the issues should be cancelled as they were based on fraud and deception and attracted "the provisions of the Sebi Fraudulent and Unfair Trade Practices Regulation, 1995, against Sebi, the BSE and the ministries concerned."
