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Political Scams In India

Corruption is a serious concern in countries all around the world. With the passing time there are also changes in the forms and ways of corruption. Though it is a world-wide problem, it reached alarming levels in India. Not only that it affected every level of government in our country but it is in a stage of rapid growth especially in the political activists and functionaries.

The presence of widespread public cynicism against it, the recognition of corruption as a fact of life by citizens and the impression that those guilty of political corruption in public life, inevitably go scot-free and more 'power, status and riches' have led to a situation in which even the most deterred attempts to tackle venality have failed miserably in the process.

Talking about corruption and condemning others of corruption has become a favourite pastime among Indians. But still very little efforts are made to curb it. The government is very much aware about the existence of the evil in our society, however, no action is taken against it.

In the 1960s Gunnar Myrdal, the earliest students of the subject, highlighted the need to examine the folklore of corruption and the extent to which in India it reflected `a weak sense of loyalty to organised society'. If there were `a general asociality that leads people to believe that anybody in a position of power is likely to exploit it in the interest of himself, his family or other social groups to which he has a feeling of loyalty ...', Myrdal insisted, `people's beliefs about the corruptibility of politicians and administrators would be in part a reflection of what they would like to do, given the means'.[1]

Corruption in 1960's was like a shoot growing but by the 1980's and 1990's it grew up into a fully grown plant, moving into the heart of national and provincial political institutions. Charges of corruption have become a common ingredient consumed by almost every political figure. But the most astonishing feature here is that many people, in India, consider being corrupt as some feature that is necessary to survive in politics these days. India's rank on the Corruption Perception Index slipped from 80 to 86 in 2020.

In my essay I talked about various scams that took place in India since Independence and analysed the role of political personnel in them. An attempt is also made to analyse the dimensions of these scams and also to highlights the efforts made by the government and investigation agencies to investigate them and the extent to which the guilty are held.

Political Scams In India

Since independence many incidents shaped the form of Indian politics. Corruption has passed through various stages like obtaining legitimacy, everyone's indulgence and shapeless defence. Very often political corruption in India takes in collusion with the bureaucracy in the shape of huge kickbacks in big national and international deals which go undetected and unchecked for obvious reasons[2].

As explicated by the famous Santhanam Committee, "political corruption includes all forms of `improper or selfish exercise of power and influence attached to a public office or to the special position one occupies in public life"[3].

The constitutional legacy of the colonial government, with its refined sense of constitutional ownership of the position of elected officials and bureaucrats, strongly shaped what was seen as a proper or unselfish exercise of power and authority in public life. The official philosophy of public morality popularised by M. further reinforced this legacy.

During the nationalistic struggle before independence, M.K. Gandhi. Together, these two factors succeeded in establishing a relatively exclusionary political corruption discourse that ultimately had the repercussions of isolating political corruption from 'above' while at the same time stressing its 'behind' corrosive, degenerative and detrimental impact. Thus, while the misuse of public office has caused the current scandals, the zeal with which the anti-corruption movement is now being pursued has raised fundamental concerns about the legitimacy of political corruption as a legal term.

To understand better the contemporary ambivalence of the political corruption, we shall discuss how it was institutionalised in the Nehruvian Era. The following are a brief recollection of the scams that happened right after independence.

Mudgal Affair:
A member of the provisional parliament, in the first of the events immediately after Independence, H.C. Mudgal, on behalf of the Bombay Bullion Association in Parliament on a payment of Rs. 20,000, was accused of agreeing to canvas support and rendering propaganda. The accusation was refuted by Mudgal. A Parliament Committee under the chairmanship of T.T. Krishnamachari was named t o investigate the allegations.

The Committee held that the actions of Mudgal were "derogatory to the dignity" of Parliament and inconsistent with the expectations that Parliament is entitled to demand from its members. On 25 July 1951, the report was submitted to Parliament.The committee's 387-page paper, sent in August 1951 to Parliament, speaks for itself.

In conjunction with some transactions with the Bombay Bullion Association (BBA), the committee was to examine Mudgal's actions and practises, which included canvassing support and propaganda in Parliament on matters such as option company and stamp duty and reception of financial or business benefits from the BBA; and to consider and report whether Mudgal's behaviour was negative. 24 witnesses were investigated by the committee, and Mudgal was found guilty.[4]

On April 20, 1951, Jawaharlal Nehru presented Mudgal with the government nominee's report on the BBA and Mudgal's offer to receive a deputation from the president and the directors of the BBA in a letter to the finance minister, and sought his clarification. Finance Minister C.D. Deshmukh refused the appeal from Mudgal, indicating that he should be approached directly by the BBA.

Mudgal denied that he had sought Rs.20,000 from the BBA, and said that whatever he had received (he acknowledged he had received Rs.2,700) was linked to his professional work and there was nothing underhanded about it.

The committee found that he felt it fitting to put his services at the discretion of the business sector by a circular to around 200 business companies shortly after he was elected MP, and it was titled "Your spokesman in the Parliament - H.G. Mudgal" The committee expressed its dismay that it had not been informed of its target. However, Mudgal's lawyer before the committee argued that there was nothing wrong with the attempt to approach his constituents, but he was not chosen as a leader of the corporate group.

The committee was pleased that on and after March 9, 1951, all the dealings between the BBA and Mudgal Publications (a business owned by Mudgal) were on the basis that whatever services Mudgal Publications might provide them with, Mudgal would also provide them with services in exchange for a consideration paid to Mudgal Publications. The committee clarified that the services to be offered by Mudgal were to include asking concerns in Parliament, moving an amendment to the Forward Contracts (Regulation) Bill (on which the BBA had some reservations), and scheduling ministerial interviews[5].

