Remove Article 370 to salvage Kashmir from Al Qaeda


For some years now, the Kashmir Valley has been witnessing the most sleazy and abysmal form of jihad by way of ‘stone pelting’. The youth of Kashmir have been robbed off their ability and manliness to cut or chisel rocks for building of society and India. For this they must depend on the labour from outside the Valley. It is this labour which has created the recent Chenani-Nashri Tunnel linking Jammu with the Valley.

Weaned on Wahhabi or Salafi Islam, the life of youth in the Valley is self-destructive. Every stone that is hurled at the security personnel is also a hit on Kashmiriyat and ancestors of the stone-pelters. A segment of the population which treats its geography and history as its enemies, is certainly in the brink of destruction.

If conversion to another religion manifests in hatred for inherited ancestors and ethnicity, surely then security analysts must reflect on those streams of religion which cause ‘terrorism’ and lead to the phenomenon of self-destruction and suicide bombers. The stone-pelting facet of terrorism in the Valley has been the consequence of years of religious ferment. The whole country was aware of this ferment, the Kashmiri Hindus even suffered on that account, and yet we never had the intellectual courage to confront it. It is possible that probably the non-Muslims of India did not exercise their intellect on the study of various schools of Islam like Wahhabi, Salafi and Deobandi.

Kashmiriyat was killed in the Valley the day half a million Hindus were terrorized to leave their ancestral homeland and compelled to become refugees in their own country. The Kashmiri Hindus were the last the most tenuous historical link between the Kashmiri Muslims and the Kashmiri Hindus, between the Valley and the Kashmiriyat.

The demographic purge of the Kashmiri Hindus from the Valley was in accordance with a devious and sinister jihadi strategy. The ghettoization of the Valley had been going on for very long. Wahhabi and Salafi ideologies had been consuming the state for many years through the aegis of Madrasas and Mullahs. Ironically, most of these vicious Mullahs belonged to Uttar Pradesh and Bihar. The Mullahs from these states were also primarily responsible for partition of India and creation of Pakistan.

Once Kashmiriyat was killed and requisite radicalization effected, it became easy for Pakistan-based jihadi organizations like LeT, JeM and HM to spread their tentacles.

There should be no doubt that all jihadi organizations active in Pakistan and India, rather the subcontinent, like the LeT, JeM, HM, IM, JMB or even Islamic State, are linked one way or the other with Al Qaeda. Since the Arab jihadis of Al Qaeda find it difficult to operate in the Indian subcontinent, it has outsourced the responsibility to organizations like LeT to conduct jihad in India, Bangladesh, Myanmar, Sri Lanka and Maldives. There are reports to suggest that the organization and structure of Islamic State in the Af-Pak region was established jointly by the ISI and LeT in Peshawar. Sources have also revealed that the Islamic State cadres are operating from the barracks of Frontier Corps in Balochistan.

The subcontinent connection of Islamic State with organizations like LeT, as also the Indian connection has been underscored by a Hindustan Times report dated 19-Apr-2017 in which it has been revealed that the GBU-43B Ordnance, euphemistically referred as Mother Of All Bombs (MOAB), used by the US in Achin district of the eastern province of Nangarhar, Afghanistan had taken toll of nearly 100 militants of which 13 were Indian recruits. It also included two commanders from India, i.e. Mohammad and Alla Gupta. Amongst the killed, was also an LeT commander Sheikh Waqas.

Writing on the significance of Al Qaeda for the jihadi groups, Vahid Brown and Don Rassler in the book ‘Fountainhead of Jihad’ maintains: “In the sense used by Al Qaeda, jihad has come to mean universal privatized, volunteer, militarism in asymmetrical conflict with globally distributed enemy. This phenomenon – also known as ‘global jihadism’ – arose in large part due to initiative of two famous Arab supporters of anti-Soviet mujahideen Abdullah Azam and Osama Bin Laden.” Hafiz Saeed treats Abdullah Azam as his mentor and Guru.

The affinity between Osama Bin Laden and the Pakistani military is well known. Most jihadi organizations in Pakistan and India are beholden to the Al Qaeda for finances and global reach. The Al Qaeda and its affiliate Islamic State are particularly known for their ability to produce some of the most sophisticated jihadi videos for indoctrination and recruitment. It was Osama Bin Laden, who established the Zhawara jihadi training camp in the Af-Pak region. A large number of jihadi leaders in the subcontinent are products of this camp. This camp produced the nucleus of jihadi leadership for waging ‘global jihad’.

It is therefore not surprising that Islamic State flags are displayed outside the mosques in the Valley after Friday prayers.

In overall perspective, the Pakistan military is also a part of the Al Qaeda. The Pakistani affiliates of Al Qaeda of which the military is an intrinsic part consider the US, India and Israel as their sworn enemies. We should not get distracted by the fact that in Syria the Islamic State received covert support from the US and Israel. It is quite usual for countries to provide covert support to one or more terrorist organization for strategic ends. The same applies for jihadi terrorist organizations as well. They are in a very complicated relationship like the linkages between Afghan-Taliban and TTP in the Af-Pak region. This is because of exigencies of survivability and in deference to the regional and the global jihadi agenda. The Pakistani state uses various jihadi groups because of their specific reach and influence in respective geographical areas. Nevertheless, the overall arching organization of global jihad is the ‘Al Qaeda’.

By corollary it can also be said that the separatists, the Hurriyat and mainstream leaders in the Valley are also directly or indirectly part of the ‘Al Qaeda’ network. Arguably, it is for this reason that President Trump ordered the MOAB to be dropped on that specific area of Afghanistan, wherein a warning could be issued to Pakistan for patronizing the Islamic State (Al Qaeda). The MOAB also caused damage to some buildings in the Khurram Agency in Pakistan.

The challenge before the Indian State is to salvage Kashmir Valley from the ideology and depredations of Al Qaeda. We need to create a counter ideology. If Zia-ul-Haq in the late 70s could hijack the Muslims of the Indian Subcontinent towards Arab, i.e. Wahhabi and Deobandi brand of Islam, it would be our intellectual failure to not revert the Indian and Pakistani Muslims to their Indian roots. Zia-ul-Haq while embarking on themWahhabi/Deobandi path had famously said: “If Iran imbibes Indian culture, it will still remain Iran, but if Pakistan retains Indian traditions, it will over time become India.”

The nature of Islam that should impact on India is not the monopoly of Muslims, but it is the responsibility of every Indian to determine. If a particular foreign brand of Islam declares war on India, then it becomes incumbent upon every Indian to crush it.

However in the Valley, there are also Muslims whose hearts beat for Kashmiriyat and for India. In the latest by-election in the Valley, the polling percentage was seven percent. If there was no intimidation by the Al Qaeda and its affiliates, the percentage could have been much more. This seven percent people need to be celebrated. They are the actual braves. If one vote can decide victory and loss in an election, one vote can also be decisive in deciding between democracy and jihadi animalism. By this reckoning seven percent is stupendous.

Last time, when the Valley was ravaged by floods, it was seen that many of the pro-Pakistan elements after collecting the relief material pelted stones on security forces sitting on boats. In contrast, in Shia majority areas, love, affection and gratitude were showered on them. This clearly illustrates that the problem in Kashmir is not political but of religious ideology.

It is the same ideology, which is bent upon dragging Kashmir Valley to the Arab brand of Islam with all its violent shades and manifestations. It may be recalled that when Arab Islam impacted on other superior cultures like Persian, Central Asian or Indian, these regions refused to accept the cultural hegemony of Arab Islam. It is therefore bewildering as to how the cultural richness of Kashmir has given way to Arab Islam.

If people of the Kashmir Valley, who reside in only 7.2 percent of the total area of the state and democratically lord over 93 percent of the area, if the per capita consumption of meat in the Valley is the highest in the world, then, the problem is certainly not political and economic. The main problem is Islamic radicalization by an ‘Al Qaeda State of Pakistan’. Therefore, talking to the separatists or the leaders in the Valley, or Pakistan, will yield ‘no results’ because they are all part of the Al Qaeda.

