An affidavit filed in the Supreme Court (SC) regarding a derivatives scam has alleged that regulatory agencies were part of a deep-rooted conspiracy that resulted in losses of Rs 25 lakh crore to the industry. The affidavit has been filed by an individual, Pravanjan Patra, in a case involving the Foreign Exchange Dealer’s Association of India and the Fixed Income Money Market Derivatives Association of India.
The counter-affidavit was filed in the apex court in response to a special leave petition filed by the two organisations seeking a stay on the Orissa High Court judgment that ordered a probe into the forex dealings of 22 banks by the Central Bureau of Investigation (CBI).
“The criminal conspiracy was hatched by officials of the 22 banks active in derivatives with conspiracy/connivance of RBI/their officials to do or to cause an illegal act of making purported derivative contracts without complying with regulations as prescribed by law or a legal act of derivative contracts by illegal means.”
Alleging that RBI miserably failed to perform its statutory duty, it pointed out that derivative products were sold based on projections that the rupee would touch Rs 30-35 against the US dollar. This was done despite the knowledge of RBI that “under no circumstances” the government could afford the rupee to appreciate even to Rs 40-42 a dollar, “what to say of Rs 30-35”.
The counter-affidavit also quotes RBI’s submission in the high court which said the banks failed to verify the underlying of the derivative transactions and booked contracts beyond the eligibility limit.
Following the high court judgment, CBI had begun investigation into the role of banks in February last year. It also questioned officials of a top public sector bank. Both CBI and the Enforcement Directorate submitted their preliminary report in November.
The banks are alleged to have offered structures in violation of “extant” regulations that resulted the increase in risk and net receipt of premium. Besides, banks did not verify the underlying exposure, RBI in its report to CBI had said.
With due respect to the
Supreme Court (SC)and without prejudice to the subject matter, it is submitted that, such happenings should not ordinarily be deemed to occur without the complicity of the concerned Regulators.
We the common stake holders in the nation’s interest/lives and times of the people of the country shall watch, with baited breaths, and certainly with the deepest faith in, and the highest respect for. the unquestionable integrity of our judiciary, the result of the pending matter before the Hon’ble Court.