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Stock scam of 2001 was avoidable: JPC

December 07, 2002 13:35 IST

The joint parliamentary committee on the stocks scam is expected to rap the Centre for allowing a high level interdepartmental committee to keep track of promoter broker nexus in stock markets for fading into oblivion, in its final report.

The JPC which has almost finalised its report for presentation to Parliament within the winter session feels that if the committee were allowed to function, the stock scam of 2001 could have been checked.

The committee was set up as per the recommendations of the JPC of 1992 to act as the nodal agency for such intelligence gathering.

It included officials from the department of Central Board of Direct Tax, CBI, Enforcement Directorate, department of company affairs and the Securities and Exchange Board of India.

It was constituted in 1994 and met through 1995 but after that the committee simply fell away into oblivion.

The mandate of the body was to collect information from the different agencies and pool them to develop an indication of the possible market moves by rogue brokers in collusion with promoters of companies to ramp up prices of their shares.

While the high level committee on capital markets headed by RBI governor, with the finance secretary, Sebi and later IRDA chairmen was expected to act as the policy making body the interdepartmental committee was supposed to go into the market mechanics.

Though the finance ministry and other departments have given no clear reason about why the arrangement fell into disuse, JPC members feel that there was also pressure from the corporate sector to drop such a ‘witch hunt.'

The JPC has been stressing that it is the lack of systemic procedures which led to the crisis in March 2001.

During the course of its enquiry the JPC had also asked the same committee to be revived to examine the possible promoter involvement of four companies including HPCL, Global Tele, Zee and Pentamedia.

The JPC is also likely to indict IDBI for failing to inform the finance ministry about the brewing crisis in UTI.

IDBI had two representatives on the board of UTI and till 1997 had been ceding one of them to a finance ministry official.

After the then finance minister P Chidambaram decided to give more autonomy to UTI it was IDBI which, according to JPC sources became the ear and eye of the ministry vis a vis UTI since the government held no share in the mutual fund.

In his deposition to the JPC, former finance minister Yashwant Sinha has said that he was never informed by either the UTI management or by the FI representatives that the institution was heading towards a problem on its US-64 scheme till two days before the meeting of its board of directors.
BS Economy Bureau in New Delhi