To re-establish Hindustaniyat and Kashmiriyat, Article 370 needs to be immediately revoked.

(RSN Singh is a former military intelligence officer who later served in the Research & Analysis Wing. The author of two books: Asian Strategic and Military Perspective and Military Factor in Pakistan, he is also a Guest Blogger with Canary Trap. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)

Ponzi schemes and alleged Sahara payoffs


I. Why is the Central Government Not Addressing the loss of 2 lakh crores in Ponzi Schemes incurred by ten crores depositors living at the Margin?

II. Why is Sahara the only Ponzi scheme that is still in business?

III. Why has SEBI refunded only Rs. 54.43 crores in four years to 11,956 depositors (Annual Report 15-16) when the amount deposited with SEBI is Rs. 14,000 crores and around 2.2 crores depositors were duped by Sahara?

IV. Are the Alleged Sahara payoffs entries true or are they being used to blackmail those at the helm?

V. Either way the allegation of corruption in the case of Sahara needs to be Investigated, more so when it is not true!

The author of the article, having failed in his attempt to intervene in the  Sahara case (Civil Appeal NO. 9813 and 9833 OF 2011) due to lack of locus, and having drafted the pending PIL (Writ Petition <Civil> 928 of 2013) filed by Humanity Salt Lake on Ponzi schemes with particular reference to Saradha and Rose Valley, has sufficiently researched the subject-matter to explain as to why the Ponzi schemes successfully flourished for so long, what was the nature of  violation of law, why paying protection money as bribes was a part of the business expenses, and most importantly why the ten crores marginal depositors who have lost two lakh crores will not recover their money in spite these companies having assets.

Amid the controversy of the Sahara payoffs and the arrest of TMC MPs, the question to be asked is not how much pay offs were made to whom for the “smooth functioning of the Ponzi scheme” (as stated by Enforcement Directorate) but is it because of these pay offs that the poor and hapless savers will never recover their life time savings aggregating 2 lakh crores? Do we, the relatively well off, not owe a duty to these ten crore poor to recover their 2 lakh crore money that has been illegally scammed? In most cases, it represents their entire life time savings. Forget the optics and the drama of demonetization and the enriching of each Indian through the black money stashed abroad, this was their own money dammit! (Pardon the language). Has there been a bigger scam in the land of scams? Does the nation have a conscience? But first the basics of the Ponzi scheme.

What is the Ponzi scheme?

A Ponzi scheme is one in which the deposits are actively solicited from the public through commission agents and as the current deposits received from the gullible public are far more than the payments to be made on past deposits, this excess deposit is treated by the promoters of the Ponzi scheme as their own money.

For example, in the case of PACL the deposits grew from Rs. 800 crores to more than Rs. 49,000 crores over a period of 12 years due to lack of oversight of the authorities and delays involving the Courts, and this Rs. 49,000 crores amount became the scam amount when the authorities were belatedly forced to put an end to the Ponzi scam. All the money was diverted by the promoters for personal use. The way the legal proceedings were delayed at various levels which in turn gave breathing space to PACL to grow their deposits phenomenally by thousands of crores is another scam, but then that is beside the point.

Why were these Ponzi scams successful in India?

The main reason for the Ponzi scheme being successful was the absence of the banking industry in rural areas and lack of financial inclusion for the low-income daily wage earners in urban areas along with the lack of oversight by the regulatory authorities. The Ponzi companies provided to the wage earner and the unbanked gullible poor depositor easy accessibility to para banking service with doorstep service provided by deposit agents of Ponzi companies.

This absence of easy accessibility to the banking industry led to the unscrupulous elements exploiting the opportunity by spreading their tentacles in every nook and corner of the country – villages and semi urban areas – by appointing deposit agents from the local community and paying them handsome commissions. It is significant to note the Ponzi companies did not flourish in the three Southern states where there was better administration and larger penetration of banks in the rural areas.

Number of people whose savings has been wiped out:

Most of the approximately 10 crores of low income people have lost their entire savings to these Ponzi companies. In the case of Sahara, the number involved is 2.2 crores and in the case of Pearl group the number of depositors is around 4.63 crores. There were other 300 large and small Ponzi companies like Rose Valley and Saradha, operating in the country in West Bengal, Orissa, Assam and Bihar which account for the remaining three crores of depositors.

Amount of money involved:

The largest Ponzi scam is not Sahara but the lesser known Pearl group of companies known as PACL. The amount involved for the Pearl group is Rs. 49,000 crores while the amount involved in Sahara group is over Rs. 30,000 crores. The Rose Valley scam is said to be a worth another Rs. 20,000 crores. If all the other Ponzi schemes and collective investment schemes numbering more than 300 are considered, the principal and the interest due, which has been misappropriated by these Ponzi companies, is around a staggering Rs. 2,00,000 crores.

Is it the largest and the worst money scam of the country?

Yes, it is. Around ten crore people have been cheated of their life-time savings aggregating 2 lakh crore. It is not the government but the poor who have been scammed. Does this country have a conscience and a Will to make amends? (Sorry, for sounding like a Gas-swami!)

Difference between Bank and Ponzi scheme:

The Ponzi schemes were operating like a bank without having any of the responsibilities and the safeguards that the banks have. They did not provide for SLR or CRR. They did not have to adhere to credit deposit ratio norms or to capital adequacy norms. Most important they were not subject to any lending norms let alone priority lending norms. There were neither subject to multiple rigorous audits. These companies were free to do whatever they liked with the deposit of the victims of the Ponzi scheme. Around 4% was paid to the deposit agents which was less than the salary bill of the Banks. The rest of the money was siphoned away as commissions, loans to sister companies and investment through benami companies. A small part was also spent on buying the silence of the powers that be.

What is the violation of law?

All these companies which are in the business of misappropriating the savings of the marginal saver are in breach of section 3 of the Company Deposit Rules 1975 made under section 58 A of the Companies Act which prohibits all companies from accepting deposits which are unsecured instruments (debentures or otherwise) for more than 10% of their net worth. The law has a rationale in that an entity should not borrow beyond its capacity to repay and innocent savers should not be exploited by unscrupulous elements. The Rules were framed in 1975.

Violation of 80 to 1600 times the permissible limit went unnoticed by ROC and Serious Fraud Department:

The omission on part of the law enforcers to enforce the law, lies at the root of the scam and companies have been allowed to collect deposits 80 to 1600 times the permissible limits. This omission was deliberate and the concerned officers are far more accountable than the politicians belonging to  Trinamool Congress.

In the case of one Sahara group company, Sahara India Real Estate Corporation Limited (SIRECL), the balance sheet of the Company for the year ended 30/6/11 shows the paid up capital and reserves of Rs. 2,325 crores. Hence the permissible limit for the company was Rs. 230 crores. However, deposits of Rs. 19,000 crores were raised as unsecured debenture. This deposit exceeds the limit by a whopping Rs. 18,770 crores which is more than 80 times the permissible limit.

In the case of PACL, the Company’s balance sheet for the year ending 31/03/2011 shows Rs. 235,508,150,280 as costumer advance. This money is nothing but unsecured deposit though called customer advance. According to the same balance sheet the paid up capital of the company on 31/3/11 was Rs. 40.1 crores and reserve & surplus was Rs 117.4 crores. Thus the total paid up capital plus reserve capital was Rs 157.6 crores only and the company was permitted to accept deposits of Rs. 16 crore only. The company PACL India Ltd. had collected/accepted the deposit to the tune of rupees Rs. 23,550 crores. This permissible limit of 10% under the Act has been exceeded by more than 1600 times.

This violation was going on for decades and yet the ROCs, Income Tax, RBI and SEBI did not act.