In his defence, Mudgal had argued that everything he was alleged to have done was as an editor, publicist or proprietor of Mudgal Publications in his professional capacity and that it had no relation to his capacity as an MP. It was a normal business transaction completely above board, and in the name of Mudgal Newspapers, the cheques were received, crossed to order, he told the Chamber. He said that his sincere concern about the problem influenced the questions he raised in Parliament. H.G. Mudgal immediately resigned his seat. The report was submitted to Parliament on 25 July 1951. No further action was taken.

Nevertheless, two of the members of the committee - Vaidya and Shah - dismissed this claim, stating that if some monetary consideration was approved by any member, except for professional services, in relation to matters before Parliament for disposal, it would not be compatible with the conception of the codes of conduct to be required of MPs.

It is debatable whether accepting an MP's consideration for an issue would constitute a crime, attracting criminal prosecution under the law - as even the ad hoc committee formed in 1951 had not assumed so.

If the judgement of the Supreme Court in the case of Jharkhand Mukti Morcha (1998) is any indication, those who succeeded in raising questions in Parliament after gaining consideration could not be tried on account of the immunity provided by Article 105(2) of the Constitution from any prosecution in any court with regard to anything said or any vote given in Parliament.

No doubt, once the case hits the courts of law, the evidentiary validity of the tapes concerning the MPs must be proved, for those MPs who were unsuccessful in asking the questions for which they obtained any attention and those MPs who sought commissions to approve funds under the MP Local Area Development Scheme may be prosecuted under the Corruption Prevention Act.

Mudgal was a case of real conflict of interests in his positions as a publicist and as an MP; the new "cash for query" scam is a case of media trapping, of fictional calls for legitimate attention, in the public interest.

It could be legitimate to inquire, in cases of incarceration, whether the MPs involved were prepared to commit the crime they are convicted of in order to prove their guilt or innocence.

Jeep Scandal Case:
In independent India, this was the first financial scandal involving an amount of around Rs. 216 crores (about $ 500 million at the exchange rate at the time), as the country was the first High Commissioner to the UK. Krishna Menon, on behalf of the government, signed an unfulfilled but entirely paid-up deal. Mr. Menon haas has purportedly placed an order for these jeeps from a foreign company without following the due procedure.

These jeeps were to be utilised in Hyderabad and Kashmir in turbulent areas. The first incident included the procurement of 200 jeeps for which a complete payment of 80 lakh was made, but only 155 jeeps were produced. Of 45 jeeps, for which about 20 lakh had been paying, the government was robbed[6]. The reluctance of Menon to face an investigation triggered a public outcry . However, despite this, no action was taken against Menon, who subsequently became Minister of Defence of India in the Cabinet of Nehru.

Mundhra Deal 1957[7]:
The Mundhra Agreement introduced crucial issues relating to the extent of the powers of independent credit agencies, the position of civil servants and, above all, Parliament's ministerial duty. In 19S7, the acquisition of the weakening shares of the Mundhra Companies by the nationalised Life Insurance Company drew substantial critical public interest. A Commission of Inquiry, led by Chief Justice M.C. Chagla of the Bombay High Court, was asked to investigate the question posed by Feroze Gandhi, a member of parliament. Chagla maintained the theory of Ministerial accountability and indicted H.M. for the lapses on the part of the then Minister of Finance, T.T. Krishnamachari. Patel, the Chief Secretary, and the President of the LIC. All three had to withdraw from their respective jobs as a result of the enquiry.

Haridas Mundhra, an industrialist and stock speculator based in Calcutta, directed the government-owned Life Insurance Company (LIC) to spend Rs 1,26,86,100 (one crore, twenty-six million, eighty-six thousand and one hundred) in the shares of six of his distressed firms. This investment was carried out under political pressure and without the investment committee of LIC being consulted.

In the meantime, Feroze Gandhi, son-in-law of then-Prime Minister Jawaharlal Nehru and a Member of Parliament for the Indian National Congress, called for a clarification of the decision of the LIC. There was a well-known divide between Mr. Gandhi and his father-in-law that sensationalised the matter when Feroze Gandhi discussed the issue in Parliament and charged the Senior Secretary of Finance, H.M. Patel, and the Minister of Finance, T.T. Krishnamachari, with influencing the expenditure of LIC.

He also stated that he was in possession of classified letters surrounding this investment between Mr. Patel and Mr. Krishnamachari. Mr. Nehru, seeing these charges, named former Chief Justice M.C. Chagla, as a one man commission of inquiry.

Mr. Chagla performed incredibly quickly in one of the most open inquiries ever and submitted his report in just 24 days. The Chagla commission's hearings were held in public. Numerous leading stockbrokers who were on the Investment Committee of the LIC testify that, as the Ministry of Finance said, the investment should not have been done in order to help the market. They also reported that if the LIC had approached the Investment Committee, they would have found out the 1956 episode of Mundhra's forged shares.

On February 18, 1958, Mr. Krishnamachari resigned from his position as Minister of Finance after Mr. Chagla lodged his paper. Mr. Mundhra was also convicted and he spent 22 years in prison.

We ought to acknowledge the pace at which the investigation was carried out in a straightforward way, leading to the culprits being nabbed. Such a case has been going on for years in contemporary India, with the culprits roaming openly at large. I wish that the same clarity and pace will be used in all the controversies of today!

P.S. Kairon Case 1963:
In 1963, after Justice S.R. was assigned to investigate the charges of corruption and nepotism etc. against a politician, an Investigation Committee was first appointed. Das was ordered to probe the allegations against Sardar Partap Singh Kairon, then the Chief Minister of Punjab. As a result of the Commission's conclusions, Kairon had to quit from his position as Head of Ministership.

