Derivative scam: HC issues notice to Centre

The Orissa High Court has asked the Union government to reply on why the Central Bureau of Investigation (CBI) should not be asked to investigate an alleged Rs 25-lakh crore derivative scam.

The Bench of Acting Chief Justice IM Quddusi and Justice Sanju Panda adjourned the hearing yesterday after Assistant Solicitor-General JK Mishra sought more time on behalf of the central government for filing replies.

The case was listed before a Division Bench but could not be taken up as replies could not be received from the Reserve Bank of India, the CBI, and ministries of home and finance. The court had asked RBI and others to file their replies on August 17.

The case has been filed by an individual, Prabjan Patra. According to the petition, Indian companies suffered huge losses on account of exchange derivatives contracts that they entered into a couple of years ago to hedge foreign exchange risks.

The dollar continuously fell against the rupee with the exchange rate reaching Rs 39 in 2007. It alleged that there were widely circulated reports wherein banks and analysts continued to say that the dollar would depreciate and touch levels like Rs 35. Government agencies and RBI did not exercise any caution on credibility/correctness of the reports, said the petition.

Forex derivative contracts to the tune of $3 trillion were traded in India as on December 2007 whereas the total foreign exposure of India was not more than $500 billion annually, it said. Companies across sectors entered into derivative agreements with nationalised and private banks to safeguard their foreign exchange risks, it said.