No return trust

Bansali’s network raked in an estimated Rs 100 crore by promising almost 24 per cent returns on investments per annum plus incentives to agents who got the group business. Bansali, who was arrested in Hong Kong and later brought to India is now out on bail. Little is known about his whereabouts.

ACCORDING to Shailesh Ghedia, honorary general secretary of Investors’ Grievances Forum—which blew the whistle on the group—‘‘there is no point in keeping track of Bansali. The investors have lost their money, we do not know if there is any chance of them ever getting it back as Bansali owes money to too many people.’’

Bansali—a chartered accountant by profession—set up the CRB Group with 133 companies under its umbrella. He created a large financial network of agents and sub-agents by promising them lucrative incentives. He also offered 24 per cent interest on investments.

According to Ghedia, as news of the CRB offer to investors started filtering into the market, the Forum began getting curious. ‘‘We wondered how he could repay the principal after incurring high procurement cost and heavy recurring expenses. Given the then financial circumstances in the market this was not possible. Bansali had collected funds much more than his capacity to manage,’’ says Ghedia.

From 1996, the Forum—launched by former member of Parliament Kirit Somaiya —started getting regular complaints from CRB investors about irregularities in the repayment of the principal amount on its maturity. Apparently the money collected was being diverted to other companies in the Group. As the complaints started getting louder, Bansali started borrowing money from the market at a monthly interest of four per cent.

ON June 24, 1997, the Investors’ Grievances Forum filed a PIL (Public Interest Litigation) in the Bombay High Court. The respondents in the podium included: Union Government, Ministry of Finance, RBI, Securities and Exchange Board of India (SEBI), State Bank of India, the investment credit rating agency, CARE, RB Group of companies and its auditors D P Bhaiya, department of Company Affairs, Central Board of Direct Taxes, CBI and the commissioner of Mumbai Police.

The PIL filed by the Forum notes that the respondents failed in their duties which in turn affected investors. It further said that the regulatory negligence gave CRB the halo of a clean company and helped C R Bansali defraud innocent investors. The PIL said, ‘‘The RBI did not deem it fit and proper to publicise that it had issued a show-cause notice on December 9, 1996 asking CRB Capital Market as to why the in-principle banking licence granted to it should not be revoked. This resulted in the CRB Group mobilising huge funds from the unsuspecting public.’’

The writ also mentioned that the four-month delay by RBI to cancel the licence resulted in Rs 100 crore being siphoned off from the public. ‘‘The inescapable inference is that certain officers of the RBI were involved with the CRB Group of companies and deliberately did not do anything…and permitted the CRB Group of companies to siphon off funds,’’ said the writ.

SEBI was charged with the grant of a merchant banking licence to CRB Capital Markets and the permission to float a mutual fund. SEBI stood accused of imposing restrictions against CRB Mutual Fund on one hand and on the other hand of renewing the licence of the CRB Group as merchant bankers.

The Finance Ministry, department of Revenue and CBDT have been named as respondents for giving tax-free status for CRB Caps’ power bonds.

CARE was named a respondent for giving A+ ratings to CRB Capital Markets’ fixed deposit programme which misled depositors into believing that their monies were safe. Interestingly, within four months of getting the A+ credit rating the entire CRB Group went bankrupt.

SOON after the downgrade of the company’s debt rating, the CRB Market scrip started moving down from October 1996. From December of this year it was a sharp decline. During the period between September 3, 1996 to April 17, 1997 —before the whistle was blown on the group—the value of the CRB Capital Markets’ scrip declined from Rs 39.50 to Rs 10.40, while the value of the CRB Corporation scrip fell from Rs 24.50 to Rs 9.80 during the same period.

For almost a month and a half after the PIL was filed in the Mumbai High Court no one represented the Group in Court. When the lawyer did appear it was to seek relief to make payments after a period of 12 years. This was rejected both by the RBI and the Forum.

Meanwhile RBI filed a liquidation petition in the Delhi High Court. Bansali requested the Delhi High Court to transfer the Mumbai cases to Delhi. The request was granted. This was in 1997. Since then the matter is pending. ‘‘Delaying tactics are being used by CRB,’’ sums up Ghedia.