Variava orders fresh probe into Stanchart

MUMBAI, JUNE 15: Disposing off a petition filed by stock broker, Bhupen Dalal against Stanchart, Justice S N Variava of the Special Court ha...

MUMBAI, JUNE 15: Disposing off a petition filed by stock broker, Bhupen Dalal against Stanchart, Justice S N Variava of the Special Court has ordered Central Bureau of Investigation (CBI) to re-investigate the role of Stanchart officials in the securities scam. Dalal has alleged that Standard Chartered Bank has not lost all the money it claims to have lost in the securities scam and large funds came back to their coffers by way of a reverse infow of funds.

The four Standard Chartered Bank officials are: the role of Pesi Nat, the then chief of Stanchart in India, David Gardiner, Ravi Iyer and R Kannan, senior officials of Stanchart, in the securities scam. The special court asked the CBI whether it had examined the contents of Prakash Yardi report and the bank had followed legal opinion given by their legal advisors. The CBI should find out if the higher ups of Stanchart took any steps to stop these transactions. The minutes of the weekly and fortnightly meetings of the senior officers should be examined bythe CBI. The judge said that this what he had already directed in its order in October but the CBI has not complied with it. The court gave CBI time till September 15th to complete fresh investigations. The judge observed that CBI was only to look into the criminality of the transactions and is not concerned with the reverse flow of funds.

The counsel for Stanchart pleaded that the Special Court has no powers to order reinvestigation, the judge remineded the bank’s counsel that it was he who had argued earlier that the court has the powers to order reinvestigation.

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"This vindicates our position as the application had no merit," said a spokesman for Stanchart. Stanchart however refused to comment further on the issue. According to the petition filed by Dalal, the investigation conducted by the CBI so far is incomplete. The Special Court, by an order in October, 1996, asked the CBI to investigate the involvement of higher-ups in Stanchart. Justice Variava observed on several occasions that transactions ofsuch big volumes could not have taken place without the knowledge of higher-ups in the bank.

Prakash Yardi, a manager in Stanchart, had alerted the management of Stanchart as early as September 10, 1990. He submitted a note to senior officers of the bank in London and Mumbai. Acting chief executive, David Gardiner ordered an enquiry on the very next day. The chief inspector of India, Geoff Williams also conducted an enquiry into Yardi’s allegation and observed that the bank was exposed to substantial credit risks and was contravening regulatory controls. Williams concluded that a new management team which was aggressively pursuing business "deliberately or mistakenly circumvented proper avenues of control, believing their market knowledge in terms of both credit risks and regulatory risk to be fully adequate to safeguard the business undertaken.

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