This were the times when, in the first years since Emancipation, the residual memory of the freedom struggle and the high expectations of rectitude in matters of managing public funds helped maintain certain rules of public behaviour. Stuff started to change afterwards, and the norms of public morals under Mrs. Indira Gandhi began to collapse, hitting the lowest ebb under Rajiv Gandhi and his successors.

Nagarwala Mystery 1971:
On 4 May 1971, Ved Prakash Malhotra, Chief Cashier of the State Bank of India, received a phone call allegedly from the office of the Prime Minister, asking him to make available from the bank an amount of Rs. 60 lakhs (six million) needed for a top secret mission in Bangladesh. After a delay, Mrs. Indira Gandhi's voice came on the line to direct Malhotra to hand over the number to someone with a code word who would address him. Rustom Sohrab Nagarwala was the person who asked Malhotra to drive straight to the house of the Prime Minister and receive a voucher for the number.

Nagarwala took the money-containing package and escaped. Malhotra disclosed the prank to the police, and after confessing to the crime, Nagarwala was convicted to four years of stringent incarceration. Mrs. Gandhi did not respond whether she ever spoke to Malhotra on that particular day or not. The survivor of that episode, of course, was Mr. Malhotra, who was dismissed from his employment.

Political corruption was governed, handled and institutionalised under Nehru through the 'machine' of the Congress. Democratic corruption went from the level of folklore to being an integral part of national political culture as this machine started to disintegrate. Most interpretations appear to blame this accomplishment on Mrs Gandhi and her son Rajiv; in fact, while both inventions were made, they merely intensified the decline under Nehru that had begun.

Indira Gandhi was initially cast as a puppet prime minister in the hands of the regional congress ministers[8]. When she refused to play such a role then need parties are formed. But Indira was a women with strategic planning and hence with certain calculated measures she made the split in the party a less disastrous one. In 1969, there were severe changes in the financial sector - the nationalisation of banks.

Also, corporations are prevented from donating to political parties. With increasing controls on big businesses, black money started generating due to tax evasions, black marketing, and illegal transactions. These moves started the era of briefcase politics[9].

Briefcase politics provided the required financial support for the new congress. Mrs. Gandhi established herself as the new leader committed to the poor but due to her quest for power she ensured centralisation of power not only in Delhi but also in and out of the congress by using briefcase politics. Indeed, poor organisational power within the party contributed to a focus on fund generation as a means of protection and upward mobility. The Cabinet Office has sanctioned the procedure of using controls to extract funds.[10]

As one representative recalls:
"[11]Often representatives of trade and industry were called ... to Delhi and asked to produce specific amounts. Those who declined were threatened with possible raids by the Revenue Intelligence and Enforcement Directorate, which was now operating under the Cabinet Secretariat. In Bombay Financial circles stories started circulating of the amounts secured by the Foreign Trade Minister under such threats. Others who came forward willingly with whatever was asked for, received concessions . . . to expand their businesses and amass further resources."

Businesses who accepted and worked along it benefitted. Many small businesses in India grew into large business dynasties under the protection of these politicians (congress politicians in particular) and they also had monopoly access to domestic markets and imported raw materials. During the 1970's there were many Indian businesses that underwent a drastic change in their size and profitability. They turned out to be the major controllers of non-banking and non-governmental assets in the country.

Doubts that were raised on the credibility and morality of Indira Gandhi and her indulgence in 'Briefcase politics' disappeared when she imposed a national wide emergency (1975 -1977) breaking the regular democratic process in the country. She was charged with expulsion from office on charge of corrupt electoral practises by the High Court, for she got many arrested during this period.

During this time, her younger son, Sanjay Gandhi, emerged as a source of authority who mobilised black money, thugs and reluctant institutions of the state to affect his mother's policies. Terms like criminalisation of politics emerged from this era.[12]

In the 1980 elections, the alleged trial of Mrs Gandhi backfired and led to her return as Prime Minister. By further centralising authority in New Delhi, where 'fawners and flatterers' ruled supreme, Mrs Gandhi, however, soon returned to her old ways. In preference to confronting imaginary issues, the deterioration of the economy, the demands of the regions and the decay of her own party were neglected. The last Machiavellian act of Mrs. Gandhi was to stoke the sentiments of nationalism among the Sikhs only by putting them to the sword. She faced the consequences for her life by doing so.

Although the governing Congress party was suspected of collecting huge sums by contributions in the form of commercials for a party souvenir in the pre- and post-1975-' 77 emergency period, the expense of which was extremely disproportionate to the sum of advertising space obtained by the large corporations[13]. So when a leader or politician is generating more funds, they are most likely to be promoted and be kept in the forefront in case of any promotions.

Moreover they are most likely to be chosen for the positions of ecumenic ministries so that they can shower benefits on the their donors. As we all know that these donations are mostly from corporate house holds and large industrial firms, this method of practise calls for a quid pro quo[14], where the parties once elected to power show their gratitude to these firms for providing them with donations by showering policies in their favour. This made our political system 'a mortgage of money to power'. Scams related to these kind of politics is also further discussed.

Both the political and economic structures showed symptoms of structural collapse and decline at the end of Mrs. Gandhi's reign. By embarking on a programme of democratic regeneration and economic liberalisation, Rajiv Gandhi, who became Prime Minister in the big 'Indira wave' of 1984, reacted to these challenges. However, neither of these policies were followed with any vigour or zeal, with the effect that Rajiv was ultimately forced to resort to his mother's tactics that he personally detested so much.

The picture of Rajiv as 'Mr Clean', untouched by the usual corruption of Indian politics, made it possible for him to prepare an agenda to take India into the next century. The structural regeneration of Congress was at the centre of this programme. He chastised his fellow party-men during the party's centenary celebrations (1985).

