Tags:
Journalism of Courage
History repeats itself in different climes and different situations yet public memory is proverbially short. Take the US 64 imbroglio. It indicates that little seems to have been learnt from the first capital market scam in independent India when, in June 1957, the Life Insurance Corporation of India (LIC) — nationalised barely a year earlier — entered into a deal of buying shares directly from the dubious Haridas Mundhra. There was a public outcry. The lead to unearth it was taken, not by any enforcement agency or investigative journalist, but by Feroze Gandhi, who took enormous pains to collect evidence in public interest.
The government, too, equally keen on unearthing the truth, appointed a commission of inquiry headed by Justice M.C. Chagla. The proceedings, which began on January 20, 1958, were open to the public which took a keen interest. A large number of witnesses was examined under oath, including the then finance minister, T.T. Krishnamachari (TTK), and the principal finance secretary, H.K. Patel. It was over on the eleventh day and a comprehensive report was released by the government on February 13, 1958. Such speed is unimaginable today.
What was also striking was the objectivity of the government which deputed M.C. Setalvad, the attorney general — to assist the commission in arriving at the truth. This is in total contrast to the practice of attorney generals defending the indefensible, as Soli Sorabji did in the Ayodhaya case. The commission was all praise for Feroze Gandhi. In Parliament, too, questions were raised by members across the spectrum. This was due to the high regard for clean governance and respect for the letter of the law by Prime Minister Nehru, who lost no time in advising TTK to tender his resignation.
On the subject of ministerial accountability, Justice Chagla is both succinct and unequivocal: the testimony of the finance secretary was found to be more explicit and reliable, apart from the constitutional position in which the minister ‘must take the responsibility for actions done by its subordinates’. As for H.M. Patel, the commission was of the view that ‘it is impossible that he should proceed to finalise it (the deal) on his own’, adding that ‘the lack of repudiation on the part of the Minister would go to support Shri Patel’s story that the Minister had approved of the transaction in Bombay on the 20th June.’
It is equally unfortunate indeed that these comments and conclusions are not even referred to in the context of the behaviour and deeds of the former UTI chairman, P.S. Subramanyam, even though nemesis caught up with him eventually. As for the former finance minister and his ministry, they persist in disowning accountability in utter disregard of propriety. No tears need be shed over Subramanyam’s unceremonious exit. But a sober reappraisal of the chain of events is called for. The fact is that the entire US 64 imbroglio could have been prevented had the guidelines in the Chagla report been followed. A significant feature is that it concedes the role of LIC as a major investor in stabilising the capital market, stressing that LIC’s funds should only be used ‘for the benefit of policy-holders and not for any extraneous purpose’ which, if at all, ‘must be the larger interest of the country’. To that extent, the government has now acted rightly, as the market has since started a recovery.
While moving the UTI bill in the house in 1963, the then finance minister had declared that the proposed institution was meant to serve the needs of the small sources and ‘that too, the smallest of the small means’.
The genesis of the present scam can be traced back to the nineties, when the the funds of modest investors were squandered in a series of misadventures. Those guilty of this have got off unpunished. It is agonising to find that despite clear guidelines, those in power seem to have developed an immunity to the vital need of probity in the managing of public funds.
The peril of liberalisation without stringent regulations is best highlighted by J.K. Galbraith, in his classic work, The Great Crash 1929. He traced its genesis to American business having ‘extended its hospitable arms to an exceptional number of promoters, grafters, swindlers, imposters’. History, it seems, continues to repeat itself.
