Bhansali Scam

History:
The Bhansali scam took place in the year 1995 and is worth Rs.1200 crores and the key person
involved in this businessman was Chain Roop Bhansali. Between the years of 1992-1996, Chain
Roop Bhansali was running a lot of financial firms like CRB Capital Markets, CRB Mutual Fund
and CRB Share Custodial Services. He offered a lot of attractive schemes and made the public
and big organizations invest in his financial outfits. Once investment was made Bhansali very
conveniently transferred the money to imaginary companies. Chain Roop Bhansali made
enormous amounts of money through his various financial outfits like through CRB Capital
Markets he raised Rs 176 crores, CRB Mutual Funds -Rs 230 crores and fixed deposits earned
him around Rs 180 crores. Thus he easily owned money worth Rs 900 crores from all the
sources. Bhansali would pay the interest on investments by borrowing from the market, but
however when there was a stock market crash in the year 1995 it took a toll on all the financial
institutions owned by Bhansali and he swindled nearly an amount of about Rs.1200 crores

Chain Roop Bhansali:

Chain Roop Bhansali belonged to a very common middle class jute trader's family in Kolkata. He
had a degree in Commerce and in the year 1980 he completed his Chartered Accountancy. It
was at the time of his completion of Chartered Accountancy he also ventured into his financial
consultancy firm, named 'CRB Consultancy: Because Bhansali had lot of personal contacts with
people in various field he was very quickly and successfully able to get business of providing
issue management services to a few well-known and reputed companies in Kolkata. The name
CRB consultancy was changed to CRB Capital Markets and became a public limited company in
the year 1992 The CRB capital market did very well in various fields and rendered good service
in various fields like merchant banking, leasing and hire purchase, bill discounting and corporate
funds management, forced deposit and resources mobilization, mutual funds and asset
management, international finance and forex operations. In a very short span of time he raised
an extremely good amount of money CRB Corporation Ltd, raised Rs.84 crores through three
public issues between May 1993 and December 1995

Arihant Mangal Growth Scheme:

The CRB Mutual Funds which was launched in August 1994 came up with a successful scheme
named Arihant Mangal Growth scheme which raised almost Rs.230 crores from the market. The
financial institution of Bhansall also came up with fixed deposits which intensified the fixed
deposits from the investors to Rs.180 crores. Another 100 crores was lifted in January 1995 by
the CRB Share Custodial Service. A large group of people turned up for a specific scheme where
an A+ rating was given by CARE and upfront cash incentives of 7-10% Also Bhansali was
maintaining a close and harmonious relationship with almost all the religious leaders and
political parties which in turn favored him in bringing in customers and investors.

Central Bureau of Investigation:

Fortunately various other factors like global outlook and timely foreign collaborations also
favored Bhansali for his success in his field. It was only when his capital grew from Rs.2 crores in
1992 to Rs.430 crores in 1996 there was a suspicion. Unfortunate times came over to Bhansali
only during the mid 1996 where media played a major role in bringing to light the fraud
activities which was being committed by the CRB group. Thus Chain Roop Bhansali was soon
charged under various grounds like fraud, cheating, siphoning off funds from SBI and much
more. An FIR was filed against CRB as per section 120B read with section 420 of the Indian Penal
Code and section 13(2) read with section 13(1) D of the corruption Act. It was during this time
the great swindler Harshad Mehta's scam was rolling among the public. But however people
concentrated more on Harshad Mehta without realizing that there was also an equally
imminent swindler Bhansali in the market whose foundation was already laid in 1991. Over a
period of time Bhansali very cleverly transferred away the investor's money and raised it to
about 1200 crores by attracting the public with various great deal of profit making investment
schemes over a period of nearly 4-5 years. The most surprising fact is how the major financial
regulatory bodies like SEBI and RBI failed to perceive the possibility of the practice of sharp
fraudulence taking place behind the rosy schemes.

BHANSALI'S Evil Intentions Schemes:

Bhansali's evil intentioned schemes captured the people at a very high success rate and also
because of the major financial bodies like RBI and SEBI which did not pay attention to the rate
of fast growth of all the CRB firms Impossible to explain enough, RBI had considered issuing an
in-principle license for a bank to an unregistered finance company like CRB while the
applications of well reputed giants like TATA and Birla were rejected. The next foolish thing done
by the rating agency CARE which were not even able to smell that there was something wrong
in the company and instead rated the CRB's with a three star rating of AAA Only in 1996 things
were not really favouring Bhansali when the market fell heavily and he was trapped in the
deliberately cruel surrounding of raising the money from market and paying back on high
interest rates. Besides, Bhansali was soon revealed when an SBI official without any intention
discovered that he had duped SBI of Rs 59 crores by issuing fake dividend warrants and
converting them into money or encashing it.