'We [Congressmen],' he said,' observe no discipline, no statute, follow no public morality concept, show no sense of social awareness, and show no regard for public resources. Not only is corruption accepted, but it is viewed as the symbol of leadership. These words were going to bounce back on Rajiv like a boomerang in two years. He consistently refused to hold intra-party elections and became directly involved in one of Indian history's most infamous corruption scandals.

If the personal opinion of Rajiv soon became that Congress was unreformable, his half-hearted economic liberalisation created a new polarisation among some leading disenchanted Congressmen between the institutionalised graft lobby of 'licence-permit raj' and the emerging anti-corruption moralists. While the selective liberalisation of the economy initially created a powerful import-based consumer boom, it soon resulted in an increasing fiscal deficit in the absence of sufficient structural change. V. P. Singh, the Finance Minister, and leader of the anti-corruption faction within Rajiv's administration, responded to this development by launching high profile tax cases against leading business houses.

Scandal followed scandal (Reliance Industries, Fairfax and Bofors) until V. P. Singh was first demoted to the Ministry of Defence and, subsequently, compelled to resign over his prosecution of the inquiry into illegal payments in the purchase of submarines from the Howaldt Deutsche Werke of Kiel. It was widely believed that business pressure had led to V. P. Singh's demotion and resignation. The elaborate tax enforcement machinery estabished during his tenure as Finance Minister was quickly dismantled and his very own income tax return was subjected to extraordinary audit.

The following are some of the most talked about scandals that shook the image of India. They happened during the tenure of Rajiv Gandhi.
The Infamous BOFORS Scam:
India signed a Rs 1,437-crore deal on 18 March 1986 with Swedish arms manufacturer AB Bofors to supply the army with 400 155 mm Howitzer guns. A year later, a Swedish radio station reported on 16 April 1987 that the company had bribed top Indian officials and security personnel to win the contract. The conflict rattled the Rajiv Gandhi-led government in the late 1980s.

The Central Bureau of Investigation (CBI) lodged a FIR on 22 January 1990 against the then President of Bofors, Martin Ardbo, the alleged broker, Win Chadda, and the Hindu brothers, on charges of criminal conspiracy, fraud and forgery.Any public officials and private persons in India and abroad entered into a criminal conspiracy to commit bribery, corruption, fraud and forgery between 1982 and 1987.

On 22 October 1999, the first accusation in the case was brought against Chadda, Ottavio Quattrocchi, and Ardbo and Bofors, SK Bhatnagar, the then Secretary of Defense. A supplementary indictment sheet was filed on 9 October 2000 against the Hindu brothers. In the Bofors pay-off affair, on 31 May 2005, Judge R S Sodhi of the Delhi High Court quashed the CBI lawsuit.

Previously, on 4 February 2004, retired Justice J D Kapoor had exonerated late Prime Minister Rajiv Gandhi in the case and ordered the trial of forgery against Bofors under Section 465 of the Indian Penal Code, not allowing the company to expend its money on his extradition, which had already cost him Rs 250 crore or more or less. Quattrocchi, who had fled from here earlier on 29-30 July 1993, never appeared to face trial before any court in India. On July 13, 2013, he died. Bhatnagar, Chadda and Ardbo were the other defendants who died.

Bofors is a tale of mystery. For more than two decades, from 1987 to 2009, the investigation proceeded. It happened nine years after it was recorded in the First Details Study (FIR). Basically, this was a classic case of collaboration between the manufacturer/seller of weapons and the buyer of the government. There was nothing new about the activities that this individual arms trader practised.

Many leading figures in the corporate sector have told me that without paying fees to middlemen, no arms sales or purchases in any part of the world would ever take place. The situation has acquired enormous political overtones and a battle between the Congress Party and the Opposition has taken place. Prime Minister Rajiv Gandhi's defeat in the 1987 general election was attributed to the Congress Party's role in the scandal.

In 1988, a Preliminary Survey (PE) was reported. Two years later, on 22 January 1990, under the Indian Penal Code (IPC), a Regular Case (RC) was registered by the CBI for alleged conspiracy, cheating and forgery offences, along with parts of the Prevention of Corruption Act. Martin Ardbo, then President of Bofors AB, and Win Chadha, a Dubai-based intermediary, and a few others, were the defendants.

Consequently, the name of another intermediary, Ottavio Quattrocchi, an Italian national who had for some time been the executive of Snamprogetti, headquartered in Delhi, and who was generally perceived to be loyal to the Gandhi family, was added during the investigation process.

The naming of Rajiv Gandhi on the charge sheet as "unsent to trial accused" was a momentous and controversial development because he was no longer alive.

The High Court of Delhi quashed all prosecutions in the case in June 2002, an order that was reversed in July 2003 by the Supreme Court of India. When the High Court of Delhi quashed charges against Rajiv Gandhi and others, the CBI suffered another setback in February 2004.The three Hindu brothers were successful in getting the charges against them dismissed by the same judge in May 2005. It was for a range of reasons, including the transition of government in 2004 and a series of contentious judicial rulings, that the retrospective investigation did not ultimately succeed in court.

It should be remembered, however, that a range of limitations and challenges were encountered by the CBI. The CBI required the node either of the Ministry of Foreign Affairs or of the Department of Personnel (the administrative department of the CBI) or of the Ministry of Law for every step in the process of approaching governments and courts of other countries such as Switzerland, Malaysia and Argentina (the latter two countries where Quattrocchi requested refuge).

The alleged apathy of the government of PM Narasimha Rao (1991-96) to the task of ensuring rapid progress in the CBI investigation compounded this. nt. The Central Bureau of Investigation is still pursuing the case to unravel the mystery of political kickbacks alleged to have been paid in the deal.