Had it not been for the WTM of SEBI and Hon’ble justice J S Khehar (as he was then) the scam would not have been brought out in the open. Both were criticized for their brave acts. The former by Sahara and the SEBI chief U K Sinha and the latter by Sahara lawyers which led to his recusing himself from hearing the matter further. (‘Should we be hearing this case,’ the opening famous lines of the 207-page judgment). In fact, he had reportedly directed the Registry not to put any matter related to Sahara before him! (Legal India 15/5/14)

Criminal Liability under Companies Act

Under 58-A (6) (b) of the Companies Act (old) if the overall collection of deposit beyond the permissible limit is punishable by five years’ imprisonment. Why has this clause not been enforced against any of the Ponzi companies? This shows that the government is complicit in allowing these Ponzi companies to cheat the 10 crore marginal depositors.

Why despite the bribes, commissions, diversion of funds abroad there are sufficient assets to pay back the depositors.

In most cases after diverting the cash for the purpose mentioned above, around 50% of the money was invested in land, real estate, hotels, and real estate development etc. These appreciated over a period of time and made up for the losses incurred in bribes, commissions, investments abroad and lavish lifestyle. Thus, there is sufficient asset to pay back the hapless depositor as the assets can be easily traced. However, it is more important to identify the depositors.

Protection money part of expenses is paid to continue the fraud

The entire Ponzi business is based on continuing the fraud of misappropriating the hard-earned deposits of the marginalised sections of society. If the violations of laws are grave, then so are the earnings. It is money for jam as crores of money are collected each day without any concern that the amount is to be returned.

Paying protection money to politicians, political parties and bureaucracy is a part of expense of the Ponzi business so that their activities are not inquired into. This protection money is a legitimate expense of an illegitimate business. It is for this reason that these Ponzi schemes have continued for decades and would have continued for a longer period had it not been for the honesty and the courage of Dr KM Abraham, erstwhile member of SEBI who wrote the Sahara order and Hon’ble Justice J S Khehar (as he was then) who upheld the order and how! However, neither of them went into the violation of the Companies Act as the same was not the issue before them.

Are the entries of bribes in Sahara computer/records true?

As stated above donations to political parties is protection money for all the Ponzi companies. It is routine. After all what is Rs. 100 crores when the deposit base is over Rs. 30,000 crores. Peanuts! But whether the amount alleged to have been paid to then Gujarat Chief Minister was a future investment or was a blackmailing entry is a different matter.

It is not a coincidence that most of the big Ponzi operators are also in the media business and involved in sponsoring sports? The former gives them blackmailing power and the latter is an advertising expense. They are also large advertisers in the media and buy their silence. At least Sahara was and continues to be.

Sahara, the only Ponzi still in business

Despite the Sahara Chief having spent substantial period in prison, it is the only Ponzi company that is carrying on business as usual by metaphorizing its business model, as rightly predicted by Dr K M Abraham of SEBI while alerting other regulators in his order. The following quote of a newspaper report from the order of SEBI has come true: ‘Sahara agents will now peddle several new investment schemes to raise money under the name Sahara Credit Co-Operative Society. The society has its headquarters and registered office in Sahara India Bhawan, Lucknow, where most Sahara group entities are based.’

Its insurance and its media businesses are intact, a large part of the deposits having been converted into co-operative deposit. It is business as usual.

Meagre amounts of Rs. 55 crores from Rs. 14,000 crores paid to depositors by SEBI in the Sahara Scam:

The Apex Court in 2012 had ordered the refund of the scammed money to the depositors and for SEBI to supervise it. It also appointed a former Justice of the Hon’ble Supreme Court to oversee the refund. What happened? In spite of SEBI receiving Rs. 14,000 crores (with interest on money deposited), only 11596 depositors out of 2.2 crore depositors have received Rs. 54.43 crores (refer SEBI annual report for 15-16) out of this Rs. 14,000 crores in last 4 years.

The low refund figure is because SEBI wants immaculate documentary proof from the illiterate gullible depositors. These were never given to the duped depositor! If the illiterate investor could prove his identity and the deposit would he be depositing his money with Sahara?

At another level one suspects that SEBI chief too is hand in glove with the promoters of Sahara (Refer to the letter written by the then WTM of SEBI, who wrote the Sahara order, to the then PM) and is out to reinforce Sahara’s contention that they have paid the depositors!

Allegations of bribes paid to the Prime Minister:

While there is much in what the Hon’ble CJI says that no document of Sahara can be trusted as there are very few who would know more about the character of Sahara than he does. After all, he had spent months hearing their lawyers before recusing himself!

But then that precisely is the point and why the allegation based on documents should be investigated. Not because they may or may not be true but because the good name of the Prime Minister needs to be cleared in a scam involving a company which is the mother of all scams. Why should the name of the PM be sullied by Sahara?

The fact that Sahara is the only functioning Ponzi scheme, the fact that its insurance and media businesses are flourishing, the fact that its assets are intact and no one is bidding for it, the fact that refunds of only Rs. 55 crores to 12,000 out of 2.3 crore depositors have been made in four years by SEBI, the fact that CBI has not arrested a single politician in this flourishing Ponzi scam, the fact that the neither the Serious Fraud Office not the Registrar of Companies have applied section 3 of the Deposit Rules and taken action under section 58 A (6) (b) of the old Companies Act providing for 5 years imprisonment and more recently the fact that the Settlement Commission has passed a very lenient order strikes at the very credibility of various institutions, shows that Sahara continues to be a favoured group.

Surely the impression that these failures of various government agencies are because of Sahara having falsified documents to falsely implicate the Prime Minister needs to be brought out in the open as the institution and the office of the Prime Minister is far more important than a powerful Ponzi company out to destroy the credibility of the Prime Minister.

Use 120B and 420 of the IPC against the deposit agents and the employees of the Ponzi scheme for refunding the depositor’s money:

The Prime Minister, however, having been accused by a Ponzi company needs to address the much larger tragedy relating to the ten crore marginal depositors losing Rs 2 lakh crores to the Ponzi companies.

Sections 120B and 420 of the IPC has been invoked by the CBI in all the cases of arrest of politicians of TMC, but not against the deposit agents.

It is a fact that accurate details of the depositor’s identity were not recorded and adequate proof of having received deposits were not given by the deposit agents. Most the depositors were gullible illiterate depositors. The agents forced the depositors to renew their deposits or made them do the rounds before refunding a discounted amount.

The Ponzi operators, in turn, never intended to return the bulk of the deposits and therefore found it convenient not to keep proper records so that they could deny the claims of the depositors. It is precisely this trap of the Ponzi operator and the colluding deposit agents that has led to the meagre refund of 55 crores out of Rs. 40,000 crores held by SEBI in the case of Sahara. In the case of PACL, SEBI in its order has abdicated the responsibility of making the refund and left it to the company!

The deposit agents fearing the wrath of the depositors, have united and formed an association to align themselves with the efforts of the depositors to get the refund. There are reports of their getting backdoor entry into the pending PIL referred to above and assuring the depositors that the PIL will get them their refund. Sadly, the present status of the PIL is on implementing future reforms, as suggested by SEBI, to prevent future scams. There is absolutely no concern in the PIL for evolving effective strategies for refunding the money to the depositors who have been duped.

The depositors can be identified by the deposit agents alone. And it is for this reason that section 120B and section 420 should be invoked against them at the district level and the name and the identity of the depositors should be obtained and tallied with the amounts remitted by the deposit agents. It is totally impractical to expect that the semi-literate depositors can approach SEBI and comply with their rigorous procedure to prove their deposit and claim refund.