Arrest of Bhansali:
Once the scam was brought to light by the media, Chain Roop Bhansali escaped from the
country to Hong Kong along with his wife Manjula, parents, sister and his two children. Later the
Central Bureau of Investigation arrested Bhansali, but however they let go his wife Manjula free
when who was in fact the director in CRB Capital Markets which has been at the centre of an
immoral motive and tale of financial dishonest activities that left thousands of investors in CRB
group companies stranded. The Central Bureau of Investigation has worked in a well organized
and planned manner in regard to Bhansali's scam case. The CBI has not only registered a case
against Bhansali but also on few other officials of the State Bank of India for they have cheated
the bank a huge chunk of money of about Rs 57 crores. The report submitted by the CBI clearly
shows that the CRB Caps apparently used their accounts in SBI to take away funds from the
bank concealing the true nature of encashment of interest warrants and refund warrants of
principal amount.
Conclusion:
The government later asked the RBI to prepare a panel of auditors asking to explore the
possibility of making auditing of NBFCs a prerequisite to registration. The CBI also registered a
case against a few of the officials of the SBI who cheated the bank with Bhansali.

This scam shattered thousands of investors’ dreams, and led to a loss of hard earned investors’
money. Around 20,000 investors finally hoped to get back some of their money when the Delhi
high court set up a 3-member special committee to ensure termination of the scheme &
repayment to unit holders. Unit holders of CRB Mutual Fund – Arihant Mangal Scheme were
invited to contact the Registrar & Transfer Agency with necessary documents for redemption of
their units. The investors were paid back at a provisional NAV of Rs. 6.48 per unit almost 20
years after they bought units of the doomed Arihant Mangal Scheme.

In his later years he shifted to Ghaziabad, and became the Chairman of Vidya Bharti School,
where again he was exposed by the RTI of dominance and torture to the teachers and
management of the school. These kinds of scams opened the eyes of the investors and the
regulatory authorities. As once mentioned by Vinod Baid, promoter, Prudential Capital Markets,
“Few people realize it but the CRB collapse has done a great deal of good to the country. It has
stopped investors from seeing ads and feeding money into the fixed deposit whirlpool”.
 Bofors scandal Scam

Bofors is an iron works, cannon maker, and defence industry located in Sweden. The name
Bofors is strongly associated with a 40mm anti-aircraft gun based on a Bofors design.

Introduction of Bofors scandal:

The Bofors scandal was a major corruption scandal in India in the 1980s and was far worse than
any that India had seen before in 80s. PM Rajiv Gandhi and several others were accused of
receiving kickbacks from Bofors AB for winning a bid to supply India's 155 mm field howitzer. It
has been speculated that the scale of the scandal was to the tune of Rs. 400 million.

What was the Bofors Scam

The years of 1980 to 1990 saw a huge scam take place with the involvement of India and
Sweden with the Indian National Congress playing a great part in it and the Prime Minister of
India, Rajiv Gandhi being one of the prime suspects. A $1.4 billion deal had been signed
between the Swedish weapons manufacturer Bofors and the Government of India for the selling
field howitzer guns, and supply twice the amount as laid by the contract. It was a huge deal
where tons of money was invested, even money deviated from other fields and projects.

India had signed a contract worth billions on 24th March, 1986. They had entered into a
contract with AB Bofors, Swedish arms manufacturers for buying more than 400, 155mm
howitzers and ammunition for the Indian Army. But suddenly the Swedish National Radio
brought in front of all that how about $40 million had been paid to agents and middlemen as
commission for ensuring the success of the deal. But this contention was clearly denied by both
the parties. To avoid any sort of exposure Rajiv Gandhi’s government had also passed a bill to
suppress the press. In 1987, Rajiv Gandhi had denied these allegations in the Lok Sabha. But in
the same year, Sweden’s National Audit Bureau had released a report highlighting the payment
of $40 million by the Swedish company, Bofors, to Indian middlemen but still quite a bit of the
complete report was not revealed as it involved bank secrecy protocols. This report had also
notified that the investigations related to this case had been under undue influence and
handled accordingly mainly because of the lack of cooperation from Bofors company. Although
in August of the same year the Bofors had confirmed the allegations of the payment they had
still refused to disclose information on the middlemen.
Rigorous and persistent investigations had soon revealed the role of Ottavio Quotrochi, an
Italian businessman in the deal as well. Information regarding Ottavio Quotrochi’s secret bank
accounts had been discovered and it had been traced that he had benefited almost $7.3 million
from the Bofors deal. The ninth general elections had seen three parties contending for the
powerful position. Mr. Rajiv Gandhi’s doubtful integrity and character had resulted in him losing
his position to V. P. Singh.

