Financial scams: India

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This is a collection of articles archived for the excellence of their content.


1945- 2018: a brief history

Dhananjay Mahapatra, Niravs don’t surprise us, for scam is India’s seventh season, February 19, 2018: The Times of India

India, according to the Hindu calendar, experiences six seasons — Vasant (spring), Grishma (summer), Varsha (monsoon), Sharad (autumn), Hemant (pre-winter) and Shishir (winter). ‘Ghotala’ (scam) deserves to be added as the seventh season as Indians have perennially experienced it, even before the country gained independence.

Believing in Netaji Subhash Chandra Bose’s grit, bravery and ability to free the country from colonial rule, commoners donated personal ornaments and jewellery to the Indian National Army (INA). Immediately after Bose’s death in 1945, the INA war chest went missing thanks to the greed of some of the freedom fighters. In the 1950s, the Jawaharlal Nehru government ignored repeated recommendations for a probe into embezzlement of INA’s wealth. One prime suspect became the PM’s media adviser.

Even before India became a republic, the then Indian high commissioner to the UK V K Krishna Menon ignored protocol and signed a Rs 80 lakh contract with a foreign firm for supply of 200 jeeps to the Indian Army. The contract money was paid up front. But only 155 jeeps were delivered. Nehru stopped the probe and then home minister G B Pant closed the file. Menon went on to become the defence minister under Nehru.

The foundation for scams was welllaid with political collusion. Irrigated by many bountiful seasons of politician-bureaucrat-police-criminal nexus, scams have spread to every field.

Form coal block allocations to cashfor-vote in Parliament, Jain hawala to JMM MPs bribery, Bofors payoff to fodder, Satyam Computers to Sarada chit funds; Harshad Mehta to C R Bhansali to Ketan Parekh, spectrum to Commonwealth Games, PDS to rice export, Vijay Mallya to Nirav Modi — all these scams make us remeber Kabir’s famous doha, “Do patan ke beech, sabut bacha na koi (between the two stones, no one survives)”.

Why has no regime been free from scams? Why have scams become a seasonal happening? Why has no government been able to detect even the big fish?

The PV Narasimha Rao government in 1993, set up a committee headed by then home secretary N N Vohra “to take stock of all available information about activities of crime syndicates/mafia organisations which had developed links with, and were being protected, by government functionaries and political personalities”. Other members of the committee were the revenue secretary, the Intelligence Bureau director and the CBI director.

It was promised that based on the committee’s recommendations, the gover nment would deter mine the need, if any, to establish a special agency to regularly collect infor mation and pursue cases against such elements.

On October 5, 1993, the committee submitted its damning findings, most of which were known to people. Vohra committee’s report painted a dismal picture and said the mafia network “is virtually running a parallel government pushing the state apparatus into irrelevance”.

The Supreme Court in Vineet Narain case on December 18, 1997, said, “The report is significant for the dismal picture of the existing scenario which discloses a powerful nexus between the bureaucracy and politicians with mafia gangs, smugglers and the underworld. The report of the Vohra committee is the opinion of some top bureaucrats and it confirmed our worst suspicions, focusing the need of improving the procedure for constitution and monitoring the functioning of intelligence agencies. There is, thus, no doubt that this exercise cannot be delayed further.” Nearly 25 years have passed since the Vohra committee submitted its report about the state of affairs in governance of India and the parallel system run by mafia in nexus with politicians, bureaucrats.

The Vijay Mallyas and Nirav Modis have confirmed to us that nothing has changed in the quarter century since the Vohra committee report. No government has been able to stop the onset of the seventh season of scam, which with periodic regularity continues to wreak havoc on the economy.

Regularity of scams has taken the sheen off lofty words used regularly by the SC — “be you ever so high, the law is above you”. Scamsters have seldom been punished as the machinery takes years to gather evidence and courts take still more years to examine the evidence.

In 2003, the Centre had set up Serious Fraud Investigation Office. It comprised officers from taxation, customs, central excise, information technology, company law, capital markets, banking, investigation, police, forensic audit etc and it started functioning from October 2003.

What a waste of such a talent pool? Has the government fastened accountability on SFIO? How could the Mallyas and the Modis escape its lenses? We must also fasten accountability on Intelligence Bureau, Department of Revenue Intelligence and the Central Bureau of Investigation, the specialised agencies which were created to keep India’s economy and citizens protected against scamsters.

On Ram Jethmalani’s petition against black money, an SC bench headed by Justice B Sudershan Reddy on July 4, 2011, had summed up the situation, “Increasingly, on account of ‘greed is good’ culture that has been promoted by neoliberal ideologues, many countries face the situation where the model of capitalism that the state is compelled to institute, and the markets it spawns, is predatory in nature. From mining mafias to political operators who, all too willingly, bend policies of the state to suit particular individuals or groups in the social and economic sphere, the raison d'etre for weakening the capacities and intent to enforce the laws is the lure of the lucre.

“Even as the state provides violent support to those who benefit from such predatory capitalism, often violating the human rights of its citizens, particularly it's poor, the market begins to function like a bureaucratic machine dominated by big business, and the state begins to function like the market, where everything is available for sale at a price.”

Some notable financial scams in India

India Today Lax regulation and pathetic conviction have seen a surfeit of major scams since the 1992 Securities Scandal

Securities scandal, 1992

Harshad Mehta and other brokers used forged bankers’ receipts and manipulated banks to siphon off money. This money—to the tune of Rs 4,100 crore—was used to rig the stock market.

CRB Capital, 1996

Chairman C.R. Bhansali was accused of using CRB’s accounts in SBI to siphon off Rs 1,031 crore using refund warrants.

Plantation, 1998

Companies raised money from the public, offering them astonishing returns for investing in plantation companies.

US 64 scam, 2000

Companies used money and political influence to get the Unit Trust of India to invest in dubious scrips leading to a loss in the NAV of Unit 64 and a bailout of over Rs 3,300 crore.

Ketan Parekh scam, 2001

One-time Harshad Mehta acolyte Ketan Parekh (left) used over Rs 3,800 crore from cooperative and nationalised banks to rig share prices.

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