New Delhi, Dec. 19: The parliamentary probe into the Rs 5,000-crore stock market scandal that rocked the country last year has pieced together a gigantic jigsaw with a large cast of characters, including then finance minister Yashwant Sinha and rogue broker Ketan Parekh.
Sinha, now the foreign minister, is being accused by the joint parliamentary committee (JPC) of having turned a Nelson’s eye to shenanigans in the stock exchanges and not bothering to keep himself abreast of the happenings in the Unit Trust of India, leading to the mutual fund’s near collapse.
Opposition members of the JPC — Mani Shankar Aiyer and Kapil Sibal, of the Congress — demanded Sinha’s resignation.
“What else do you expect the Opposition to do'” Sinha asked. The BJP rallied in his support. JPC chairman Sriprakash Mani Tripathi, of the BJP, stonewalled all queries, saying “there is no direct reference to any wrongdoing by him”, though he admitted that the finance ministry was ultimately responsible for regulatory failures.
The political battle is expected to be joined by the very vocal Left parties and Parliament can well be expected to turn into a battlefield tomorrow, the last day of the winter session.
Others in the firing line include Sinha’s top aide, former finance secretary Ajit Kumar, who has been indicted for failing to report UTI’s mess in time, as well as then UTI chief P.S. Subrahmanyam whose questionable investment decisions triggered the crisis.
The finance ministry itself has been indicted for its inability to check or detect a single scam during the period.
Big Bull Ketan Parekh was found to have rigged up the prices of select stocks by getting his own investment companies to trade among themselves. The rogue trader was found guilty of not only being involved in the scam but was also blamed for the payments crisis in the Calcutta Stock Exchange and crash of the Madhavpura Mercantile Cooperative Bank.
Parekh had paid three Calcutta-based brokers Rs 3,191 crore to buy shares of two companies — HFCL and DSQ Software — taking advantage of the exchange’s well-known faulty payment system. Three brokers — D.K. Singhania, A.K. Poddar and H.C. Biyani — have been accused of being responsible for the payments crisis in Calcutta.
Call it systemic failure or blinkers, the market regulators — the department of company affairs then headed by Arun Jaitley, the Securities and Exchange Board of India and even the Reserve Bank — were found inept in dealing with the situation.
The Reliance group figures in the report for sucking some Rs 1,900 crore out of the market in 10 days in March 2000, though completely legally, which was followed by a crash.
Of particular interest to the common man is the report’s indictment of the finance ministry in the UTI case. Investigation has revealed that “the investment decisions in UTI were not in accord with the interests of the investors”.
n See Business Telegraph