The payoffs were in violation of the formal assurances sought and obtained from Bofors by the
government of India. The evidentiary basis for the investigation was the documentation leaked
to The Hindu by the confidential source, the key documents being the Swiss bank papers,
transaction documents, secret contracts, and a diary and notes kept by Ardbo, which had been
seized by the Swedish police.

Timeline of bofors case:

March 24, 1986: The Rs 1,437-crore deal between India and the Swedish arms manufacturer AB
Bofors for the supply of 400 155mm Howitzer guns for the Indian Army was entered on March
24, 1986.

April 16, 1987: The Swedish Radio on April 16, 1987, had claimed that the company had paid
bribes to top Indian politicians and defence personnel.
April 20, 1987: Rajiv Gandhi told the Lok Sabha that no kickbacks were paid and no middlemen
were involved.

August 6, 1987: Joint Parliamentary Committee (JPC) set up under former union minister B
Shankaranand to investigate the kickbacks allegations. he panel submitted was to submit its
report in the next two years, coinciding with the parliamentary polls.

July 18, 1989: JPC submitted report to the Parliament

November 1989: Congress was defeated in general elections, therefore, Rajiv Gandhi lost his
position.

December 26, 1989: Then prime minister V P Singh-led government barred Bofors from signing
any contract with India.

January 22, 1990: The CBI had registered the FIR for the alleged offences of criminal conspiracy,
cheating, forgery under the Indian Penal Code and other sections of Prevention of Corruption
Act against Martin Ardbo, the then President of AB Bofors, alleged middleman Win Chadda and
Hinduja brothers.

February 1990: First Letter Rogatory sent to Swiss Government.

February 1992: Journalist Bo Anderson’s report on the Bofors scandal was published, which
created a massive controversy.

December 1992: The Supreme Court rejected the complaint in the case reversing Delhi High
Court’s decision.

July 1993: The Swiss Supreme Court dismissed the appeal of Ottavio Quattrocchi and other
accused in the case. Quattrocchi was an Italian businessman who was being sought until early
2009 in India for criminal charges for acting as a conduit for bribes in the Bofors scandal. In the
same month, Quattrocchi left India and has not returned since.

February 1997: Non-bailable warrant (NBW) and Red Corner notice issued against Quattrocchi.

March-August 1998: Quattrocchi filed a plea, which was rejected in Supreme Court as he
refused to appear in the Indian court.

December 1998: Second Rogatory Letter sent to the Swiss government to probe into the
transfer of money from Guernsey and Austria to Switzerland.
October 22, 1999: The first charge sheet in the case was filed against Win Chadda, who was an
agent of A B Bofors, Quattrocchi, then defence secretary S K Bhatnagar, Martin Karl Ardbo, who
was the president of the gun manufacturer, and the Bofors company.

March-September 2000: Chadha came to India to face trial and sought permission to go to
Dubai for medical treatment but the plea was rejected. An open NBC was issued in July against
Ardbo.

September-October 2000: Hinduja brothers issued a statement in London that said that the
funds allocated by them had no connection to the Bofors deal. However, a supplementary
charge sheet was filed against Hinduja brothers and a chargesheet was filed against
Quattrocchi, who asked Supreme Court to reverse the order of his arrest but when the court
asked him to appear before CBI for a probe, he refused to oblige.

December 2000: Quattrocchi was arrested in Malaysia, but later received bail on the condition
that he does not leave the country.

August 2001: Bhatnagar dies of cancer

December 2002: India requested for Quattrocchi’s extradition but Malaysia High Court turned
down the request.

July 2003: Letter of Rogatory sent by India to the United Kingdom seeking the freezing of
Quattrocchi's bank accounts.

February-March 2004: Court had exonerated late Rajiv Gandhi and Bhatnagar the case and
directed framing charges of forgery under Section 465 of IPC against the Bofors company. The
Malaysian Supreme Court rejected India’s extradition request of Quattrocchi.

May-October 2005: Delhi HC quashed charges against the Hinduja brothers and A B Bofors. The
apex court had allowed Ajay Agarwal, a Supreme Court lawyer, to file an appeal against the high
court verdict in the absence of any appeal by CBI within the mandatory 90 days.

January 2006: SC directs Centre and CBI to ensure the status quo of freezing Quattrocchi's
accounts. However, money was withdrawn on the same day.

February-June 2007: The Interpol arrested Quattrochi at Iguazu Airport in Argentine. Three
months later, the Federal court of the first instance declined India’s request for extradition.