The Bofors case will remain a notorious example of how a government run by a party that has a lot to hide from the public will purposely sabotage a real case. In the 1990s and later in 2004-14, the burden lay on the shoulders of those who managed the CBI. If a preliminary enquiry was reported by the CBI in 1988, it was only due to the huge public furor caused by the Swedish Radio and Hindu Publication.

While it meant an unbridled 'whitewash operation,' the government headed by Rajiv Gandhi had no alternative but to launch a thorough investigation. It was never known that the money had arrived Rajiv's way, but by being hesitant to conduct inquires into the matter, he blinded the atmosphere. Amid speculation that he was defending those who had taken bribes, Rajiv was charged with lying in Parliament. An picture of Rajiv as the innocent Pinocchio whose nose replicated the long cannon of a Bofors rifle was one of the most unforgettable posters of the 1989 election.

Fairfax Affair:
A Commission composed of two justices of the Supreme Court, Justice MP. Thakkar with Justice S. Natarajan.In April 1987, they began investigating the Fairfax affair. It investigated the agreements entered into with Fairfax Group Inc., an American detective firm, to investigate violations of FERA (For-eign Trade Control Act) and in their report implicated the former finance minister, V.P. Singh. Mr. V.P. Singh later became India's Prime Minister in 1989.

Fodder Scam:
A former Lok Sabha (Lower House of the Indian Parliament) speaker, Balram Jakhar, was accused of supporting the interests of Mr. Brady*, a foreign acquaintance, by waiving import duties in exchange for 50 machines processing fodder. The outfit of Mr. Jakhar, the Bharat Krishak Samaj (Indian Agriculturist Society), reportedly played a questionable role in a transaction that relieved the Indian people of taxes of Rs. 36 million and foreign exchange of over Rs. 35 million. While the case is still ongoing, it is probable that no action will take place. Jakhar was the Minister of Agriculture in Narasimha Rao's Cabinet.

HDW Deal:
Under a contract signed in 1981, the Government of India purchased two sub-marines from a West German firm. Under the terms of an open-ended deal, a seven per cent fee, which turned out to Rs. 3,000 million, was paid to HDW's Indian agents. No body interested with the book has been brought in.

Airbus A 320 Deal:
The Federal Bureau of Investigation in April 1990 - A lawsuit was lodged against the senior officials of the Ministry of Civil Aviation and Indian Airlines for the hasty procurement of aircraft A-32.0. Bribeiry and incompetence in negotiating the purchase amounting to Rs. 25,000 million were paid to the officers. Nothing came out of this programme, however.

This is the latest scandal that rocked the nation and the government. It is during the early 1990's, P.V. Narasimha Rao took over as the prime minister after the assassination of Rajiv Gandhi. The amount involved is Rs. 55000 millions; 80 times more amount than in Bofors.

BSE Stock Market Scam 1992: The Harshad Mehta Scam
The year 1992 maintains a curious position in India's history of scams. The planet saw the ingenious machining of stock markets for the first time that year. The 'Securities Scam,' as it has been known, involving fraud of Rs. 4,000 crore, is now one of the biggest frauds to date on the Indian stock market. It was a systemic scam involving bank receipts and stamp records that eventually resulted in the stock market collapsing. The scam rocked the country and finally modified the rules of the Dalal Lane game (Das, October 20, 2020).

By exploiting the loopholes in the banking system, Harshad Mehta, a licenced and well-known broker, manipulated the Bombay Stock Exchange (BSE) along with its associates. Mehta reportedly clashed with bank workers to get the publication of fake bank receipts (BRs). Under the presumption that they were investing against government securities, he used these bank receipts to get other banks to lend him money.

To boost share prices by up to a whopping 4,400 percent, this figure was then put on the stock market. These shares were subsequently sold at a significant profit by Mehta and the principal amount was returned to the banks. In all, Mehta has defrauded about Rs 4,000 crore from the banks.Since uncovering and exposing their modus operandi on the stock market, banks learned that they were in charge of fake BR holdings. As a result, the BSE Sensex rose from 2,000 in January to 4,000 in March 1992. People started to look up to him as the Big Bull when shares began to reach new heights and began buying the stocks in which he had invested. Most retail investors have ended up investing huge amounts on inventories. The tax department raided the Mehtas on February 28, 1992, after the scam came to the government's attention. Many papers and trade certificates have been seized.

On 4 June 1992, the CBI carried out the Mehtas probe. In a turn of events, Harshad Mehta's tax return for the 1992-93 appraisal year was rejected. In 1992, Mehta was arrested. In 1992, the Janakiraman Committee was created by the RBI to provide a comprehensive picture of the scam. In order to address irregularities in securities and financial transactions after the Harshad Mehta case, a Joint Parliamentary Committee (JPC) was also created in 1993.

Both the Bombay High Court and the Supreme Court convicted Mehta and charged her with 74 criminal offences. His court battles lasted until 2001, when he died from heart arrest in prison. He was now 47 years of age. A host of changes in the financial regulatory system of India have been triggered by the Harshad Mehta scam. In 1995, the Securities Laws (Amendments) Act was passed, expanding SEBI's power and empowering it to regulate depositories, FIIs, venture capital funds and credit rating agencies. The Indian stock exchange has come a long way ever since the scam. Down the years, clients have been cleaned up from other stock market controversies and left officials red-faced. But Mehta was the one who got all started. Events he has scripted continue to serve as a lesson to be vigilant at all times for investors and regulators.

The beginning of the end began for Harshad Mehta when it was announced that Rs 500 crore had been missing from SBI's books in the form of Subsidiary General Ledger (SGL) at the RBI Public Debt Office.

This anomaly led to a wider inquiry by the Janakiraman Committee, the Joint Legislative Committee formed by the Central Bank.

