scams in india
It is good to recapitulate the scams in nutshell as public memory is
too short to remember these things. Still there were other cases
which perhaps have been unwittingly left out of the discussion as it
is not the exhaustive list.
For example, the name of Antule was linked with sugar scandal. Today
he claims to be the epitome of morality and uprightness.
Lottery Churhat scam of Arjun Singh was the most famous one. Today he is
more worried about Bathla encounter and Rahul Gandhi's ascendance on
the throne.
Mention should be made of upright persons like Rafi Ahmad Kidwai,
Shastri, KM Munshi, CRR, Feroz Gandhi, etc.
In contrast to the Indians involved in various scams, the example of
due to the misdeeds of one person. Similarly in the famous Profumo
Keelar case, McMillan the then Prime Minister of
forthwith.
There is a joke but quite important. One MP from
and stayed with one political leader there. He saw the host's plush
furnished house (in States such things/houses are quite normal). He
asked his
politician invited the Indian MP on the window and showed a flyover
across the road. He accepted that during the construction of the
flyover, he got a cut of 10%.
After some time the
occasion to stay with the Indian leader who had stayed with him
once. The
his most decorated, furnished and wonderfully illuminated house to
the tantalizing level. He repeated the question of his Indian friend -
as how could he build such a palatial house when you claim the most
poor country. The Indian leader called the
indicated towards a far flung area. He asked his
could see the flyover. The guest was perplexed and said definitely
NO - I dont see any flyover sort of thing. The Indian leader assured
him not to worry as he had the 100% cut in the construction. The
guest had no answer. The moral of the story that we are fast in all
matters....BNG
In the first decade of independence all kinds of wrongdoings
erupted, which have naturally gone out of public memory. For example,
in 1948, the then high commissioner in
name was linked to a scandal where the Indian government had placed
an order for 2,000 jeeps with a London-based firm that had false
credentials. While most of the money was paid upfront, just 155 jeeps
landed. As we all know, Krishna Menon went on to become Prime
Minister Jawaharlal Nehru's trusted ally and the defense minister.
Does anyone remember that in 1949, Industry minister Rao Shiv
Bahadur Singh, father of Arjun Singh, was jailed for three years for
taking a bribe of Rs 25,000 from gemstone trader Sachendubhai Baron
for renewing his diamond- mining lease? Please note, only Rs 25,000
exchanged-hands.
What was seen then as the mother of all scandals happened in 1958.
Finance minister T T Krishnamachari, finance secretary H M Patel, LIC
chairman L S Vaidyanathan, are some of the names linked to a scandal
exposed by Indira Gandhi's husband Feroz Gandhi, involving LIC's
investment of Rs 1.25 crore in six companies set up by Haridas
Mundhra. TTK resigned as a result of the affair, and Mundhra was
jailed.
Businessmen were punished with some regularity those days. In 1959
Ramakrishna Dalmia, chairman, Bharat Insurance Company, was arrested
for misappropriating around Rs 2.2 crore from the company and sent to
jail for two years.
In 1960, businessman Dharma Teja managed to get a Rs 22 crore loan
from the government to start a shipping company, and then siphoned
the money out of the country. He was arrested in
for six years. Must have been exciting times.
The swinging Sixties also saw its share of misdoings and blatant
corruption. In 1965, Orissa chief minister Biju Patnaik (present
chief minister Naveen Patnaik's father) was forced to resign after it
became known that he had favored his privately owned company,
Kalinga Tubes, in awarding a government contract. It is difficult to
believe that acts like these were seen as crimes those days.
In the Seventies, Indira Gandhi and her son Sanjay's names started
popping up every now and then. There was the never-quite- explained
Nagarwala scandal. Nagarwala is said to have impersonated the prime
minister on the phone and got State Bank of
lakh. Both Nagarwala and the police officer who investigated the case
died in mysterious circumstances soon after. In 1974 Indira Gandhi's
name came up again in the first Maruti scandal, where her son was
favoured with a licence to make passenger cars in the then highly
restrictive-environment.
Again in 1976, in the face of falling oil prices, a $200-million
contract was awarded to the Hong Kong-based Kuo Oil Co to take future
deliveries at current prices. The government lost Rs13 crore. The
money is supposed to have gone to Indira and Sanjay.
From the Eighties, the names Snamprogetti, and its representative
Ottavio Quattrocchi started doing the rounds. In 1980 petroleum
secretary H N Bahuguna, N N Kapadia, agent of many foreign companies,
petroleum minister P C Sethi and K P Unnikrishnan were accused in a
scandal where a consultancy contract for the Thal Vaishet project was
awarded to a subsidiary of Italian Snamprogetti in violation of laid
down-norms.
In 1981 there was the great
minister A R Antulay was charged with malpractices and favouritism in
giving cement meant for public consumption to private builders.
Coming of age the political scandals got much bigger.
In 1986, there were alleged kickbacks to the Indira Gandhi government in buying two submarines from German firm HDW. The scandal that refuses to die happened the
next year in 1987, when Rajiv Gandhi and others were accused of
receiving Rs 64 crore in payoffs for the 155mm howitzer deal from the
Swedish-firm-Bofors.
