ICICI-Videocon case: When history repeats itself more than once

"History repeats itself, first as tragedy, second as farce," Karl Marx had famously said. In 2013, when Prime Minister Manmohan Singh was addressing a packed gathering of investigators of the Central Bureau of Investigation, he cautioned them from sitting in judgement over policy formulation, without any evidence of malafide. 

This was the first caution in the public domain to the agency coming from the government a year ahead of the 2014 Lok Sabha elections. Embroiled in a series of corruption cases, the UPA-2 government was ticking off the CBI from holding "ill informed" inquiries and investigations against public servants that was directly impacting the policy-making ability of their government.

Dr Manmohan Singh said, “In order that public servants may not be paralysed in taking effective decisions based on their own sound judgment and on the apprehension of an ill-informed inquiry or investigation, it is necessary that lines of confidence be clearly drawn between investigating and police agencies on the one hand, and honest executive functionaries on the other." Calling for greater care in investigation, he said "pronouncing decisions taken with no ill-intention within the prevailing policy as criminal misconduct would certainly be flawed and excessive".

The opposition BJP was quick to latch on to Dr Singh's comments accusing the Congress-led government of putting pressure on institutions like the CBI. Interestingly, the country's premier anti-graft agency is once again in the crosshairs of a political battle due to the fast-approaching general elections in May. 

This time it is the BJP government's Union minister Arun Jaitley who has cautioned CBI against indulging in "investigative adventurism" over "professional investigation". His caution came soon after the CBI converted its Preliminary Inquiry (PE) into an FIR in the alleged irregularities in the Rs 1,730-crore ICICI Bank-Videocon loan case. The CBI has named former ICICI bank chief Chanda Kochhar; her husband Deepak Kochhar who is MD of Nupower Renewables Ltd, and V.N. Dhoot, MD of Videocon group, as accused in the case on January 22. The CBI alleged that Chanda sanctioned certain loans to private companies in a criminal conspiracy with other accused to cheat ICICI Bank.

Jaitley's caution to the CBI appears to many long-term observers as a case of history repeating itself. However, the warning that comes from a top cabinet minister of a government which claims a strong leadership and a corruption-free record would appear tragic to many. Jaitley was in the US for medical treatment when the CBI registered its FIR naming top bankers. 

In a blog he wrote: “Sitting thousands of kilometers away, when I read the list of potential targets in the ICICI case, the thought that crossed my mind was again the same—instead of focusing primarily on the target, is a journey to nowhere (or everywhere) being undertaken? If we include the entire who's who of the banking industry—with or without evidence—what cause are we serving or actually hurting. My advice to our investigators—follow the advice of Arjun in the Mahabharat—Just concentrate on the bull's eye (sic)", he wrote.

By registering an FIR, the CBI has not only begun a full-blown probe into the alleged "quid pro quo" in the disbursal of loans given to Videocon, but also launched a probe into the role of top bankers who were part of the sanctioning committee when six high-value loans were disbursed to various Videocon Group companies between June 2009 and October 2011. “These loans have turned NPA resulting in wrongful loss to ICICI Bank and wrongful gain to the borrowers and accused persons," said the FIR.

The CBI said these loans were sanctioned on various dates by various committees having senior officials of ICICI Bank as members, namely its former chairman K.V. Kamath; current MD Sandeep Bakhshi; K. Ramkumar; Sonjoy Chatterjee (CEO Goldman Sachs India); N.S. Kannan; Zarin Daruwala (CEO, Standard Chartered India); Rajiv Sabharwal (CEO Tata Capital) and Homi Khusrokhan. 

The role of these senior officers of the sanctioning committee may also be investigated, said the CBI. All these officials are not accused in the case and only find mention in the text of the FIR which does not elaborate further.

It is this mention of leading names of the banking sector in the CBI's FIR that prompted Jaitley to rebuke the CBI. He said one of the reasons why conviction rates are poor is that "adventurism and megalomania overtakes our investigators and professionalism takes a back seat". 

READ: Jaitley targets CBI over Kochhar probe, says adventurism taking over professionalism

Jaitley's comments were retweeted by two Union ministers—Defence minister Nirmala Sitharaman and Railway minister Piyush Goel, who is holding interim charge of finance due to the indisposition of Jaitley.

This time, it was the turn of the Congress to take a swipe at the BJP government. Former finance minister P. Chidambaram said he was glad that Jaitley's conscience and legal acumen have finally stirred to condemn the "indiscriminate targeting of eminent bankers", in cases where the allegations are about thousands of crores of rupees. "The CBI has received the ultimate certificate from the one who has the best ring-side seat, the Finance Minister (on leave): 'Adventurism and megalomania have overtaken investigators'! (sic)," he said.

Chidambaram said the government was in slumber when there was "indiscriminate targeting" of distinguished IAS officers and others, in cases where the allegations are about small sums of money.

One such example was the Aircel-Maxis case in which a number of IAS officers were named. Chidambaram is an accused in the case. Congress party spokesperson Manish Tiwari termed Jaitley's comments as the most telling endorsement of what the Opposition has been alleging for the past 56 months that the investigating agencies are being used as instruments of persecution rather than “just prosecution.” "When the opposition leaders are prosecuted, it is called investigative integrity, but when the suited booted cronies of the government are prosecuted it is called investigative adventurism," he said.