Harshad Mehta had already developed close ties in the banking sector during his rise through the 1980s. As several other traders at the time, Mehta used the 'shortcut' used by banks to deal with government securities. While RBI guidelines required banks to negotiate directly with other banks in the event of security transactions, they preferred to focus on brokers as it was simpler and time-consuming. Although RBI guidelines allowed banks to deal directly with other banks in the event of security transactions, since it was cheaper and time-consuming, they preferred to rely on brokers. To optimise the value of their government bond portfolios, many banks have used a process called Ready-forward (RFD) deals. Short-term 15-day loans were also secured from one bank to another via RFDs.

Later, he was sued and convicted of diverting Maruti Udyog Limited (MUL) public sector funds to his own accounts and misappropriating nearly Rs 2.5 billion. He was convicted by the CBI again in 2001 for the latter crime and was not bailed until his death later that year.

Two facts about corruption in India are highlighted in the Harshad Mehta suitcase episode. The former is that it is more prominent than before; the latter is that it barely matters. There was a time when a minister who took money from industrialists was perceived to be a crook and his peers regarded him with a certain scorn. Any other minister today takes money from businessmen and many are not going to try to refute it. Rather, they defend this on the basis of increasing election spending costs and explain that it is only possible to raise those funds from private enterprise. There needs to be quid pro quo at a certain amount and no entrepreneurs can part with cash for free.

The following are some of the latest scams that happened in the past two decades:
2G Spectrum Case[15]:
Huge crowds stalled the 2G scam court hearings earlier today, a deception that rocked the nation and was ranked by Time magazine as the second-largest misuse of executive authority in the country. After a short delay, however, the court declared that both defendants had been acquitted in the 2G scam case.

Special CBI judge OP Saini is claimed to have said when acquitting all suspects in the 2G scam case, "The prosecution has miserably failed to prove its case, and all accused are acquitted,".

Raja, then Telecom Minister, along with 14 others were accused in the 2G Case. Companies like Swam Telecom, Reliance Telecommunications and Uninor are also involved. It is estimated that a loss of Rs. 1.76 lakh cr occurred to the Indian National Exchequer.

The scam is a collection of three cases filed by the Enforcement Directorate and the CBI.

A research by India's CAG reported that 2G, or second-generation mobile network licences, were provided at throwaway prices instead of free and equal auctions.

A Raja was primarily reported to be allocating airwaves and licences for wireless networks in exchange for bribes. He had played a major role in facilitating the 217-crore bribe from Swan Telecom to Kalaingar TV, the propaganda arm of the DMK party, according to allegations put forward by DMK MP Kanimozhi.

According to the CAG report, all the demand proposals were already backdated, suggesting that telecommunications companies had advance knowledge of the licences to be given.

Swan telecom was merely a cover for Reliance Telecom, the CBI charge sheet states, and that Reliance breached telecom policy to gain more than 10% share as permitted under the statute.

In 2008, in the Delhi High Court, a PIL against A Raja's supposed wrongdoings was accepted. The court found out about the so-called lies given by the telecommunication ministry during the PIL hearing.

The then Minister of Telecom, A Raja, refuted all allegations and claimed that the decisions were taken after PM Manmohan Singh was apprised at the time. On allegations of cheating, forgery and conspiracy, A Raja was arrested in 2011.

In 2012, the Central Bureau of Investigation (CBI) submitted to the court that it will also pursue a probe with respect to the actual beneficiaries of the Anil Dhirubhai Ambani Party spectrum fraud (ADAG).

In February 2012, the Supreme Court revoked all 122 licences issued for a paltry Rs 9,200 crore in 2008, ordering that these licences and, eventually, all natural resources should be reserved exclusively by auctions/fair tendering. The spectrum distribution was declared by the court as' illegal and discriminatory.'

The Supreme Court then sentenced Unitech Wireless, Swan Telecom and Tata Teleservices to a fine of Rs 5 crore each. Furthermore, the court claimed that A Raja "wanted to benefit some corporations at the cost of the public exchequer" and "virtually gifted away crucial public asset".

The UPA II government was rocked by the broad publicity given to the 2G spectrum scam. It is perceived to be one of the key factors in the 2014 Lok Sabha polls that contributed to the demise of the Manmohan Singh administration.

In 2011, Manmohan Singh, the then Prime Minister, also acknowledged that this government seems to have "failed in managing perceptions" "It is quite possible that we have failed to manage perceptions. We should focus on changing perceptions" he said to journalists.

Kapil Sibal took charge of the telecommunications ministry after A Raja resigned and came up with the idea of 'zero loss' in 2011. He stated that the allocation of 2G licences on a first-come-first-served basis incurred no to zero damages.

Coal Gate Scam:
Coalgate snowballed into a huge political scandal that pulled top leaders and bureaucrats from the previous UPA regime into the probe, as it was popularly known.

The Coal Allocation or Coalgate fraud is a controversy that happened during the tenure of the UPA government. Since the then Comptroller and Auditor General (CAG) levied charges against the government for allocating coal blocks to public and private companies, it came into reckoning in 2012. Out of the estimated 216 coal blocks allotted from 1993-2010, 194 were sold for captive use by these public and private undertakings.

In the CAG report, concerns were raised about unreasonable managerial decisions when allocating the coal blocks and not observing the relevant competitive bidding protocol. A report by the Comptroller and Auditor General of India revealed that the allocation of coal blocks between 2004 and 2009 was inefficient and possibly illegal. It assumed the loss to the exchequer at the rate of Rs 10.7 lakh crore, but in the final report it later toned this amount down to Rs 1.86 lakh crore.

In the Coal Scam probe, industrialists such as Naveen Jindal and Kumar Mangalam Birla have also found their names in FIRs. A report by the parliamentary standing committee reported that the distribution of blocks was not approved between 1993 and 2008. It proposed that all blocks be distributed where construction had not begun and bank guarantees in some be forfeited.

