The special court has discharged seven persons, including officials of the Can Bank Financial Services Limited (Canfina), in the securities scam case that shook the markets in the early 1990s without framing charges against them and without them having to face a trial.
After 11 years, special judge Justice J.H. Bhatia discharged 7 officials of Canfina and Rahul and Company, a Kolkata based broking firm, from the charge of allegedly entering into a criminal conspiracy during 1991-92 to cheat Canfina.
CBI officials said that Canfina had entered into fraudulent transactions in Unit Trust of India (UTI) and bonds to accommodate Rahul and Company without any authority and thereby caused wrongful loss to the Canfina.
The investigating agency had registered an offence in 1997 of cheating and corruption against the executive vice president of Canfina, M.K. Ashok Kumar, assistant VPs of Canfina S. Mohan and N. Balasubramaniam and Rahul and Company and its executives Vivek Mundra, Harsha Himmatsinghka and proprietor Gourishankar Kayan.
The CBI claimed that Kumar, Mohan and Balasubramaniam had entered into ready forward transactions (RFT) in securities. Under RFT, when a transaction is struck, buying back for the same securities on a fixed future date is determined by both the parties, including the rate of interest.
In the present case, there were 8 RFTs, amounting to Rs 40 crore, entered into by Canfina with Rahul and Company on September 9, 1991. Canfina was shown to have purchased 3 crore units of UTI from Rahul and Company. According to the RFT, the very same securities were to be purchased back by Rahul and Company.
According to the CBI, the 8 transactions were only paper transactions, and that there was a conspiracy between Canfina officials and Rahul and Co, whereby Canfina advanced huge amounts to the company under the cover of the structured transactions without security of units of UTI in existence or delivery to Canfina. The units in question belonged to Hindalco.
In the present case, there were 8 RFTs, amounting to Rs 40 crore, entered into by Canfina with Rahul and Company on September 9, 1991. Canfina was shown to have purchased 3 crore units of UTI from Rahul and Company. According to the RFT, the very same securities were to be purchased back by Rahul and Company.
According to the CBI, the 8 transactions were only paper transactions, and that there was a conspiracy between Canfina officials and Rahul and Co, whereby Canfina advanced huge amounts to the company under the cover of the structured transactions without security of units of UTI in existence or delivery to Canfina. The units in question belonged to Hindalco.
However, the counsels for accused Vivek Mundra, contended that there was no material to frame charges against the accused. The units figuring in the transactions were handed over to Canfina by Rahul and Co, which got it from Hindalco along with blank sign transfer dates with authority to transact and raise funds for Hindalco from the market.
Justice Bhatia held there is no material what so ever to frame charges against the accused except the statement of chairman and MD of Canfina, which was recorded by the CBI only in 2007, after a gap of 12 years.