Vipin Malik, a former RBI director, felt that the CBI action cannot be entirely dissociated from the authorities who control it. "It is the CBI director who gives sanction for registering an FIR in a high profile case and informal approval to name senior bank officials who were part of the loan sanctioning committee would have come from its controlling authority. He would not have taken such a sensitive decision himself.” The CBI director in question here is its interim chief Nageshwar Rao, who is currently in controversy with his appointment. 

Terming the CBI FIR as a “disaster for the banking sector”, Malik said the CBI’s move has come at a time when the banking sector is already under stress. "If you want the banking sector to collapse, you can touch few in the system and it will collapse. The banking sector is already under stress with more than half of the state-owned banks under Prompt Corrective Action (PCA) on account of bad loans, profit and capital inadequacies. When a bank is placed under PCA, it cannot issue fresh loans, open new branches or hire. The banking sector works on earnings, but the banking regulator‘s prompt corrective action on state-owned banks clearly shows that the earnings have dropped and the profitability has dipped. After the CBI has named the top bank directors without any evidence to substantiate wrong doings, who will take any decisions to lend?” he asked.

Malik said the RBI needed to act promptly to bring relief to the banking sector by loosening its purse strings. "Unless the RBI comes out with a proposal to release funds to the banking sector, I see difficult times ahead. After all, the reserves of the RBI are for such times and because we have a huge population we have to ensure a minimum basic income... We need to act more responsibly".

Malik also said the CBI was not the competent authority to investigate banking cases. “When I was on the RBI board, I had suggested that we need specialised people to investigate such cases. The CBI cannot look into how banks take decisions, and if we allow the police agencies to understand decision-making processes of banks then god help us!”

The RBI should a take stand before the government that no FIR against bankers is registered without their approval.

In the political space, Jaitley's criticism of the CBI is being seen as a desperate bid by the government to salvage a mismanaged economy. “The government wants to salvage the remnants of the economy and is apprehensive that such FIRs would stall its efforts,” said an opposition leader.

Incidentally, the reputation of the CBI, like the state of the economy, has gone through a churn after allegations and counter-allegations of corruption and political interference between its top brass Alok Verma and Rakesh Asthana spilled out into the open in October culminating in the ouster of both from the agency in January. 

While Verma was removed by the PM-led selection panel on January 10, Asthana who is also facing an FIR has been moved to another agency. 

N.R. Wasan, former director general of Bureau of Police Research and Development said the CBI seems to have thrown caution to the wind in its investigations. “The CBI manual gives seven days time to the agency to convert a preliminary inquiry into an FIR. But, (in the Kochhar case) the CBI has taken more than a year to register an FIR. The manual also says that the agency's FIRs should be sharp and evidence-based. There is always a scope for a second FIR once there is substantial evidence. Vague mentions of persons who are not even suspects in the case is nothing but an example of roving and fishing inquiries which need to be avoided completely," he said. 

The fatal mixture of alleged political intereference, roving inquiries and non-adherence to the CBI manual has chipped away at the reputation of the agency. The cracks were evident even when the Kochhar file landed with the banking division of the CBI. Sources disclosed that there was no unanimity within the agency over the conversion of the PE in the ICICI Bank case into an FIR. 

While the investigators were of the view that the PE should be converted into an FIR, the law officers of the agency had doubts. Their contention was whether the evidence can substantiate the FIR to nail the alleged guilty. Eventually, the view of the investigators prevailed. 

Interestingly, there has also been a series of transfers in the banks fraud division of the CBI in the last few months. Superintendent of police Sudhanshu Dhar Mishra, the investigating officer of the ICICI-Videocon case, was shunted out of CBI a day after the registeration of the FIR amid suspicion that he was leaking information about the searches in the case to the accused. Other senior officers like the Deputy Inspector General of police and the joint director were also transfered several times since October.

After the ouster of its chief Alok Verma, the government is now busy looking for his replacement to fill the top post. Verma is the second CBI director in twenty two years to have been unceremoniously removed by the government on graft charges. The other time a sitting CBI director was removed from the post was in 1997 when the I.K. Gujral government removed Joginder Singh as the CBI director for mishandling of several sensitive cases like the Lalu Yadav fodder scam and Jain Hawala case, besides hobnobbing with politicians involved in various cases. 

CPI(M) general secretary Sitaram Yechury said the removal of Joginder Singh was a deliberate move to cover up the investigation into corruption at high places. "It came in the midst of the CBI investigation into high profile cases—Bofors, Hawala and fodder scam. This hurried action created problem for the United Front government and provided a handle to the BJP,'' he recalled. 

Two decades later, it is now difficult to answer if it is the CBI or the government who is the fall guy. Keen to avoid any problems at its doorstep in the coming months as a new government takes charge, Prime Minister Modi will tread with caution when he sits down to appoint the new CBI director. Unlike 2013, this time the warning has come from the closest quarters.