CBI drags feet on SEBI’s role in CRB scam

The Central Bureau of Investigation has been dragging its feet on a preliminary enquiry (PE) registered in April last year against Partip Kar, executive director of the Securities and Exchange Board of India (SEBI). The PE sought to enquire into Kar’s alleged role granting the approval to C R Bhansali to launch the now famous CRB Mutual Fund in 1994. It is the only case initiated by the Anti Corruption Branch of the CBI against an official of the SEBI in connection with the Rs 1000-crore CRB scam which was unravelled in April 1997. The other cases are two chargesheets filed by the Bank Securities and Fraud Cell of the CBI, in which SBI bank officials are accused with Bhansali. Kar is suspected to have influenced the decision in favour of Bhansali, despite the notes of his (Kar’s) subordinate, Vikas Gauba, who cautioned against granting CRB Capital Markets the licence to sponsor a mutual fund. Gauba had cited the reasons of an inconsistent net worth over five years, lack of dividend paying capacity, and low profitability over the same period amounting to an unsound track record, to deny the approval. While he had pointed out low profitability (for the years 1988-89 and 1989-90) when measured by return on net worth — one% and 0.4%, respectively, he had also cautioned that the last financial year adopted by the company/sponsor was only nine months — April 1, 1992, to December 31, 1992. The profitability had fallen from 36% for 1991-92 to 17% for the nine months from April 1992-Dec 1992. The dividend declared, however, in the corresponding period was 21% and 22% (annualised). Interestingly, documents available with ENS reveal that Gauba’s first note dated August 2, 1993 is unequivocal –“We may, therefore, if approved, advise CRB that it does not fulfill the eligibility criteria.” His second note, dated August 13, 1993, is not so categorical. It concludes “It is therefore for consideration as to whether the applicant, viz CRB has a sound track record in view of the above observations made with regard to the net worth, profitability, and specifically dividend paying capacity for the last five years.” This note also contains various notings by Kar in hand, citing the positive statistics to justify granting the approval to CRB. All the documents, including the final approval, are within the scope of the PE. A preliminary enquiry, on completion is usually converted into an RC (regular case) wherein an FIR is filed, making the basis for a prosecution. Or, it results in a closure report if the agency fails to collect enough evidence. The CBI has been communicating with the Sebi on this material, according to informed sources. CBI DIG K P Raghuvanshi, when contacted, said he could not discuss the case as investigations are still on.