CBI Charged Chidambaram

The Central Bureau of Investigation (CBI) has charged the former Finance Minister of India Palaniappan Chidamabaram with abuse of power and criminal conspiracy over the 2006 2G spectrum scam.

The Lok Sabha has also passed a bill for authorities to seize assets of fugitives accused of crimes involving sums over 1 billion rupees ($14 million). Fugitive tycoons such as Vijay Mallya and Nirav Modi will be targeted under this law.

Background

On 16th November 2010, the Comptroller and Auditor General of India (CAG) released a report on licenses and allocation of 2G spectrum by the Department of Telecom.

CAG revealed 2G licenses had been issued to telecom operators at throwaway prices causing a loss of Rs. 1.76 lakh crore to the exchequer. Moreover, licenses had been issued to ineligible applicants who had deliberately suppressed facts, disclosed incomplete information, submitted fabricated documents and used fraudulent means to acquire licenses for access to the 2G spectrum.

The telecom ministry under A. Raja changed rules and eligibility criteria several times before the auction. The ministry then issued licenses on a distorted First Come First Served (FCFS) Policy at 2001 prices, not 2008 prices.

The Supreme Court declared the allotment of spectrum "unconstitutional and arbitrary,” cancelling the 122 licenses issued in 2008 under A. Raja. According to the CBI charge sheet, several laws were violated and bribes were paid to favour certain firms in granting licenses. A. Raja and M. K. Kanimozhi were the prime accused alongside bureaucrats and executives.

6 years ago, Time magazine ranked the 2G spectrum case in a list of top abuses of power, only behind Nixon’s Watergate Scandal at the first position. P. Chidambaram was the Finance Minister when the scam broke out in 2008 and has since been under the judicial scanner for his alleged role in the cover up of the 2G scam. BJP politicians have accused the former minister of abetting fraudulent practices of jewellers like Nirav Modi and Mehul Choksi.

Analysis

Special CBI judge O.P. Saini filed a supplementary chargesheet against P. Chidambaram, his son Karti and 16 others in the Aircel-Maxis deal case. The hearing has been scheduled for 31 July. The agency has invoked provisions of the Indian Penal Code (IPC) and the Prevention of Corruption Act (PCA) against the accused.

Chidambaram has responded by tweeting that the agency had been pressured into filing the chargesheet to “support a preposterous allegation against me and officers with a sterling reputation.” Chidambaram and his son have on many occasions refuted the charges, stating that they were not named in the FIR and that the CBI/ED charge sheets have already been invalidated with the accused persons discharged.

The Fugitive Economic Offenders Bill law, which will go to Rajya Sabha and the president in the coming days, is part of a push to prosecute dozens of people who have fled in the last four years, including former UB Group Chairman Vijay Mallya and diamond jeweller Nirav Modi.

India has sought to extradite Mallya from Britain to face charges of fraud as a group of Indian banks seek to recover more than $1 billion of loans granted to his defunct Kingfisher Airlines. The law will also replace the executive order to seize assets of Nirav Modi who might have fled to the Carribean after being accused of $2 billion bank fraud. Both business tycoons have denied the claims.

“This is the first time in the last 70 years after independence that such a strict measure has been taken against fugitive economic offenders,” Piyush Goyal, interim finance minister, told parliament.

Chidambaram has been accused by members of the ruling BJP government of using his power as Finance Minister to provide benefits to Mallya and Modi.

According to analysts, many corruption scandals including the 2G spectrum case, coal mining scam, Adarsh Housing Society scam and the Commonwealth Games scam were major factors behind the Indian National Congress-led UPA government's massive defeat in the 2014 Lok Sabha election.

For the BJP-led NDA coalition, in order to maintain a majority in the parliament, stringent actions had to be taken to prevent billion dollar defaults. The recent scams expose the biggest flaws in the Indian banking system: weak risk management practices and glaring oversight lapses.

After the financial crisis of 2008, international banks have adopted stringent measures to prevent banking sector weaknesses. In spite of Central Vigilance Commission rules to identify sensitive positions and routinely transfer such individuals, most Indian banks appear to remain indifferent to such steps.

Chidambaram has once been quoted saying, “Everyone is presumed guilty until he is proven innocent, which I think is wrong, as it will destroy the rule of law in this country.”

Assessment

Our assessment is that the new bill will assist Indian authorities in prosecuting fugitive businesspersons, however, extradition from a foreign country remains a hope for the future. We believe that the measure might assist the BJP-led NDA in gaining popularity ahead of the upcoming general elections. We feel that there is limited evidence against Chidambaram to prosecute him in court and he is likely to be acquitted.