In fact, the Odissa government has taken the lead in identifying the depositors duped by Ponzi firm Rose Valley Group of Companies to make way for refund of their money. They have passed the Odisha Protection of Interests of Depositors (in Financial Establishments) Act, 2011. In May 2016, the additional district magistrate (ADM), Cuttack, Bibhuti Bhusan Das, issued a notification in different newspapers for identification of duped depositors with a warning of prosecution against those who make false claims. This model along with invoking section 420 against the deposit agents is the only way in which the duped depositors can be identified and paid back their deposits from the seized benami assets of the Ponzi operators. Once behind bars under section 58A of the Companies Act these Ponzi operators will sing like a canary and identify all their assets.

We as a nation owe it as a duty to these hapless ten crore depositors who have lost their life time savings thanks to these Ponzi operators who have bribed their way to immunity.

Will the Prime Minister stand up for these ten crore marginalised Indians and clear his name in the only Ponzi scheme that continues to flourish and in which he is shown to have been paid Rs 55. crores?

The author wants to make it clear that he is not accusing the Prime Minister of having received the bribes but certainly supports investigations on Sahara having allegedly paid bribes in view of the overwhelming circumstantial evidence of the favourable treatment given by various government agencies.

In conclusion, the good name of the Prime Minister needs to be cleared from being associated with these scammers and justice done to the 10 crore marginal depositors who have lost two lakh crores.

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)

The Essar Tapes petition


Essar tapping and taping Reliance! Could the story get bigger!

The story involving two of the greatest icons of crony capitalism in India, Essar and Reliance, indulging in corporate espionage, wherein the former was tapping and recording conversation of the latter would be considered as one of the biggest stories of recent times.

The concerted cover up by the media bordering on blackout was shocking. However, those familiar with the transformation of the media from the fourth pillar to surrendering to cronyism were not too surprised except by the extent of the surrender.

This time media did not have the alibi of the EMERGENCY. Money and power were their only alibi and ally. The omnipresence of the nefarious capitalists in free media portends ill for the nation. Democracy can and has been subverted.

However, it is time that the reader and the viewer freed himself from the print and broadcast media. The Gas Swamis of the ‘The NATION WANTS TO KNOW’ fame have rendered themselves obsolete and irrelevant. Yes, “The nation knows!”

Barring Outlook and the India Today group, none stood up to be counted.

Here then is the copy of the petition filed before the Delhi High Court to let the nation know that it is no more dependent on the conventional media.

The petition shows that the petitioner lawyer, Suren Uppal, has shown remarkable maturity in acting responsibly in the filing of the petition and eschewing the temptation for sensationalism.

Click here to read the petition

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)

VVIP Helicopter Scam: A shakeup call for India


The subversion of Indian security establishment as a result of the Rs 3726 crores AgustaWestland VVIP Helicopter scam strikes at the very roots of India’s foundation of nation-state. It is not merely a question of kickbacks amounting to Rs 350 crores, but it has raised doubts about the role of the entire governance and security apparatus of the country, i.e. Prime Minister, Defence Minister, National Security Advisor, Defence Secretary, other senior bureaucrats of the MoD, at least one Chief of Air Staff and the head of the SPG. This is besides the erstwhile’ Super Prime Minister’ and her political secretary.

Before proceeding further, it is pertinent here to explain the broad details of the arms procurement process in the country through a flow chart:

Stages in Defence Procurement

Services Qualitative Requirements (SQR)

Drafted by the Service Headquarters. Lays down user requirements, which needs to be broad based and realistic. Must express users requirements in terms of capability desire with minimum required verifiable functional characteristics and its formulation must not prejudice the technical choices by being narrow and tailor-made.

Acceptance of Necessity (AoN)

Consequent to SQR. Service HQs prepares ‘Statement of Case’. Total quantity required given out.

Request For Proposal (RFP)

RFP issued soliciting technical and commercial offers, but in two separate sealed envelopes. This system safeguards against possibility of vendor increasing his commercial offer consequent to development of a Single Vendor situation after evaluation. Vendors make offer after consideration of full requirements of acquisitions.

Technical Evaluation Committee (TEC)

TEC constituted by Service HQs for evaluation of Technical Bids in response to RFP.

Field Evaluation Trials

Conducted by user service. Trial methodology given in RFP. Shortlisted vendors send equipment to India for trial.

Staff Evaluation

Consequent to ‘Field Evaluation’, Staff Evaluation done by Service HQs to analyze field evaluation results and shortlist equipment recommended for introduction into service.

Technical Oversight Committee (TOC)

Constituted by Defence Secretary comprising three members, one senior service officer, one DRDO scientist, one representative of DPSU. Members should not be involved with the acquisitions case.

Contract Negotiation Committee (CNC)

After Staff Evaluation report is accepted by DG Acquisition and TOC report accepted by Defence Secretary. CNC carries out all processes from opening commercial bids till conclusion of the contract.

Approval of Competent Financial Authority

Note: This is the DPP of 2013, which also has an Integrity Pact for signing all defence deals above 100 crores, wherein the government promises that it will accept no bribe and the bidders promise that they will not offer any bribe. It also stipulates that trials will be on no cost and no commitment basis under Indian conditions. The DPP of 2013 was only a perpetuation of India’s DPP from earlier periods, incorporating certain changes to close the loopholes.

The contrast between patriotic India and anti-nationals, between ‘men of integrity’ and ‘men of low character’ stands acutely juxtaposed in the run-up, and now in wake of the exposed scam by Italian authorities. What is worrisome, however, is that the latter category invariably triumphed over the former during the tenure of the previous regime. For eight years, after the AW-101 helicopter was disqualified in 2002 during flight trials for failing to reach the stipulated height of 6000 meters, the conspirators were exerting or were rather desperate to somehow bring back the company into reckoning. They insisted that the service ceiling could be reduced from 6000 meters to 4500 meters on the specious plea that VVIPs rarely flew above that height. Most concerned agencies and organizations were browbeaten, but the then Air Chief Marshal Krishnaswamy did not buckle. In January 2004, he insisted that the VVIP helicopters must be able to fly from Leh to Srinagar crossing Zoji La Pass as well as Siachen glacier. Was he wrong? After all, most defence ministers and prime ministers have made several trips to the Siachen and other high altitude areas. It may be reiterated here that movement of VVIPs within the country is part of the country’s security imperative or part of the war-effort at times of war. These are not pleasure trips. Such visits must act as force-multipliers. It would have been more honourable for these VVIPs to risk their lives with the aging MI-8 helicopters than go for a unworthy replacement like the AW-101 which solely relied on bribes to steal the deal.

An Air Force helicopter incapable of flying from Srinagar to Leh is not worth the second look. A year later in March 2005, come new Air Chief SP Tyagi, all these operational imperatives were killed, the height got reduced to 4500 meters and the AW-101 was back in favour. Accordingly, a new RFP was issued in 2006.  Apart from Augusta Westland two other companies i.e. makers of MI-172 and Sikorosky (maker of S-92) helicopters responded. The Russian manufactures of MI-172 helicopter refused to sign the ‘Integrity Pact’ and withdrew. Thereafter the game became much more convenient to manipulate.

The Tyagi brothers allegedly had fixed up this unthinkable altitude concession in favour of AW-101 even before their cousin Air Chief Marshal SP Tyagi had taken over as the Air Chief. During critical years towards the finalization of the AW-101 deal, one person, i.e. Mr. Shashi Kant Sharma had an overwhelming presence in the Ministry of Defence (MoD) between 2003 and 2013 with brief interludes elsewhere.  In those years in the MoD, he held the appointments of Joint Secretary, Additional Secretary, Additional Secretary DG (Acquisition), Secretary DG (Acquisition), and finally Defence Secretary from July 2011 to May 2013.

Mr. Sharma in these years had not only played a pivotal role in major defence acquisitions but also in the age controversy of General VK Singh, who it is believed by many quarters, to have been the victim of a conspiracy by the arms lobby. The perpetrators of Tatra scam that Gen VK Singh exposed are yet to be punished. In all fairness, it must be said that during the period between 2002 and 2004, there were Defence Secretaries, who stood their ground in rejecting the AW-101. The tragedy however of our land is that those who submitted themselves were rewarded not only with kickbacks but also constitutional posts to render them immune from any legal action.

