SC raps govt's handling of PSUs' conflict in Harshad Mehta scam

Says the 'whole exercise appears to be an eyewash'

The Supreme Court has dismissed an appeal filed by the National Housing Bank (NHB) against the State Bank of Saurashtra (merged with State Bank of India) over a payment dispute related to the Harshad Mehta scam two decades ago. The apex court also criticised the government's handling of disputes between the two state-owned institutions over payments related to the scandal.

The apex court noted in an order passed on Wednesday that it had earlier directed the dispute to be resolved through a committee of secretaries of the Government of India or the states on more than one occasion.

"Unfortunately, such orders remain unimplemented…," it said. The court observed that no attempt appeared to have been made by the government to find out the truth as to how Mehta was given custody of a high-denomination cheque by one bank and how another paid out money on his instructions on the basis of the same - the apparent genesis of the dispute originally pegged at Rs 95 crore, now with interest running over nearly 20 years.

THE LAW SPEAKS

• The National Housing Bank had filed an appeal against the State Bank of Saurashtra (merged with the State Bank of India), over a payment dispute related to the Harshad Mehta scam two decades ago, in the Supreme Court
• The court has dismissed the appeal, noting it had earlier directed the dispute to be resolved through a committee of secretaries of the Centre or the states on more than one occasion

"The professed purpose of the Special Courts Act - the backdrop of the scandal that shook the nation - and the manner in which the litigation was conducted coupled with the absolute indifference of the government to get at the truth only demonstrates the duplicity with which governments can act," said the order.

The government did not make adequate efforts to settle the dispute, the court observed. It instead wrote to the apex court stating "there seems to be no reason to suggest any change in the decision of the special court".

If such was the case, then "nothing stopped the government from directing both the banks to withdraw their appeals before this court", noted the order.

"The whole exercise appears to be an eyewash. A thinly-veiled scorn for the orders of this court... We must also place our disgust at the audacity of the author of the letter," it added.

The apex court also expressed its disapproval of the finding recorded by a special court established to deal with the issue, which found that the plaintiff did not suppress the truth.

"We are of the opinion that the plaintiff approached the special court with unclean hands by suppressing the relevant material," said the order.

"The entire effort of the plaintiff in the suit, according to us, is to suppress all the relevant information... we are convinced that such a process is resorted to in order to shield the delinquent officers of the bank," it added.

"Whether the payment in question was made in discharge of any existing legal obligation… could be known only when the full facts are disclosed. But disclosure of full facts might (though we are almost certain) lead to trouble to somebody or the other in the management of the plaintiff Bank or perhaps both the banks and God knows who else," it said.