Rbi Files Wind-Up Petition In High Court

Govt agencies crack down on CRB

Government agencies yesterday cracked down on the controversial crb Capital Markets (CRB) group even as CRB chairman C R Bhansali remained untraceable. While the Reserve Bank of India (rbi) moved a winding-up petition in the Delhi High Court, the Securities and Exchange Board of India (Sebi) announced a series of measures to halt the groups activities, including the re-imposition of a ban on crb Mutual Fund against launching any new schemes. Sebi had earlier imposed a nine-month ban up to June 1996 on the mutual fund.

The capital markets watchdog also asked IIT Corporate Services, the custodian of CRB Mutual Fund, not to dispose of any of the securities held in its custody on behalf of CRB Mutual Fund and to submit inventories of the securities held in the Fund portfolio. The Sebi directive, issued under Section 11B of the Sebi Act, followed the failure of crb Mutual Fund trustees to show up for an emergency meeting with the market regulator yesterday.

 

The filing of the winding-up petition by the RBI marks the first time that the central bank has moved a court seeking the winding up of an NBFC. The RBI has filed the petition under the powers vested in it by the Reserve Bank (Amendment) Act, 1997, which empowers the central bank to file a winding-up petition if it is satisfied that the continuance of an NBFC is detrimental to the public interest or to the interest of the depositors of the company.

The central bank petition, which will come up for hearing today, has sought the appointment of a liquidator and an injunction from the court for disposing off CRBs properties.

In its petition, the RBI cited complaints by several sources, including a co-operative society in Maharashtra, the State Bank of India (SBI) and private individuals. The bank said it was convinced that CRP had defaulted on its commitment to depositors and violated the provisions of the law relating to NBFCs, including disclosure norms.

Even the revenue minister of Gujarat has complained against this company to the RBI. We have based our petition on complaints received by RBI and newspaper reports because detailed information is not available on the company , said RBI counsel H S Parihar. Arun Jaitley is also involved in the case on behalf of the central bank.

The central bank pointed out that it had issued prohibitory orders asking CRB to stop receiving deposits on April 9 and sought detailed information from the company on several issues, including the size and nature of its assets. However, the company provided only sketchy information, charged the central bank.

On May 16, 1997, the central bank issued another order asking C R Bhansali to appear before it within three days. The central banks order was ignored by Bhansali, who is suspected to have fled from the country.

The RBI said that it has been forced to file the petition because CRB offices have closed down and there is no contact with the company.

Asked how CRB can be involved in the case if its top officials remain underground, Parihar said, Lets see whether anyone turns up at the court on Thursday (today). If no one comes, we will request for publication of the petition through the registrar of the court.

The petition has pointed out that NBFCs are not covered under the Banking Regulation Act and as such their accounts and records are not scrutinised thoroughly. The central bank carries out its scrutiny on the basis on an NBFCs annual balance sheet.

In the case of CRB Caps, the balance sheet for the year ended March 1996 appeared to be a healthy one and did not give cause for suspicion, the petition said.

However, the RBI had received a stream of complaints against the company in the past five months, which prompted it to issue the prohibitory orders in April, added the petition.

Meanwhile, finance ministry sources said the ministry had directed both Sebi and the RBI to keep investors interests in mind while proceeding on the CRB case. While the State Bank of India is the single largest loser, with losses amounting to about Rs 57 crore, preliminary investigations peg total investor losses at Rs 300 crore. ``The governments primary concern is safeguarding investor interests, said ministry sources.

Senior Department of Company Affairs (DCA) sources said the department is informally examining the issue to find if any company law violations have taken place. The fact-finding enquiry will be followed by a formal enquiry only if company law violations are detected. Although CRB is a company, its NBFC status brings it under the sole purview of RBI, while its merchant banking facilities are subject to Sebi regulations.

On Tuesday, the cbi had registered a first information report (FIR) against Bhansali, his company and some sbi officials for defrauding and siphoning off Rs 57 crore. The investigating agency has alerted all airports and is checking immigration records to find if Bhansali and his family members have fled the country. It has also asked chief vigilance officers of all banks to report any fraud in Bhansalis dealings with the respective banks.

A cbi team will shortly meet officials of the RBI, SBI and Sebi to discuss the issue, said sources. We do not know how many banks, individuals, depositors or organisations have been cheated so far since neither Bhansalis relations nor key employees are traceable, said a CBI official.

THE CRB SCAM SAGA: HOW THE COOKIE CRUMBLED

April 9: RBI bars CRB from accepting fresh deposits and freezes all its assets March 2: CRB vice-chairman S K Jain resigns

May 1997: BSE shuts down BOLT trading terminal of CRB Share Broking

May 15: CRB shuts down all offices

May 15: CRB Share Custodial Service managing director N M Rampooria informs BSE that it had discontinued services as the registrar and share transfer agent for CRB Caps and CRB Corp.

May 16: RBI sends letter to CRB Caps asking them to present to the RBI monthly cash-flow statements and statements of assets if any. Also asks C R Bhansali to appear before RBI by May 19.

May 19 : Bhansali does not appear before the RBI.

May 20: S P Talwar, deputy governor of RBI goes to Delhi ; CBI files FIR naming accused C R Bhansali.

May 21: RBI files petition in Delhi High Court to wind up CRB and asks for appointment of official liquidator.