Kathmandu: There is a popular Nepali proverb: “At the sight of wealth, even Lord Shiva opens his third eye.” This adage perfectly describes the conduct of billionaire businessman Raj Bahadur Shah. Despite being a top taxpayer frequently honoured by the government, Shah has been implicated in multi-billion-rupee stock market scams.
Five years after being penalized for the illegal sale of Himalayan Distillery shares, Shah is once again under investigation for a major financial scandal. The Securities Board of Nepal (SEBON) has recommended action against Shah and other high-profile businessmen after discovering that he misappropriated funds from Himalayan Reinsurance to purchase shares on credit under his own name.
Alongside “Liquor King” Raj Bahadur Shah, prominent businessmen Deepak Bhatta and Sulabh Agrawal are also under the scanner for money laundering and the alleged misuse of funds from various public companies, including Himalayan Reinsurance.
SEBON has submitted a report to the Central Investigation Bureau (CIB) of the Nepal Police, recommending criminal prosecution against Shah, who is the Managing Director of Jawalakhel Group of Industries. The regulator has called for a fine and a prison sentence of up to two years for his involvement in financial irregularities.
CIB officials confirmed that investigations are moving forward based on SEBON’s findings. It was discovered during the probe that Shah purchased nearly a billion rupees’ worth of shares without actually paying for them.
“We were already conducting a discreet investigation into the misuse of Himalayan Reinsurance funds for share purchases. Several businessmen were on our radar. SEBON’s report has provided further evidence against them in this case,” a CIB source told Clickmandu. “The investigation is now gaining momentum.”
According to the report prepared by a committee led by SEBON Executive Director Rupesh KC, Shah owes Bhrikuti Stock Broking (Broker No. 55) a staggering Rs 897,097,346.71 for Nepal Reinsurance (Nepal Re) shares purchased on credit. He has yet to settle the payment for shares bought between late 2023 and mid-2024.
“The report reveals that Raj Bahadur Shah purchased 1,051,204 shares of Nepal Reinsurance through Bhrikuti Stock Broking for a total of Rs 1.418 billion, but only paid Rs 525 million of that amount,” the report states.
It appears that Bhatta and Agrawal formed a syndicate to manipulate Nepal Re’s stock price for profit, with Shah as an active member
The investigation found that Shah failed to deposit the required funds for the purchase. Despite his failure to provide collateral or settle the balance, the brokerage allowed him to trade beyond his limits and even credited the shares to his account.
SEBON has forwarded the case to Police Headquarters for further investigation, citing violations of Sections 94, 95, and 98 of the Securities Act, 2006, and recommending action under Section 103 (3).
It appears that Bhatta and Agrawal formed a syndicate to manipulate Nepal Re’s stock price for profit, with Shah as an active member. Following Agrawal’s plan, they allegedly created a “pool fund” of Rs 2.5 billion to buy and “corner” shares, artificially driving up the price.
SEBON’s investigation highlights a two-fold crime: the misappropriation of Himalayan Reinsurance funds to fuel the manipulation, and the criminal failure to pay the broker for the shares purchased. By securing trading limits without collateral and receiving shares without payment, the group successfully manipulated Nepal Re’s stock price, deceiving both investors and the market.
Shah was also found to be involved in “circular trading” of Himalayan Life Insurance shares. Under a scheme orchestrated by the then-Chairman of Himalayan Life, Sulabh Agrawal, Shah purchased 125,111 shares for Rs 165.6 million. Simultaneously, it was discovered that while Agrawal’s wife, Subhi Agrawal, sold 309,936 shares, Shah purchased an equivalent volume for Rs 407.3 million.
The report concludes: “In collusion with Bhrikuti Stock Broking, Shah artificially inflated securities prices, committing offences under Sections 96 (market manipulation) and 98 (fraudulent transactions) of the Securities Act, 2006.”
Under Section 101 of the Act, such offences carry significant penalties. Violating Section 96 can result in a fine of Rs 50,000 to 175,000, up to one year in prison, or both, along with compensation to any affected parties. Violating Section 98 carries a fine of Rs 100,000 to 300,000, up to two years in prison, or both, plus restitution for losses caused to victims. Following the CIB investigation, billionaire Raj Bahadur Shah faces the real possibility of a prison sentence and heavy fines.
Raj Bahadur is the son of the prestigious businessman Bijaya Kumar Shah. While the elder Shah earned a stellar reputation for his contributions to the development of Nepal’s liquor industry, often stating he even paid political donations from tax-paid income, his son’s obsession with quick wealth has tarnished that legacy.
International embarrassment for multinational partners
Shah holds a 15 percent stake in Gorkha Brewery, which is majority-owned by the multinational giant Carlsberg. Shah recently became Carlsberg’s local partner after merging Raj Brewery with Gorkha Brewery and currently serves as the Chairman of Gorkha Brewery.
His involvement in this stock market scandal is not just a personal failure; it risks damaging the country’s international reputation by painting Nepali businessmen as unethical. Generally, multinational corporations avoid partnerships with controversial figures. If Shah is found guilty, there is a strong possibility that Carlsberg will terminate its partnership with him.
Despite having previously faced consequences for insider trading, Shah appears to have learned nothing, mired once again in an even larger scandal. The fact that one of the country’s highest taxpayers has resorted to illegal means to amass wealth has further soured the public’s perception of the business community.
A troubled history: Penalized for illegal share sales
This is not Shah’s first brush with the law. In 2020, SEBON penalized his wife, Rahisha Shrestha Shah, for the illegal sale of shares. She was fined Rs 75,000 for selling shares worth Rs 272.6 million in Himalayan Distillery while serving as a director in a direct violation of the Securities Act.
While Shah faced scrutiny five years ago through his wife’s insider trading, the current investigation reveals his direct involvement in a much larger financial conspiracy
Under the law, any director or executive penalized under Section 108 is barred from holding a similar position in any listed company for ten years. Consequently, Rahisha was banned from the boards of listed organizations for a decade. The brokerage was also pulled up for failing to maintain proper records and violating Anti-Money Laundering (AML) directives.
Furthermore, Rahisha had violated corporate governance guidelines. Having resigned as a director representing the founder shareholders on September 4, 2019, she was legally barred from selling her shares for one year. However, she ignored the regulations and sold 213,183 shares before the lock-in period ended.
While Shah faced scrutiny five years ago through his wife’s insider trading, the current investigation reveals his direct involvement in a much larger financial conspiracy. If the allegations are proven, Shah could face up to three years in prison along with substantial financial penalties.
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