Different strokes

A new star in court?If Justice Variava has handed out a stunning indictment of Standard Chartered Bank and whittled down its loss claims ...

A new star in court?

If Justice Variava has handed out a stunning indictment of Standard Chartered Bank and whittled down its loss claims from Rs 1,233 crore to a mere Rs 280 crore, against broker Hiten Dalal, then the credit goes mainly to one person his lawyer M. P. Rao of Purnanand amp; Co. The complicated transactions have foxed even the best legal brains. Add to this Stanchart8217;s MNC image and Dalal8217;s lack of credibility and it is clear that court room psychographics were tilted against the young lawyer. Yet, his meticulous cross-examination, which Variava documented at length, broke down all the top officers of Stanchart. Bit by bit, he trapped them into revealing themselves as lying, prevaricating or feigning ignorance of transactions and reporting systems, until he could build up a strong enough case to prove that it has an arrangement with Hiten giving it a sure 15 per cent return on securities. Justice Variava8217;s specific acknowledgement of his cross examination, say legal sources, is expectedto see an upward surge in Rao8217;s career graph.

Cost comparison

Though M. P. Rao got to the bottom of the false losses, his client Hiten Dalal could not summon up witnesses to back his charge that he parted with Rs 305 crore-worth of securities only under coercion. Justice Variava ruled that this dragged the case to 52 days and ordered Dalal to bear the cost. Interestingly, the trial had cost the Custodian a mere Rs 1.84 lakh while Stanchart spent Rs 2 crore probably in order to bring its former employees back to India and then to court. Dalal has been ordered to pay the custodian8217;s costs and Rs 30 lakh to Stanchart.

Know your broker

Interestingly, one of the things that finally nailed Pesi Nat, Stanchart8217;s suave former country head, was his claim that he did not know Dalal. He insisted that he first knew about trouble in the bank only in May 1992 when Ravi Iyer informed him of the losses. The defendant then produced a contract note issued by Dalal for a personal transaction of Rs 10 lakhdone for him. Brokers are often blamed for greedily doing business with clients they do not know. Was Nat trapped by the exact opposite?

NAV hypocrisy

At a financial services convention last week, SEBI chief D R Mehta, spoke about the hypocrisy8217; of some senior persons in connection with UTI. He said that in 1996 when SEBI wanted UTI to declare the NAV of its Unit-64 scheme, this person had argued that it was a hybrid scheme and should not be touched. The same person, he says, is now saying that if SEBI has asked UTI to declare NAV, it would not have been a mess. Incidentally, Mehta still feels that NAV cannot be declared overnight, because investors cannot suddenly be told that their holding has depreciated. I wonder how NAV can be declared gradually. Also, to refresh SEBI8217;s organisational memory, it had demanded that Unit 64 should be regulated by it and declare NAV, way back in 1993, under a different chairman. Even if a gradual declaration, of the type Mr Mehta had in mind, had begun in 1993then five years later UTI would not have been a mess.

Perception problems

It appears that SEBI too is in no hurry to release its findings on the payment crises in May 8212; one relates to the role of BSE officials and the second to links of corporate houses to Harshad Mehta8217;s price rigging. Last week, SEBI chief seemed satisfied with the action taken against 34 brokers after the crises. Is it any wonder that there is such a dichotomy between investor perception of SEBI8217;s regulation and its own. Investors think that the matter is being hushed up while SEBI feels that there has been adequate action. The result is that investor confidence is never restored. In fact, Prof Manubhai Shah, who heads the Consumer Education Centre at Ahmedabad, has apparently said as much to the finance minister at the FM8217;s meeting with consumer bodies last week.