The Coal Ministry is creating an inter-ministerial panel to study the block allocation process and to determine if bank guarantees will be de-allocated or forfeited.The government has since taken back over 80 coal fields, while bank guarantees have been forfeited in 42 situations.Over the process of the investigation, a special court was formed by the Supreme Court to prosecute all cases relevant to the coal scam.

Point to note:
From the above two mentioned scams we can see that CBI's politicisation is very clearly reflected in the investigation process. The SC had directed the Director of CBI Ranjit Sinha to reduce himself from and not to interfere in the 2G Spectrum Case. This clearly shows the level of damage caused to the credibility of the nation's premier investigative agency. With increasing high profile corruption cases in India, like 2G Spectrum and Coalgate scam, it is important to insulate and restructure the CBI from political interference and by granting it more autonomy.

The investigation done by the CBI in coal allocation probe was subjected to change based on the suggestions of the government officials. CBI can be compared with a parrot (caged) that repeats its master's voice. The apex court questioned the credibility of the investigation agency and observed that if the agency is not made independent then the court would step in. Justice RM Lodha also asked the government whether it was contemplating a law to make the working of the CBI independent and to insulate it from external intrusions and interferences[16].

The erstwhile United Progressive Alliance government following the directive of the Supreme Court submitted a 41-page proposal on how to free the CBI of political control. In the affidavit the government assured the court that it would amend the 1946 Delhi Special Police Establishment Act, which created the CBI, thereby giving it more autonomy.

The government promised to set up a three-member "Accountability Commission" under Section 7(i) consisting of retired judges to investigate complaints against any officer or employee serving under or associated with the 1946 Delhi Special Police Establishment Act. Changes were also proposed to bolster the independence of the CBI chief, who would be appointed by a three-member panel comprising the Prime Minister , the Supreme Court Chief Justice and the Leader of the Opposition in Parliament. The director would have a fixed tenure of two years.

Only the president would be in a position to remove the CBI director on grounds of proved misbehaviour or incapacity only after a proper enquiry conducted by the Central Vigilance Commissioner (cvc). As far as the question of financial autonomy was concerned, the CBI director would have the same powers as enjoyed by the director general of the Central Reserve Police Force (NDTV 2013A[17]).

Despite these new changes, CBI cannot hire its own lawyers, which would have ensured greater autonomy. Moreover the CBI lacks financial independence from the Parliament. Every expense like an officer travelling abroad has to sanctioned by the government. Though the revisions made are to provide autonomy to our nation's premier investigative agency, it lacks support in key areas like independent decision making and financial resources.

The Supreme Court has accepted and appreciated the move to words depoliticising the CBI despite several short comings. But still the court questioned why CBI is being denied the right to employe its on lawyers. The Supreme Court also asked why the CBI should need the government's sanction to prosecute officials and public servants, saying "The supervision of the chi is entrusted with the cvc. The Centre has no role. How can the CBI say government permission is needed for sanction? We need to discuss this" (NDTV 2013[18]).

It is very important to depoliticise the CBI as we have seen in various cases like this 2G spectrum case and COAL GATE scam, the way government has influenced and intertwined in the investigation process. The ruling governments have misused the institution of CBI for getting regional parties under their control and also to settle political scores against the opposition.

For example, the CBI consciously did not oppose the bail petition of Dravida Munnetra Kazhagam (DMK) MP Kanimozhi, daughter of the DMK party founder M Karunanidhi, and one of the prime accused in the multimillion dollar 2G spectrum scam. Apart from Kanimozhi, the CBI had also not opposed the bail pleas of Kalaignar tv MD Sharad Kumar, Kusegaon Fruits and Vegetables directors Asif Balwa and Rajiv Agarwal and film-maker Karim Morani, whose names had figured in the supplementary charge sheet of the 2G spectrum case (Times of India 2011[19]).

This unhealthy trend not only demoralised the organisation but also eroded the credibility of the CBI in the public eye. For all practical purpose the CBI is largely fettered and final decisions, especially in high profile cases of political corruption, seem to be taken outside its four walls. This predicament was succinctly described by the former CVC chief N Vittal who had said, "Our system is like a spider's web in which only small insects are caught and big bumble bees can breeze through�" (Chakraborty 2013[20]).

Moreover the 'single directive' is the main reason for no autonomy for CBI. It makes it compulsory for the CBI to get prior permission before initiating investigation against officers at the level of joint secretaries and above. There is always a delay in obtaining sanction from the government to investigate any senior government officials.

To put all these in a few words, CBI must be refurbished, and be made sure that it is depoliticised. It has be given paramount importance. Radical measures need to be brought up in the CBI such that police personnel are not taken in, as they are more susceptible to political influence. In oder to achieve this all, it is very important for us to have that political will.

To quote Quah[21]:"Political will refers to the commitment of political leaders eradicate corruption and exists when these three conditions are met: (1) comprehensive anti-corruption legislation exists (2) independent anti-corruption agency (3)the anti-corruption laws are fairly enforced by the independent ACA(anti-corruption agency)."

Conclusion
By the end of this essay I came to a conclusion that it is the greed that is driving men to commit all these shady things and then walk away with loot. They are looting the people who stood for them, who voted for them and in return what they are getting is betrayal. Moreover with primitive investigation techniques and tight bureaucratic control over the investigating agencies we hardly see the accused being convicted.

With passing times the number of scams and scandals came increasing and not decreasing. As a result we need to be formulating tough policies that protect the whistle blowers and prevent the law breakers from escaping.