April-November 2009: CBI withdrew Red Corner Notice against Quattrocchi and sought SC’s
permission to withdraw the case as continuous efforts of extradition had failed. Later, Ajay
Agarwal filed an RTI application seeking the documents of de-freezing Quattrocchi’s account in
London, but CBI refused to reply to the plea.
December 2010: Court reversed order on CBI plea to discharge Quattrochhi. Income tax tribunal
asked the income tax department to get the tax dues from Quattrochhi and Chaddha’s son.

February-March 2011: Chief Information Commission accused CBI of withholding information. A

month later, a special CBI court in Delhi had discharged Quattrocchi from the case saying the
country cannot afford to spend hard-earned money on his extradition which has already cost Rs
250 crore.

April 2012: Swedish police chief Sten Lindstrom revealed that he was the Deep Throat in the
Bofors case and the key source that Chitra Subramaniam turned to. He added that the Swedish
Police had no evidence of Rajiv Gandhi or Amitabh Bachchan, who was a close friend the former
prime minister, receiving kickbacks in the Bofors scam. Amitabh Bachchan's name first appeared
in this scandal through a newspaper who printed his name and a case was filed against him but
later he was declared innocent.

July 2013: Quattrocchi, who fled from here on July 29-30, 1993, has never appeared before any
court in India to face prosecution. He passed away on July 13, 2013. The other accused persons
who have died are Bhatnagar, Chadda and Ardbo.

December 1, 2016: The hearing of Agarwal’s had taken place after a gap of almost six years
since August 12, 2010.

July 14, 2017: The CBI said it would open the investigation on the Bofors case if the Supreme
Court and Centre orders for the same.

October 19, 2017: CBI asserted that they will probe the facts and circumstances revealed in
connection to Bofors scam, including the information provided by Michael Hershman to a TV
channel in an interview, wherein he made several revelations and named some powerful
politicians in India linked with the deal. Michael Hershman, who first found Bofors papers, was a
secret investigator the Indian government had deployed.

Conclusion:
The CBI in this case was also blamed for not taking adequate steps at proper times. They hadn’t
opposed the appeals of the accused in the courts well, proper letters needed to be sent to the
international courts were not done in time, they had delayed lodging FIRs, and so on. Whether
it was the inefficiency of the CBI or an internal corruption is yet a topic of debate. A difficulty
faced during that time was in the pre-internet era most of the substantial materials were in
Swedish, not much helpful as it hardly gave any clear information but this when declassified and
seen from today’s perspective, those materials could bring in a different side of the case if it had
been revealed at that time. Time and again the absence of much evidence turned in favour of
the influential offenders in this case.

Even when Congress came to power again the first step it took was to dismiss and quash the
charges of corruption and bribery against Rajiv Gandhi and other suspects related to the party.
During the investigations of the Bofors scam when investigators had been sent to Switzerland
they had also discovered transactions and information related to the 1981 submarine contract
with a West German firm, Howaldtswerke-Deutsche Werft AG (HDW). Here too, it was claimed
that $23 million had been paid to an Indian agent for securing the deal. This information was
provided to the Indian Embassy in Bonn, according to which HDW didn’t want to reduce the
price of the submarines because of the commission that had already been paid. Although such
information was denied later.

The Bofors scandal revolved around the Rajiv Gandhi government’s decision to purchase from
the Swedish arms manufacturing company an advanced 155mm howitzer system. The
transaction was valued at SEK 8.41 billion (Rs 1,437.72 crore or $1.4 billion at the prevailing
exchange rate). It turned out that unacknowledged payments aggregating Rs 64 crore or US$ 50
million — termed "commissions" and calculated on a percentage basis — had been paid by
Bofors into secret Swiss bank accounts after the contract was won on March 24, 1986.

The Bofors case will remain an example of how a genuine case can be deliberately sabotaged by
a government run by a party which has a lot to hide from the public. The guilt here rested
squarely on the shoulders of those who controlled the CBI in the 1990s and later during
2004–14. If the CBI registered a PE (preliminary enquiry) in 1988, it was solely because of the
huge public furore created by the Swedish Radio and Hindu disclosures. The government led by
Rajiv Gandhi had no option but to do a thorough investigation, even if it meant an unobtrusive
‘operation whitewash’. The judiciary at the middle level was a willing accomplice, and its ‘holier
than thou’ claim here was almost a charade.

Also this scandal necessitated new registration requirements and guidelines defining the
functions of local agents, which were issued in April 1990. Agents of foreign suppliers selling co-
Indian government departments and public-sector units (PSUs) now must register with the
Directorate General of Supplies and Disposals (DGS&D) and with respective public-sector units.
Foreign suppliers’ bids will not be considered unless they are registered. The directive covered
agents, consultants on retainer, representatives, and servicing agents.