Normally, the gestation period of such defence procurement is 10 years. The arms lobby therefore has to ensure that at least two service Chiefs, if not three, of its choice, are at the helm to pursue its agenda. It is for these reasons that they, many times, with the help of the government or particularly intelligence agencies of their host countries try and manipulate the ‘succession plan’. It is relevant to reflect that SP Tyagi was succeeded by Air Chief Marshal FM Major, a helicopter pilot, amidst huge protest by the fighter pilots. The age controversy of Gen VK Singh and series of accidents in the Indian Navy, which compelled the Naval Chief Admiral Joshi to resign should be seen in this backdrop.

Mega deals, such as the AW-101 one, cannot go through without a complicit bureaucratic setup in the MoD. The posting profile of these bureaucrats when seen in the backdrop of the defence procurement process as given in the flow chart, says it all.

Such subverted bureaucrats and service chiefs cannot occupy the offices to facilitate corrupt acquisitions without the patronage of the Defence Minister and the Prime Minister. Mr Antony cannot be spared of the guilt. In fact he desiccated the soul of the Indian Armed Forces. It started with ensuring the exit of Gen VK Singh by fabricating the age-controversy and subsequently the Naval Chief because of series of so-called 13 accidents, which came to a halt the moment a new Chief took over. Air Chief Marshal SP Tyagi, during his service was spared for obvious reasons, and now that his utility is over, the same Mr Antony is protecting himself and his masters by hiding behind him. It may be recalled that Mr Manmohan Singh had prevailed upon Mr Antony to re-seek the opinion of the Law Ministry after a joint secretary had ruled in Gen VK Singh’s favour over the age issue. Mr Manmohan Singh had then maintained that joint secretary was not a high level functionary. Just because a person has a soft or squeaky voice and has a supine and submissive personality does not mean that he is not corrupt. Such people are the worst facilitators of corruption because their character is made in a way that they can go to any extent just to remain in close proximity to the highest power. Mr Manmohan Singh is singularly guilty of violating the spirit of the Constitution by accepting an arrangement with an extra-Constitutional authority over him.  His deference to this authority is responsible for all scams under his leadership.

While the technical parameters were tweaked in favour of AW-101 by the Service HQs, i.e. IAF, the magnitude of the kickbacks can only be decided by the politicians, which is evident from the fact that the largest chunk has gone to them, followed by the bureaucrats. In the note written by the middleman Guido Hashcke the distribution of kickbacks is: Politicians – 6 million Euros, AP (allegedly Ahmed Patel) – 3 million Euros, Bureaucrats – 8.4 million Euros and Air Force officials – 6 million Euros. This note is vindicated by the Italian Court judgment which sentenced Orsi to four years imprisonment for paying 30 million Euro bribe to Indian politicians and officials.

There was corruption at each stage of the procurement as shown in the flow chart. Not only the service ceiling was reduced from 6000 meters to 4500 meters, the height of the cabin was also increased from 1.45 meter to 1.8 meter, thus leading to a single vendor situation in favour of the AW-101 helicopter. Most intriguingly, the field trials of this helicopter were not conducted in India and were carried out on representative helicopters – Merlin MK-3A and Civ-01 instead of AW-101. Compelling test pilots to make compromise on trials does not augur well for the IAF as these pilots have promising careers and are likely to occupy higher ranks in future.  Also once it was decided to purchase the said helicopter AW-101, the quantities were increased from 8 to 12. In violation of the basic principle, the helicopters were being procured not from the Original Equipment Manufacturer (OEM). This is the most blatant corruption in arms deal in post-independent India. The final price of the helicopters escalated six times from the initial agreement.

Kickbacks in defence deals with foreign countries are just not matter of bribe, but it constitutes an act of sedition and criminality, in that it subverts the armed forces. It plays havoc with the moral fabric of the armed forces. This onslaught has been there since independence. India is the second largest importer of arms. India’s arms import is critical to the economies of the arms industries and their host countries. The Western arms industry or the military-industrial complex therefore not only subverts but also creates vulnerabilities and threat perceptions in respect of the target countries. It is no wonder that the media has also allegedly received kickbacks in the AW-101 helicopter scam.

This system of kickbacks was working very smoothly, but for two major disruptions by way of Bofors guns and now AW-101 helicopters. The host country Italy, as Sweden in Bofors Case, has not raised the issue of kickbacks, for any altruistic reasons, but because the former Chief of Finmeccanica, Giuseppe Orsi, the parent company of AgustaWestland was arrested at the beginning of 2013, as he had fallen out with the officials in his own country over possibly kickbacks. It is only after the arrest of Orsi that Mr Antony panicked and took some nervous measures to distance himself from the company. On 25 March 2013 Antony stated: ‘’Yes corruption has taken place in helicopter deal and bribes have been taken.’’ It was however too late. There is law in any civilized country wherein a bribe giver can be punished without identifying the bribe taker. The Italian authorities including the Judge Marco Maria Maiga know their identity for certain. He exactly knows who are AP and Signora Gandhi. In fact the name of Signora Gandhi figures four times in the 225 page judgment delivered on 08 April 2016. This is also a quirk of destiny or natural justice that the kingpin of the scam is being undone by the country of origin.

Arms industries and their parent countries, which bribe target countries, also resort to constant blackmail. They in league with the beneficiaries of the bribe will always ensure that India does not become self-reliant in arms. They will never allow indigenous arms industry to takeoff.

We are caught in a terrible vicious cycle of arms import trap. The arms lobby is getting increasingly murderous. Here is the opportunity to unshackle  and redeem ourselves.

(RSN Singh is a former military intelligence officer who later served in the Research & Analysis Wing. The author of two books: Asian Strategic and Military Perspective and Military Factor in Pakistan, he is also a Guest Blogger with Canary Trap. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)

All that you wanted to know about Panama Papers

On April 7, NSA whistleblower Edward Snowden tweeted: “The next 24 hours could change Britain”. He also posted a link to an article from The Guardian which carried a news report “David Cameron admits he profited from father’s offshore fund”. A host of world leaders are in the dock since the release of Panama Papers. A political crisis has erupted in Iceland too, where protesters are demanding the ouster of PM Sigmundur Gunnlaugsson after his name appeared in the leaked papers.

In what is being termed as one of the biggest leak of confidential documents globally, the International Consortium of Investigative Journalists (ICIJ) on April 3 started the release of documents which exposed how rich and powerful people around the world exploit secret offshore tax havens.

According to the information on its website, ICIJ is a global network of more than 190 investigative journalists in more than 65 countries who collaborate on in-depth investigative stories.

The documents released by ICIJ belong to one of the biggest offshore law firm based out of Panama, Mossack Fonseca. According to available information, the data was leaked to a German newspaper Süddeutsche Zeitung by an anonymous source, which they later shared with ICIJ. The size of the data obtained by ICIJ is 2.6 terabyte (600 DVDs) and has 11.5 million files concerning around 214,488 offshore companies run by about 14000 people.

Out of the total 11.5 million files, so far (till April 8) only 186 files have been released. The documents released so far have revealed names of political leaders who have used offshore tax havens to hide their money. Close associates of Russian President Vladimir Putin, Pakistan’s PM Nawaz Sharif, President of Ukraine Petro Poroshenko, Son of former Egyptian President Hosni Mubarak, and former interim PM of Iraq Ayad Allawi are some of the people whose names have cropped up in the Panama Papers.

A controversy, however, has erupted post the expose as there have been allegations from some quarters that the release of Panama Papers does not include any American names. The Russian government has said that the Panama Papers were released to target President Vladimir Putin. During a TV discussion on Russia Today involving WikiLeaks spokesperson Kristinn Hrafnsson it was also pointed out that ICIJ, interestingly, “was funded by Ford Foundation, the Carnegie Endowment think tank, the Rockefellers and George Soros”. A news report on the same media outlet, quoting former whistleblowers from CIA and MI5, questioned the motive of the ‘Western Media’ in portraying President Putin as the face of Panama Papers leak.