List Of References
  • Understanding Political Corruption in Contemporary Indian politics by Gurhalpal Singh
  • The Craft of Political Graft in India: An Analysis of Major Scams by R.B. Jain
  • An Impossible Dream ? Depoliticising The Central Bureau of Investigation by Shiladitya Chakraborty
  • https://frontline.thehindu.com/the-nation/article30207963.ece
  • https://www.thehindubusinessline.com/opinion/the-exponential-rise-of-corruption/article8393707.ece
  • https://www.indiatoday.in/fyi/story/what-is-2g-scam-in-india-2g-scam-verdict-upa-a-raja-cbi-judge-op-saini-verdict-things-to-know-1113444-2017-12-21
  • https://thelogicalindian.com/news/independent-indias-first-big-financial-scam-mundhra-scandal/?infinitescroll=1
End-Notes:
  1. G. Myrdal, 'Corruption as a Hindrance to Modernisation in South Asia', in A. J. Heidenheimer (ed.), Political Corruption (New Brunswick NJ, Transaction, 1978), p. 232..., cited from Gurhalpal Singh, 'Understanding Political corruption in Contemporary Indian Politics', 1997, pg 626, accessed on 05-02-2021.
  2. Puri, K.K., 'Malignant Malady', Indian Express, July 13, 1993 cited from R.B. Jain, The Craft of Political Graft In India: An Analysis of Major Scams', The Indian Journal of Political Science, Oct - Dec 1994, Vol. 55, No. 4, https://www.jstor.org/stable/41855706, accessed on 05-02-2021.
  3. Government of India, Report of the Committee on the Prevention of Corruption (Santhanam Report) (New Delhi, Ministry of Home Affairs, 1964), p. 5.
  4. https://frontline.thehindu.com/the-nation/article30207963.ece
  5. ibid
  6. https://www.thehindubusinessline.com/opinion/the-exponential-rise-of-corruption/article8393707.ece, accessed on 06-02-2021.
  7. https://thelogicalindian.com/news/independent-indias-first-big-financial-scam-mundhra-scandal/?infinitescroll=1, accessed on 06-02-2021.
  8. Called as the Syndicate
  9. "a phase that is used to describe the transfer of vast amounts of black money in the form of cash into the coffers of the Congress Party. Prices for licences or other permits were quoted in the number of briefcases required. Initially, prices were set as fixed fees, but later they were levied as a percentage of the benefits."
  10. S. A. Kochanek, 'Briefcase politics in India; the Congress Party and business elite', Asian Survey, xxvii (1987), p. 1290. Cited in Gurhalpal Singh, 'Understanding Political corruption in Contemporary Indian Politics', 1997, pg 631, accessed on 05-02-2021.
  11. Ibid pg no. 632.
  12. C. S. Pandit, End of an Era (New Delhi, Allied, 1977), p. 113. Cited from Gurhalpal Singh, 'Understanding Political corruption in Contemporary Indian Politics', 1997, pg 632, accessed on 06-02-2021.
  13. For a review of the causes see P. B. Mayer, 'Congress (I) Emergency (I): Interpreting Indira Gandhi's India', Journal of Commonwealth and Comparative Politics, xxvi (1984) 128�50.
  14. One such analysis of Souvenir Committee accounts before the 1977 general elections see Shourie, Amn, "A Crumb for the Historian" in Indian Express, New Delhi, April 11, 1982. Also see Noorani, A.G., Ministers' Misconduct, Vika, New Delhi, 1973, p. 263. For DMK's method see Times of India, New Delhi, October 18, 1972; and op.cit., pp. 339-40 and 355. More recently, the name Antulay has become inextricably bound up with the most sophisticated techniques of raising funds for ostensibly charitable, or party purposes, or for promoting personal interests.
  15. It is a Latin term meaning favor for favor.
  16. https://www.indiatoday.in/fyi/story/what-is-2g-scam-in-india-2g-scam-verdict-upa-a-raja-cbi-judge-op-saini-verdict-things-to-know-1113444-2017-12-21, accessed on 07-02-2021.
  17. An article in The Hindu 2013, cited from S. Chakraborty, 'An Impossible Dream? Depoliticising the Central Bureau of Investigation', Economic and Political Weekly, Vol. 50, No. 32 (Aug 8, 2015), pg 16, accessed on 08-02-2021.
  18. Government Submits Affidavit on CBI Autonomy in Supreme Court," All India, NDTV, 3 July, http://www.ndtv.com/article/india/government-submits-affidavit-on-cbi-autonomy-in-supreme-court-387598, viewed on 27 November 2014.
  19. "Parliament Will Decide on CBI Autonomy, Says Supreme Court," 11 July, http://www.ndtv.com/article/india/parliament-will-decide-on-cbi-autonomy-says-supreme-court-390306
  20. HC Notice to CBI on Bail Pleas of Kani, 4 Others," 9 November, http:// www.timesnow.tv/HC-notice-to-CBI-on-bail pleas-of-Kani-4-others/articleshow/4388472. cms, viewed on 24 November 2014.
  21. Chakraborty, Shiladitya (2013): Public Service Reforms in India: A Fight against Corruption, Kolkata: Towards Freedom Publishers. Cited from S. Chakraborty, 'An Impossible Dream? Depoliticising the Central Bureau of Investigation', Economic and Political Weekly, Vol. 50, No. 32 (Aug 8, 2015), pg 17, accessed on 08-02-2021.
  22. Quah, Jon S Τ (2007): "Anti-Corruption Agencies in Four Asian Countries: A Comparative Analy sis," International Public Management Review, Vol 8, Issue 2. cited from S. Chakraborty, 'An Impossible Dream? Depoliticising the Central Bureau of Investigation', Economic and Political Weekly, Vol. 50, No. 32 (Aug 8, 2015), pg 17, accessed on 08-02-2021.

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