Well, the Congress is in power today and has the job of completing the 2001 investigations and ensuring that action is taken against those who manipulated the capital market. But its record is already fairly patchy. On the one hand, it seems determined to move against Ketan Parekh, whose reckless trading caused a loss of over Rs 888.25 crore at Madhavpura Mercantile Cooperative Bank (MMCB) and cost thousands of small depositors their savings. His cronies Mukesh Babu and Shirish Maniar and owe another Rs 225.63 crore and Rs 19 crore respectively to MMCB. In addition, Parekh owes Rs 124 crore to Bank of India (BOI), Rs 267 crore to the defunct Global Trust Bank and probably Rs 1,000 crore to various friendly companies.
Yet, there is a clear unwillingness to pursue the scamster. The CBI has been dragging its feet over a non-bailable warrant issued against Parekh over a week ago by the special CBI court. It is almost as though regulatory and investigative agencies are getting signals from the government that the scam investigation is not important. For instance, the Securities and Exchange Board of India (Sebi) is also doing its bit to bungle investigations relating to Scam 2001. It recently lost the case against First Global Securities mainly because it failed to complete its investigation and pass final orders within a specified time. The Securities Appellate Tribunal (SAT) did not even go into the merits of several serious charges against the firm.
A 1999 case of a preferential allotment of Himachal Futuristic Communications Ltd (HFCL) with clean loans from Global Trust Bank to First Global was detailed in the JPC report but never pursued. Last week, BJP leader Arun Jaitley told Parliament that the Congress Party president had asked the finance minister to help First Global. This seems to have happened before the SAT judgement cleared First Global. Now, Sebi is dragging its feet over filing an appeal before the Supreme Court and has sought legal opinion before deciding its course of action.
This lethargy is in sharp contrast to the alacrity with which it pursued another bungled investigation, against fund manager Samir Arora (formerly of Alliance Mutual Fund), where again Sebis action was thrown out by SAT. Another case where Sebi has been curiously reluctant to initiate action is that of Ketan Parekhs crony Mukesh Babu Securities. Sebi acted against the firm only after this newspaper reported that the firm, which had made no repayments to Madhavpura Mercantile Bank, continued to operate as an empanelled broker for institutions such as UTI. But Sebis belated action against the firm has also not been able to stand the test of SAT appeal and its action has been stayed in the GTB case. The firm still owes a couple of hundred crore rupees to MMCB and the bank depositors are still living in the hope that they will some day recover their savings.
While in power the Congress appears complacent about regulatory slackness
As if on cue, signals are out that scam investigations are not important
While being in power the Congress may be complacent about regulatory slackness. We are in the middle of another powerful bull run. While there is no sign of a scam today, the FII buying has created the right sentiment for tricksters to turn the small and mid-cap segments into their happy hunting ground. Each time Sebi mishandles an investigation or the appellate body creates a precedent by letting off brokers who owe the system, it is laying the ground for creating new scamsters who have even less to fear from investigative agencies.