New Delhi, Dec. 20: Nobody wants to carry the can — and former finance minister Yashwant Sinha almost certainly doesn’t even though the Opposition bayed for his scalp today because of the oblique indictment of his role in failing to prevent the Rs 5,000-crore market scam last year that almost led to the collapse of the country’s largest mutual fund, Unit Trust of India.
The specious argument the BJP has put forward is that Sinha’s name has not been mentioned anywhere in the report. But the ministry of finance has been castigated in page after page in the report and it boils down to a case of a transferred epithet — the King and the Crown are the same entities.
Or, look at it another way: Sinha headed the finance ministry during that period and any lapse on its part is a reflection on the way he ran the ministry. The question is: does the conductor take the rap when orchestra botches up the symphony'
The biggest lapse has been the way that the UTI almost foundered on the shoals of bad investment decisions of the people who ran the mutual, like former chairman P.S. Subrahmanyam. But in the end, the UTI has always been run under orders from afar — a point that Subrahmanyam strenuously maintained in his defence.
“Successive ministers of finance (MoF) have confirmed to the committee that they took care to keep themselves informed of matters affecting UTI in general, US-64 in particular and capital market activities that could have a bearing on the financial health of the fund as well as on other schemes,” the report revealed.
Earlier, Sinha had claimed that ‘the finance minister cannot be held responsible for administrative failures or management deficiencies in the case of individual banks and financial institutions’ since only the ‘Revenue’ and ‘Expenditure’ decisions are his direct responsibility.
However, the JPC said division of responsibilities and duties cannot be done under the country’s parliamentary and constitutional system of functioning. “Such a distinction cannot be sustained by the constitutional jurisprudence...the principle of constructive ministerial responsibility is equally applicable to other departments and ministries where acts of omission and commission have taken place in the discharge of function and duties of different levels,” the report explains.
The country’s growing small investor base which had invested their hard-acquired savings in the capital market and Unit Trust of India, the country’s largest mutual fund had their wealth eroded due to fund mis-management by the funds top officials and also in a series of capital market scams from the early ’90s to the recent past.
JPC also found out that MoF did not inform the High Level Coordination Committee on Financial and Capital Markets (HLCC), responsible for reviewing the capital markets, on the financial irregularities taking place. “Had these issues been taken up by the HLCC periodically, it would have definitely helped in minimising if not preventing altogether the irregularities which have surfaced in the present scam,” the report said.
The JPC has categorically blamed the finance ministry saying it should have persuaded the government to intervene in the affairs of UTI keeping in mind the interest of small ordinary unit holders whose investments had the chances of getting eroded.
“The ministry of finance is the nodal authority and co-ordinates the function of all the departments/organisations working under its administrative control. Regulators are accountable to the ministry of finance, which, in turn, is responsible to parliament,” the report observes.
It also said that the government’s accountability for US-64 and other assured return schemes have become explicit after it repealed the UTI Act of 1963.