Ex-Sebi chief CB Bhave comes out all guns blazing against CBI

The Central Bureau of Investigation (CBI) may have bitten off more than it can chew by taking on CB Bhave, former Chairman of Sebi, in the case involving Sebi’s grant of permission to Jignesh Shah’s MCX-SX in 2008 to trade in currency derivatives.

Shah is now under a cloud following defaults on his National Spot Exchange Ltd (NSEL), but Bhave actually had nothing to do with this exchange or the permissions given to it.

The CBI seems to be on a guilt-by-association trip, and has launched a preliminary enquiry (PE) about the role played by Bhave and a former Sebi wholetime director, KM Abraham, in granting trading permissions to MCX-SX when there was a tax case pending against Shah. Unfortunately for the CBI, the tax department ultimately had to close the case against Shah - and so the PE against Bhave looks like nothing more than a red herring.

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In an interview to The Economic Times today (18 March), Bhave himself has come out all guns blazing against the CBI and hints that there is something fishy in why the CBI decided to go after him and Abraham in this case.

Like any responsible official, Bhave makes it clear that he takes full responsibility for the clearance given to Shah’s MCX-SX, saying his officers cannot be held responsible for it. He said: “The buck stopped at my desk and the responsibility should rest there. The CBI needs to carry out whatever investigation it wants against me and me alone.”

Bhave’s interview makes two critical points, neither of which show the CBI in good light.

First, he points out that three Sebi chairmen - M Damodaran before him, he himself, and his successor UK Sinha - were involved in decisions involving MCX-SX. In Damodaran’s time, it was agreed that Shah could not be denied the right to start a currency exchange just because there was an income-tax enquiry against him. Bhave himself cleared the currency exchange formally, and Sinha okayed additional stock trading at MCX-SX after Bhave left.

Asks Bhave: “If three Sebi chairmen take the same view and only one is honoured with a PE against him, what does it say?”

However, far from trying to implicate the two other chairman in the probe, Bhave makes it clear that he will welcome a probe and quick exoneration.

This bring us to the second point made by Bhave: he sees the move to implicate Abraham, whose hard work in the Sahara case has landed Subrata Roy in jail, as questionable. The Supreme Court upheld Abraham’s June 2011 order asking two Sahara companies to wind up and return the money, but Roy didn’t comply and is now cooling his heels in jail for contempt of court.

The CBI’s decision to cast a cloud of doubt over Abraham’s reputation is thus questionable - both for its timing, and for its lack of substance.

Bhave is clear that Abraham is not the person to be queried on the MCX-SX case, and hints that there may be more to it than meets the eye. Calling the decision to include Abraham in the PE as “deliberate, but wrong,” Bhave hints that he may have more to say about what has been happening with the government and Sebi at the right time. He said: “I have much more to say about the whole chain of events over the last few years. That is more general and should wait for another day.”

Bhave and Abraham were denied extensions by the finance ministry under Pranab Mukherjee even though both were eligible for it. Abraham, in a separate letter to the PM, had, at one stage, alleged pressures from the ministry to go slow on cases involving some corporates.

Clearly, few former bosses believe that the CBI is upto anything sensible in going after Bhave, who is widely seen as one of the Indian Administrative Service’s upright officers. He has received wide support from other former babus with impeccable reputations. Among them: former Comptroller and Auditor General Vinod Rai, former Central Vigilance Commissioner N Vittal and former coal secretary EAS Sarma. Their point: officers cannot be held accountable for wrong decisions (assuming these were wrong, in the first place).

“Both Bhave and Abraham have an unblemished record”, Vinod Rai is quoted in The Financial Express as having said, while Vittal points out that “The CBI has become highly controversial. Its reputation has become questionable.”

It is a fair bet that at the end of it all, the CBI is likely to tarnish itself more than Bhave and Abraham.

Read the whole Economic Times interview with CB Bhave here.