The Telegraph
Since 1st March, 1999
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Let off the hook

The government’s action taken report on the findings of the joint parliamentary committee constituted in April/July 2001 to enquire into the stock market scam of autumn 1999-spring 2001 (the first 18 months of the present National Democratic Alliance government’s term of office) and the Unit Trust of India/Unit Scheme-64 imbroglio, which grew out of the stock market scam, has evoked surprisingly little attention in the media. Submitted on the last day of the last session of Parliament, the monsoon session is still to take it up. Chances are it will be debated sometime over the next fortnight or so.

There appear to be two reasons for the relative lack of interest in the JPC/ATR issue. First, the stock market has begun recovering. Second, Jaswant Singh has bailed out US-64. He has done so by injecting into UTI, for the benefit of two million unit holders, approximately what he is willing to spare on food security for the 300 million Indians who depend on the public distribution system. Nothing illustrates more clearly that it is not issues of governance involving the bulk of the people of India which drives the politics of our democracy but the material satisfaction of the upper end of the middle class.

Two years of stagnation in our capital markets have had the most deleterious consequences for domestic savings and investment, direct and institutional foreign investment flows, the financial health of banks, particularly banks in the cooperative and private sectors, and public sector financial institutions, many tottering on the verge of bankruptcy. The small saver — the sheet-anchor of our economy — has been the worst hit. Consumer confidence — a key variable in driving growth — has collapsed. In consequence, gross domestic product growth rates have been depressed to the lowest level in two decades.

The lessons of the scam are in danger of being forgotten in the “get-rich-quick” euphoria generated by a stock market which has at long last started recovering. In the current speculative frenzy, it is forgotten that this boom too will turn to bust unless the critical issues of sound regulation and good governance raised in the JPC report are conscientiously addressed instead of being fudged and brushed under the carpet as they have been in the ATR. In thus reacting with indifference to the deeply flawed ATR, we are sowing the wind and will therefore reap the next whirlwind of financial disaster and capital market collapse. The beneficiaries, as ever, will be the crooks.

The ATR dismisses in a most cavalier manner not almost all, but quite literally all of the adverse findings of the unanimous JPC report — which took 21 long months to prepare, and ran to close on 700 pages — each one of which was argued over and unanimously settled by a JPC comprising a majority of ruling coalition members. It was none other than the present deputy prime minister who, in his less exalted incarnation as a member of the opposition, had described JPCs as “Parliament in miniature” in relation to the initial ATR on the unanimous 1992 JPC report on the Harshad Mehta scam. Advani then had fervently maintained that when a JPC comes to unanimous conclusions, there is no scope for the government to reject such unanimous findings. The leader of the opposition then, and now prime minister, had weighed in with the imperative need for the finance minister to instantly resign, accepting “moral responsibility” for all that had gone wrong. And it was none other than the present finance minister, Jaswant Singh, who had insisted that the JPC’s findings be treated as the “lowest common denominator” and not the “highest common factor” as the report inevitably involved compromises in the quest for unanimity. This is as true of this report as the last. The sins of Sinha et al as listed in the report are only the minimum that could be agreed upon unanimously. The full list of their sins of misgovernance runs much longer and a lot lower.

This JPC report is just as unanimous as the previous JPC report. But in total repudiation of all they had to say when in opposition in 1993-94, the ruling coalition, comprising no less than seven members of the previous JPC (Jaswant Singh, Yashwant Sinha, George Fernandes, Murasoli Maran, Ram Naik, Harin Pathak, and Digvijay Singh) have ignored or rejected every adverse finding against the ministry of finance (under Yashwant Sinha), the department of company affairs (under Arun Jaitley) and the Central Bureau of Investigation (under the prime minister, no less!).

Unsurprisingly, in the same cavalier spirit, the ATR dismisses or ignores adverse findings against the key statutory regulators — the Securities and Exchange Board of India and the Reserve Bank of India. It only lets indictments stand against individual fraudsters, although the JPC has defined the expression “scam” as follows: “Individual cases of financial fraud may not in themselves constitute a scam. But persistent and pervasive misappropriation of public funds falling under the purview of statutory regulators and involving issues of governance becomes a scam.”

The ATR explicitly accepts this definition of “scam” — it is just about the only JPC observation unquestioningly accepted by the ATR! But immediately thereafter, in a complete turnaround, the ATR only accepts and acts on the JPC’s findings against individual fraudsters. It does not apply the litmus test of determining, as the JPC has done, whether such individual fraud was the consequence of “pervasive and persistent” failure of effective regulation involving “issues of governance”. In consequence, not only are all ministries, department and government agencies let off the hook, the regulators too go scot-free on the wholly bogus argument that as SEBI/RBI/UTI are statutorily “autonomous”, Parliament cannot hold either the regulators or the ministers responsible for their misdeeds. The ATR thus subverts the entire jurisprudence on which our parliamentary system of democracy rests.

The JPC says: “While accepting that managerial and functional accountability is required to be vested in statutory independent Regulators so that they can perform their functions effectively and without undue interference, the Committee stresses that accountability must go hand-in-hand with autonomy and the principles governing the responsibility of the Minister to Parliament in terms of the constitutional jurisprudence under which the parliamentary system works.” So, at the very least, Yashwant Sinha must go. So must Arun Jaitley. And so, of course, must the minister in charge of the CBI, one Atal Bihari Vajpayee. And if they won’t go, they will have to be driven out. By us — the People of India.

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