Bank denied access to stock scam parties' books
STANDARD Chartered Bank, one of the foreign banks at the forefront of a securities scam that rocked India in April 1992, has been denied the right to examine the books of other parties involved in the scandal.
Justice Sam Variava, who heads the special court set up to settle claims arising from the scam, passed strictures against Standard Chartered, saying the bank was guilty at first sight of being an equal and willing party to the large scale diversion of funds into private pockets.
In his order, the judge rejected an application by Standard Chartered, seeking the court's permission to inspect the books of some of the involved parties from which the bank says it must recover funds worth 12.39 billion rupees (about HK$3.13 billion).
The total extent of the scam had exceeded 30 billion rupees, caused a drastic fall in stock market values across the board. It involved most foreign banks and some nationalised Indian banks, notably the State Bank of India.
While rejecting Standard Chartered's application, the judge observed that large irregular transactions, in which prominent bank personnel had been involved, had been the cause of the scam.
'Had the petitioners [Standard Chartered] chosen to abide by the norms and regulations [framed by the Reserve Bank of India], there would have been no fraud,' said Justice Variava.
'At this stage, it cannot be said that the petitioners are innocent parties who have been taken for a ride.' The judge added that, at this stage, it was neither appropriate nor correct to grant Standard Chartered the right to inspect the books of other involved parties.
'If allowed access to the books of other involved parties, it is possible that Standard Chartered, which is regularly before this court, may mould claims, defences or evidence on the information which becomes available to [it] through this process,' he added.
The court, however, agreed that Standard Chartered's money, and other public monies, had disappeared and that efforts must be made to trace the funds.
'The bank's right to recover [its] money will be safeguarded,' he said, telling bank officials: 'In order to facilitate recovery of the money, this court could set up a tracing committee under its supervision.
'This committee could undertake the task that Standard Chartered itself has proposed to do.' The judge further observed that, apart from stockbroker Harshad Mehta, who had been in the thick of the scandal, and Fairgrowth Financial Services, none of the other involved parties had sufficient assets to meet their liabilities.