Wikileaks has also called for the simultaneous release of all 11.5 million files and have raised doubts about the selective release of documents. According to the whistleblowing group, the Panama Papers should be available to general public on a platform so that everybody can search the data and not just a group of journalists.

There is also debate on the real impact of this release. We have had Offshore leaks, Luxemburg Leaks, Swiss Leaks in the past but those are forgotten now. Everybody got away. Moreover, Panama is not the only tax haven, there are others like Cayman Island, Cyprus, British Virgin Islands among others. More than anything, the United States of America is the new emerging tax haven for people wanting to hide their money.

A January 27, 2016 news report in the Bloomberg stated:

“After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.”

An article is US digital platform Salon states:

“What we have not yet seen is any U.S. individual implicated in the leak, which seems unlikely given our stable of international wealth. The editor of Süddeutsche Zeitung, the German newspaper which first received the documents, promises there will be more to come. But one reason why Americans haven’t yet been implicated is that they already have a perfectly good place for their tax avoidance schemes: right here in the United States.”

So will the latest release have any impact on the ground? As of now, it seems that it will impact countries that are politically fragile (Ukraine, Pakistan), will result in loss of face for ruling dispensation (Iceland, United Kingdom), and will have negligible or little impact in counties like Russia and China. Also, the move to regulate and monitor offshore tax havens have been going on since a long time and the latest leak will no doubt give more fillip to these international efforts.

There are many more files that will be released in the coming days but to give more credibility to the entire process and address the allegations of Western conspiracy, it makes sense for an organization like Wikileaks to obtain the entire cache of 11.5 million files and publish it on their platform.

Letter to Public Interest Directors of National Stock Exchange

To consider if it is in Public Interest for the National Stock Exchange (NSE) to be non-transparent, promote corruption by colluding with Reliance Industries Limited (RIL) in insider trading/price manipulation and then go Public to List their Shares.

Arun Kumar Agrawal

Mr. S. B. Mathur (Chairman NSE)
Mr. Y. H. Malegam
Dr. KRS Murthy
Dr. S. Sadagopan
Justice B.N. Srikrishna


I. Investigation of Frauds on NSE by CBI/Police

II. Making public the trading details of Price Manipulation and Insider trading in Reliance Petroleum Limited (RPL) and trading details on the High Frequency Trading platform during the period OPG Securities had manipulated the trading platform in alleged collusion with NSE (refer complaint published in Moneylife).

III. Force NSE to submit to RTI Act and prevent the officials from evading the legal system after the 5-member Central Information Commission (CIC) and Hon’ble High Court Ruled against it.

IV. Cost of 50 Lacs to be Paid by Employees involved in filing of Defamation suit

V. Rationalisation of remuneration of Rs 1- 4 crore per annum

VI. NSE going Public with IPO not in Public Interest

VII. Prevention of Other Undesirable Trading: Object of SCR Act


1. This letter is addressed to the Public Interest Directors on the BOARD of NSE, who by being in a majority are presumed to be in control of the Board of NSE. They are requested to ensure that NSE functions in a corruption free and transparent manner.

2. Two instances of large scale corruption and subsequent cover up have considerably eroded the credibility of the National Stock Exchange among the investors, be it Indian or foreign. The first involved the price manipulation and insider trading by RIL in 2007 in which investors lost thousands of crores. The second was the gaming of the trading platform of the High Frequency Traders (HF Traders), exposed by an article and complaint published in Moneylife, which led to the NSE filing Rs 100 crore defamation suit against Moneylife.

3. It is in this context that this letter is addressed to the Public Interest Directors (PID) (downgraded to Independent Directors by NSE: refer Annexure from website of NSE) and the Chairman of National Stock Exchange requesting them to take stern and appropriate steps to ensure that NSE functions in a corruption free and transparent manner. The NSE, unlike other institution, has a Board in which the PID are in majority, who are capable men with no personal interest (even the sitting fee of Rs 20000 does not compensate for their time) and therefore can ensure that public interest is protected and there is no cover up of corruption. The management of the NSE should not be allowed to use the PID as a shield for its anti-public interest agenda.

4. It is further requested of the PID to ensure that NSE submits itself to the RTI Act not only because it is an antidote to corruption but because it is legally the right thing to do. The remuneration of senior officials/Whole Time Directors should be linked to their performance and they should be made to pay the cost of Rs 50 lacs ordered by the Hon’ble High Court of Bombay from the crores of annual remuneration they earn.

5. Those involved in corruption, cheating of the investors and cover up should be reported to the anti-corruption Branch of Police/CBI for investigation and prosecution. Finally, the PID are requested to decide whether it is in public interest that the NSE should go public through an IPO inspite of the contrary recommendation of the Bimal Jalan Committee report and experience with MCX.

Transparency the only option to answer allegation of corruption:

6. Hon’ble Justice G S Patel while imposing a cost of Rs 50 lacs on NSE stated the following in his judgment:

26. Today, all our institutions face the crisis of dwindling public confidence. Neither the NSE nor the judiciary are exceptions to this. It presents a very real dilemma, for the existence of our institutions is posited on that very public confidence and faith and its continuance. The challenge is, I think, in finding legitimate methods of restoring that public trust, that balance. Hence the cries for transparency and accountability everywhere; and I see no reason why the NSE should be any exception to this. (Emphasis mine)

7. Instead of heading the advice of transparency of Hon’ble Justice Patel, NSE has gone in appeal against his orders. Officials of NSE would do well to recognise the fact that court decisions are no substitute for transparency in matters relating to corruption. Persons with competency to write software of algo-trading are highly intelligent persons (probably even more intelligent than those at the helm at NSE) and at times are rank holding IIT graduates.

The anonymous complaint of the HF Trader, accusing the NSE of gaming the trading platform is very specific, with the names of the brokers, the time period and the modus operandi of rigging by the NSE. A mere reading of the complaint has a ring of genuineness to it.

8. The only way to answer those allegation was to make all the trading details of the period along with the trading record of the broker OPG Securities public. These trading records will establish as to whether OPG Securities, the brokering firm that cornered most of the deals and made profits than it did earlier or later to the period of the complaint. Incidentally, OPG securities has a track record and was also found by SEBI to be involved in Fraudulent and Unfair Trading under the PFUTP Regulations.

9. The pathetic defence by the NSE in the financial papers post the judgment of the Hon’ble Bombay High Court can neither fool the discerning public, nor the HF Traders who, as stated above, are far more intelligent than the NSE officials who have offered the lame explanation. Instead of looking at the trading record or referring the matter to the cyber wing of the CBI/Police or subjecting the data to a cyber-lab, officials of NSE have been filing defamation suits of Rs 100 crores to intimidate the media and lecture on of the infallibility of their system. It may be pointed out that systems are as infallible as the humans who operate them! Even the Libor rates were doctored and more recently Volkswagen gamed the emission software.

10. The case of Rs 513 crore insider trading by RIL and price manipulation: The second case relates to the Rs. 513 crore insider trading done by 13 front companies on behalf of RIL in November 2007 in the F&O section of the market. The shares involved was that of RPL, which was a subsidiary company of RIL, in which it held 75% of the shares. The brokers close to RIL indulged in price manipulation from September 2007 to November 2007 during which the price of the shares RPL doubled. The price manipulation was done so that RIL could realise twice the value when it sold 20.5 crore shares of RPL held by it in the cash section. The sale value of 20.5 crore shares of RPL was around Rs 4000 crores which would have been Rs 2000 crores had the price not been manipulated by the brokers. While RIL realised an additional Rs 2000 crores on account of sale of 4 crore shares, the brokers made upwards of Rs 1000 crores on account price manipulation on high trading volumes in the F&O section. RIL made an additional Rs 513 crores through insider trading by 13 front companies. This Rs 513 crores was credited by the 13 front companies to the balance sheet of RIL! There could not be a more blatant form of insider trading.