In 1991 L K Advani, V C Shukla, C K Jaffer Sharief, Arif Mohammed
Khan, Madan Lal Khurana, Kalpnath Rai, N D Tiwari and many others
were accused in the Rs 64-crore Jain hawala case.
Joining the big league with the Harshad Mehta scandal of 1991, the dimensions of money
involved expanded exponentially. Mehta, SBI, NHB, Grindlays, Citibank and Stanchart were all accused of having played a part in the Rs 10,000 crore securities scandal.
Keeping up with inflation corruption started scaling bigger
heights. No more small change of a crore or two. Remember the fodder
scam? When
politicians and bureaucrats were alleged to have siphoned off Rs 950
crore from funds meant for the state animal husbandry department?
Down south in 1996, M Gopalakrishnan, former chairman and managing
director of Indian Bank, and others were accused of having sanctioned
huge loans totalling Rs 1,500 crore to companies without obtaining
adequate-collateral-security.
Then came the first telecom scandal in 1996 when former
communications minister Sukh Ram was charged with accepting kickbacks
from a number of telecom companies in exchange for special favours.
About $1 million in small-denomination rupee notes was found in the
homes of Sukh Ram. Runu Ghosh, a senior official in the Department of
Telecommunications (DoT), was arrested on corruption charges,
including having allegedly favoured telecom equipment manufacturer
Advanced Radio Masts Ltd (ARM) in purchase contracts. In the same
year owners of several large shoe companies in Mumbai were arrested
on charges of having floated bogus cobbler co-operatives to get low-
interest loans from the
This list is only indicative and by no means exhaustive.
Bluffing gets liberalised
The rapid growth of the capital market after liberalisation has led
to its fair share of financial scandals. The major shake-up happened
with the Harshad Mehta episode. It exposed the utter lawlessness and
absence of supervision in the money markets: Funds could be
transferred with impunity from banks and corporate houses into the
equity markets; thousands of crores of bank funds moved in and out of
brokers' bank accounts in what was later claimed as "accepted market
practice".At the same time there was the Initial Public Offer (IPO) bubble.
Many existing companies in the Nineties decided to make huge public
offerings.They inflated their prices to fund
completely unrelated diversifications. Windmill manufacturers wanted to set up airlines. Shoemakers wanted to set up steel plants. It was a period of utter madness.
Then a whole lot of small traders, chartered accountants and
businessmen, teamed up with bankers and investment bankers to float
new companies and raise public funds. This caused a loss of several
thousand crores of rupees and is known as the vanishing companies
scandal.
All this resulted in the death of primary markets for many years.
The Nineties was also the period of many other scams. One of them
was the mushrooming of non-banking finance companies (NBFC). Most of
them built houses of cards, took investors for a massive ride and
then rolled over and died.
Take the case of Chain Roop Bhansali's CRB. His Rs 1,000 crore
financial conglomerate comprised a mutual fund, fixed deposit
collection (with hefty cash kickbacks), a merchant bank (he even
lobbied head-to-head the Association of Merchant Bankers of India)
and a provisional banking licence. Many of these licences required
adequate scrutiny by SEBI and the RBI, and the fact that they passed
muster is another reflection of those times. Bhansali managed to get
favourable credit ratings and audit reports, CRB created a pyramid
based on high cost financing, which finally collapsed. Bhansali,
after a brief spot of trouble with the authorities, moved on to the
dotcom business and the regulators were never held accountable.
Millions of small investors lost their shirt. The CRB collapse caused
a run on other finance companies and many cardboard empires came
crashing down.
This was also the era of plantation companies.
Investors were asked invest in dubious plantation schemes. "Put
money in one teak tree and you will get 1000 times the returns in
seven years", they were promised. Since they were not subject to any
regulations, the plantation companies could get away with wild profit
projections. The advertising companies were the real gainers.
High profile television campaigns, full-page advertisements and
glossy brochures had the investors flocking for more. Almost all
these projects have vanished.
In the early days of liberalisation even the government-promoted
mutual funds were in trouble. Nobody anticipated stock market
crashes.
Starting with the scam-hit Canstar scheme, most mutual funds had to
be bailed out by their sponsor banks, or parent institutions. Then
came the big bailout of Unit Trust of India. Since UTI is set up
under its own Act, it was the taxpayers who paid for the Rs 4,800
crore bailout in 1999. Just three years later, it was back buying
recklessly into the Ketan Parekh-manipulated scrips and suffering big
losses in the process.
The record of the private mutual funds has also been patchy.
The dotcoms which became dot cons is another big story. Sadly,
investors in all countries get carried away by hype and publicity.
They do not have the time or the knowledge to analyse their
investments. When things are going well nobody wants to know
anything. Nobody questioned Satyam's quarter-to-quarter growth and
margins. Nobody wondered why the promoters were constantly
disinvesting in their company.
Nobody took E A S Sarma, former secretary, department of economic
affairs, seriously when he was unhappy with the Satyam balance sheet,
or
(DMRC) when he alleged that the Andhra metro rail line alignment was
altered and extended to benefit the bidder (Maytas), seriously.
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