11. It is my allegation that the officers of the NSE were complicit with the brokers in allowing the price manipulation and the subsequent cover for the following reasons:

  • With expensive computers and software, this type of blatant manipulation and insider trading could not but be shown up and flagged by the computer unless the computers too were rigged by the officials of the NSE on the behest of interest parties.
  • The matter was never reported to SEBI by NSE officials.
  • The scandal was brought in the public domain four months later by a prominent Member of Parliament Shri Amar Singh on 17/4/08 through a Parliamentary question.
  • Shri Amar Singh not only accurately named 10 of the 12 front companies involved but also the amount involved in the insider trading months before the investigations were ordered by SEBI. The article was published by Business Standard.
  • Shri Amar Singh had attributed the knowledge of the insider trading and the companies involved in it, to information received from his sources in the Stock Exchange.
  • When Investigations were finally ordered by SEBI a year later in November 2008, on the persistence of Shri Amar Singh, it was found that allegations of the companies and the amount involved were true! Amar Singh had named 10 companies and Rs 402 crores as the profit while the finding of SEBI on investigation was Rs 513 companies involving 12 companies. Names of 10 companies was common.
  • The price manipulation by the brokers for the period in September to November 2007 was never investigated by NSE. It was not even investigated after the Parliamentary question and the letter of Amar Singh to SEBI published in the newspaper. The inaction on part of NSE can only lead to only one conclusion: that of collusion in enriching RIL and the brokers who benefitted by the price manipulation.
  • If Amar Singh had the information from the NSE ‘sources’ and NSE officials were blissfully unaware of it then the matter needs to be investigated by the CBI. In this connection my complaint to the CBI is pending and can be forwarded if thought to be necessary.
  • The undersigned has fought five cases with SEBI/RIL in various High Courts so far over issues of transparency. It is my experience that almost every authority is helpless against RIL. In another issue unrelated issue concerning RIL on preferential allotment of shares at a throwaway price, the same has been pending with SEBI/ government for over fifteen years even after obtaining legal opinion from one of most respected judges of the Hon’ble Supreme Court.

Rs 5 lacs as price for transparency for exposing corruption

12. There is a tendency at every level to run down the character of ‘activists’ who expose corruption in high places. Choice words like stoolpigeon are used which cannot be sustained on facts! The complainant, therefore, volunteers to deposit Rs 5 lacs in advance for making the entire detailed trading information broker/party wise of the two cases available to him/public. The relevant period in case of RIL is the trading in cash and forward section for RPL shares from August – December 2007. The amount can be forfeited if he is not able to show that there was manipulation. This information for which Rs 5 lac is being offered should have been made available for Rs 10 under RTI Act.

13. The legal fees paid to senior Counsels to prevent NSE from coming under the RTI too should also be disclosed.

14. The undersigned is enclosing a cheque for the amount favouring the Chairman of NSE requesting him to accept his unilateral offer. The account will have a balance for the amount for the next 30 days.

15. The undersigned hopes that if the efforts of the complainant results in disgorgement of profits (by SEBI) made by the brokers and RIL then 50% of the amount should be used to compensate the investors who were cheated by the fraud committed on them. The entire amount should not be appropriated by SEBI/NSE/government or to the so called investor protection fund which is used by the Authorities in an arbitrary manner. The NSE is using the Investor Protection Fund to collaborate with a TV channel to entice investors to invest in shares! This is condemnable as there are large number of investors who have burnt their fingers by investing in shares and vowed never to return on account of various scams that have taken place.

16. It is indeed a tragedy that the authorities, after putting every possible hurdle against financial ‘activists’ to uncover their scam, ultimately benefit from the efforts of the activist in case they happen to succeed!

Senior officials game the legal system to escape accountability under RTI Act

17. The information for which the complainant is willing to pay should have been made available to him under RTI for Rs 10 but for the anti-public interest elements in the NSE who first went in appeal against the order of a five-member CIC Bench (dated 7/6/2007) which in a 25-page reasoned order held that NSE was covered under 2(h) of the RTI Act. The Hon’ble Court held that this was irrespective of whether the majority shares were held or controlled by government owned institution. Subsequently NSE went in appeal against the order of the Delhi High Court (WP 4748/07 decided on 15/4/10) which upheld the order of the CIC. Is it surprising that after obtaining an interim order of stay of the order of the single Hon’ble judge who had confirmed the 5-member Bench order of the CIC, the matter has not been decided for the past five years?

18. If the senior officials can use the legal system to escape accountability from the rigours of RTI Act for 8 years, then so can the junior employees game the system to pass on benefits of thousands of crores to corporates like RIL in the most blatant instance of insider trading. Whether they actually did so will be known if the detailed trading data (broker wise) in RPL shares from August – December 2007 is made public. Is it a coincidence that the insider trading, price manipulation took place in the period when NSE was insulating itself from providing information under RTI Act?

19. It needs to be mentioned that the Hon’ble Supreme Court has held Stock Exchanges to be a State for the purpose of the writ jurisdiction of Courts and even SEBI argued at the CIC that NSE was a public authority and hence covered by the RTI.

Direct NSE to submit itself to the RTI Act

20. As one of the PID is an eminent jurist and a former Justice of the Hon’ble Supreme Court, his valuable opinion on whether NSE comes within the purview of the RTI may be sought, or alternatively it may be independently decided by the PID that NSE should submit itself to the provisions of the RTI and the seven year old appeal pending before the Delhi high Court be withdrawn. Is it surprising that NSE is not interested in pursuing the appeal after having obtained a stay in a case which it cannot win? Should it not be alleged that this is being done so that corruption in NSE goes undetected? Does this non-transparent corruption linked agenda of the NSE is in public interest and have the approval of the PID of the NSE? Even the Bombay High Court advised the NSE to be transparent because it is in public interest to dispel allegation of corruption. However, the officials of the NSE are using public funds by going in appeal against the order of the single judge of Bombay High Court in order to prevent investigation into the allegation of corruption against the exchange.

21. The very fact that the majority of the Directors – to whom the letter is addressed- are PID is sufficient for NSE to be covered under section 2 (h) of the RTI Act.

22. People of our generation (I am a senior citizen), including the senior authorities of the NSE have to recognise the merit and the intelligence of the younger generation, and earn their respect by setting an example of good public behaviour. This can only be done by a commitment to transparency and fair-play and not being clever and using the institutional money power for personal ends of not being transparent and accountable.

23. The NSE officials forget that it is the experience of the people of the Country that there is corruption in every institution where there is scope making illegal money. There is no other institution where larger sums of illegal money can be made as easily and without detection as the stock exchange. How can it be corruption free?

24. In fact the Hon’ble Judge, in the order quoted above, even included the Judiciary while stating that institutions face crisis of dwindling public confidence. One wonders as to whether those at the helm of affairs of NSE are so disconnected with reality that they think that illegal money cannot be made in collusion with the employees of the Stock exchange! Fall in Public Institution share-holding in NSE is no reason to failure of accountability

25. SEBI, NSE and the government regrettably have had a hand in preventing the public sector financial institution holding in NSE from falling below 51%. Shares have been transferred at high valuation to entities with conflict of interest, by taking advantage of the Bimal Jalan Committee report. This has been done in order to free NSE from government audit, from being accountable under the RTI Act, and to pay the senior officials crores of undeserved (compared to other similarly qualified persons in government owned financial institution) salary. The incidents of the post privatisation of the NSE shows that it has also resulted in high level corruption (refer the two incidents above), lack of accountability, non-transparency and disproportionate high salaries.

Other instances of failure to prevent undesirable trading

26. The NSE officials have failed the investors as an institution which has been granted recognition under the Securities Contract Regulation Act whose object it is to “Prevent Undesirable Trading in Securities by Regulating the Business Therein…” Undesirable trading, through price manipulation and insider trading is as old as the Stock Market. It was thought that with the advent of a broker free government owned stock exchange with professional management, the same would stop. Regrettably it did not. In the last 15 years of the existence of the NSE, there is not been a single instance in which profits from price manipulation and insider trading has been disgorged, to compensate the investors. Anecdotal evidence of share prices rising and falling prior to the declaration of favourable/unfavourable developments is commonplace.

The role of price manipulation in generation of black money also figures prominently in the SIT report on black money. Synchronised trading at artificial prices to launder black-money is stamped with the authenticity of a contract. Switching of trades in another person’s name to launder black money is another form of undesirable trading taking place. Trading based on leakage of price sensitive information (margin, circuit % and spot, promotion and demotion of shares from F&O and change in composition of shares in the Index etc.) before the information becomes public, also takes place. The pump (the price) and then dump the shares on the unsuspecting investors is another common abuse of the trading on the Stock Exchange. Cartels of brokers operating in shares of select companies with low floating stock is yet another instance of undesirable trading.

27. It appears that just as the stock exchanges of the past were said to exist for the benefit of the brokers, NSE now exist for the benefit of its employees and its shareholders. The lofty ideals of Dr R H Patil, the founder of the Exchange (who never earned the salaries of crores that the present incumbents are earning) have been given a go by.

Rs 50 lac cost to be paid by NSE employees

28. NSE filed a hundred crore defamation suit in order to cover up the alleged corruption within the organisation. The Hon’ble judge saw through the game and correctly subjected the exchange to a cost of Rs. 50 lakhs. The advice regarding functioning in a transparent manner has not been complied with. Such is the arrogance of these crorepati officials, that instead of being transparent, it has been decided to appeal against the order at the expense of the coffers of the exchange. NSE cannot behave in a manner in which other corporates behave when involved in scam.

29. As the NSE has not been transparent in its functioning, it will be only in order that the concerned employees who decided to file a defamation suit in order to cover up for the alleged corruption should be made to pay the Rs. 50 lakh cost imposed by the court.

Refer the matter for CBI investigation

30. If the trading data of the period along with the trading data of OPG Securities is not made public, then the matter be referred to the CBI for investigation and let the employees of NSE get a clean chit from the CBI.

31. The undersigned has independently verified the complaint from a knowledgeable person who has confirmed that OPG Securities during the relevant period was one step ahead of the rest of the algo-traders! Whether it was on account of his professional competency or because of his having gamed the system in collusion with the employees of the NSE needs to be investigated. As these were done on an electronic platform, there is an electronic trail which can reveal as to whether the system was gamed at the NSE level. If the matter is beyond the competency of the state investigators then private cyber labs with requisite competency can be engaged.

32. Further, if it is a problem for the NSE that the complaint published in Moneylife was from an anonymous source, then my name can be appended at the bottom of the complaint and the matter be investigated. As stated above I am depositing Rs. 5 lakhs for the information in the two cases.

33. Regarding the other issue of corruption relating to price manipulation of RPL shares by the brokers of RIL, I have already lodged a complaint with the CBI and will be taking up the matter at the next appropriate forum.

Public listing of NSE shares

34. NSE, according to newspaper reports, wants to go public and have their shares listed on their own exchange. This is against the recommendation of the Bimal Jalan Committee Report. Though this part of the report was not accepted, those responsible for not accepting the report and differing with the sagacity of the ex-RBI Governor did so to benefit MCX and will be ruing their decision. MCX took advantage of SEBI overriding the recommendation and had their shares listed on the stock market. An impartial investigation will show that the decision of overruling the Jalan Committee on listing of Stock Exchange was done to benefit MCX. Driven by the greed for profit and higher valuation resulted in a fraud of over Rs. 5600 crores which the investors will never be able to recover. It may be mentioned that the shares of MCX were placed with government-owned public financial institutions at a price of over Rs. 1000 per share having a par value of Rs. 10 at the time when the shares were not even listed!

35. No doubt the employees of NSE (barring key employees who are not eligible) too want ESOPs worth hundreds of crores and be freed from control post listing. The employees know that the value of the ESOP will increase if they are higher profits. All types of instruments will be allowed to trade on the exchange and there will be higher volumes in the speculative section in order to generate more profits. These are bound to put the financial system in jeopardy and create financial instability in the future. The country cannot afford to have the shares of NSE listed in order to appease the greed of the employees and the shareholders.

36. The public service that is carried out by a government owned National stock exchange is far too important for the economy of the country then the petty profits that the individual players are out to make by having the shares of the exchange listed on the exchange. It is forgotten that India is a land of stock market scams.

37. Due lobbying from interested quarters, SEBI accepted that part of the Bimal Jalan report that stated that the maximum ownership should be limited to 5% of shares but the stocks should not be listed. The first part was accepted by SEBI but not the second part. This was done to enable MCX to list. This has been used by the existing shareholders of NSE to divest to private players (and not to govt FI) at huge premium. Some of them are in conflict of interest situation and are now out to book their profits on the privately placed shares.

38. Any investor with some experience of IPO will tell you that the best results are produced before the company goes public. Is it then surprising, or just a familiar coincidence, that the profits of the NSE have doubled in the first half of this year when compared to last year? Higher profits will lead to higher EPS and higher valuation at the time of proposed disinvestment of shares by the shareholders! And also for the ESOPs allotted before the IPO. There is nothing National left of the NSE anymore and one seriously wonders if the NSE will be allowed to use the word National anymore!

39. Representation in this regard is being made to the government to utilise its investment in the tobacco company ITC for the purpose of buying the shares of NSE so that it remains a national asset, nationally owned in national interest. NSE is a vital institution in the economy of the country. It has to be seen as an unbiased organisation preventing undesirable trades on the stock market and existing for the benefit of the investors and not for the employees and the shareholders. The Public Interest Directors are requested to make their recommendation regarding the privatisation of the NSE in light of the recent incidents of blatant frauds and non-transparent functioning of the exchange.

Public Interest Directors requested to use their power of majority for public good and not to allow their good name to misused

40. The views of Public Interest Directors are sought on the sanitised agenda that is put before them at the Board meeting by the full-time Directors of the NSE. Fraud committed by the employees cannot and will never be an agenda item as the NSE officials believe that they are beyond corruption.

41. As it is the NSE officials have downgraded the Public Interest Directors as Independent Director as is obvious from this heading from the NSE website:

Annexure A-2
Criteria /Norms under SEBI Regulations applicable to Public Interest Directors (who are essentially Independent Directors)

After downgrading the PID to Independent Directors, without realising that PID are appointed by SEBI under SEBI regulation (SECC Regulation), the Authorities take them granted without correctly advising them on the allegations of corruption and the lack of transparency.

42. Under the SECC Regulations the appointment of all Directors are to be approved by the SEBI and the PID are to be in a majority. In other words it is the PID, appointed with the approval of SEBI, who are supposed to be in in control of the Board. One wonders as to how can NSE not submit to RTI and not function in a transparent manner, more so when allegation of corruption are leveled?

43. The Code of Conduct for Public Interest Directors under SEBI Regulations states: Public interest directors shall meet separately, at least once in six months to exchange views on critical issues.

The issues of corruption in the two matters brought to the specific notice of the Public Interest Directors, transparency, loss of confidence of investors in NSE, corruption, NSE going public are certainly matters of public interest which in the opinion of the undersigned important enough to merit a separate meeting of the PID. Restoring the credibility of the NSE is far more important than the questionable reputation of the individuals at the helm of affairs who file defamation suits and fail to report RIL insider trading and refuse to be transparent.

Yours sincerely

(i) PID Downgrade d
(ii) Cheque for 5 lacs

(Arum Kumar Agrawal)

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap or any employee thereof)