[Sh. Jaswant Singh]

idealism with which the hon. Finance Minister spoke so movingly and so eloquently, when he spoke about the banking institutions of this country aspiring a certain position in the rest of the world.

Here is what the report says:

"During our investigations, we have an occasion to meet peter Henwood, administering some Isle of Man companies, and Shri Padiyar, Adviser, BCCI, London who looks after the financial aspects of all the transactions abroad and some shareholders also."

Then the details of the meeting held were also given.

"To start with the meeting was arranged on 12.9.1986.." Since the year mentioned here is 1986, this report too must be a 1986, this report too must be a 1986 report.

SHRI SOMNATH CHATTERJEE (Bolpur) : Since it happens to be Shri Bhure Lal's report, it is bad. That is their view.

SHRI DIGVIJAYA SINGH: No, no. That was an excellent report.

SHRI JASWANT SINGH: Now, this is what is relevant to my

submission. Mr. Padiyar did admit that the investments in Bombay were made under his instructions and that he was an Adviser to the BCCI.

But he refused to divulge the identity of the real investors as it was against the professional ethics of the bankers. This is a perfectly understand able sentiment for any banker to express. But the subsequent aspects are a little more worrisome. The Europe Asian Bank, Bombay and the Syndicate Bank, Bombay had replied the they had not done any verification. They submitted that the money that came from BCCI was without verification and the Indian Banks also did not carry cut any verification, as required under the rules of the Reserve Bank of India, of the

148 Motion re. collapse of B.C.C.I.

antecedents of the investors. They totally relide upon the verification done by the BCCI, London. When Shri Padiyar was asked whether he had done any verification, he stated categorically that he had not done so and he had relied on the Indian Banks. Here again Shri Padiyar was entirely correct when he had stated that his clients had directly sent the forms to the Banks and the question of verification of antecedents of investors did not arise as far as BCCI London was concerned. Mr. Padiyar stated that whatever instructions he had revived from his clients were passed on to the bankers in India with a clear-cut understanding that the same should be implemented if they conform to the existing laws, rules and regulations framed by the Indian Government. So, Mr. Padiyar is entirely right. Somewhere somebody is responsible for a lapse. Somewhere somebody has committed a mistake. That is what I am saying. If an investment of this kind has come into India and the Indian Banks have not Verified the antecedents and those who are dealing with the nonresident accounts abroad say that they did not verify the antecedents because they were not required to do so, then I think Sir it is necessary that we look into this whole aspect of the health of our institutions very carefully.

This is what the Enforcement Directorate also recommends finally, and this also underlies our concern. The above investigations have revealed that the investments by the so called NRIs were out of black money of some unidentifiable investor for investors. Those unidentifiable investors can either be persons resident in India who have laundered a lot of money outside India through illegal channels or by way of underinvoicing, ever-invoicing, exports, imports and so on. Or, they could be persons resident out of India who have illegally amassed wealth which has not been declared or subject to taxation of the country in which they are resident. This is a very crucial question. this is a touchy question too. I expect there is a great deal of East African, Kenyan and Ugandan money which comes into India and it wants to come into India in the hope that in India their identity would not be revealed. But it is again begging the

149 Motion re. collapse of B.C.C.I.

question because in Kenya if you have this kind of unaccounted money and if it comes to light then punishment is mandatory. There is no question of punishment not being moted out of political patronage etc.

or otherwise. But in India we have no such thing. That I think has led the Enforcement Directorate to quite rightly observe that if you are not in a position to identify the real investor today the process will continue and one day the Indian companies would be taken over by unidentified persons residing abroad through their attorneys from various tax havens.

I am not at all opposed, in fact we should do everything to encourage nonresident Indians money or oversee money coming into India. But I do not think we will encourage that if we continue to play ducks and drakes with the system, unless our system is credible enough to carry confidence with the investors. I would say that the manner in which the BCCI, and institution of this land had been operated in the decades of eightees, they do not instil confidence.

That is why I said that I will cite this incident to point out some possible future consequences for our economy and for the State as such.

I have already said and I repeat, the State will be appropriated by a few either by selective acceptance of the report of the Enforcement Directorate or by selective rejection of this report of the Enforcement Directorate. I do not have to labour that point.

Institutions will then be bent for individuals. Examples again abound and those examples stretch, from the great scandal of Bofors to the day-to-day corruption of petty patwaris. All institutions, I put it to you Mr. Finance Minister, will finally go. No amount of our shared idealist; no amount of reforms, whether in fiscal policy or trade policy or industrial policy will be adequate or will succeed if you do not go into the very sinews and put into effect what you are trying to do by these three major reforms that you have initiated in this very Session of Parliament. It saddens me to say that if we do not address ourselves to all these things because that is what lies at the centre of my concern that many IMF loans later, many devaluation's later-the state of India, I hope

150 Motion re. collapse of B.C.C.I.

it does not happen but I have apprehensions that it will if we persist on this path, will become not just a captive of a few it will, become a non-entity. I hate this world of banana republic but it does portentd and there are portents of precisely that because what typifies the banana republic is the use of nation whether by drug, mafia or by dealers, and illegal money, for private use. India is very close to that. India in the eighties had come dangerously close to be appropriate by a few.

That is why I appeal to the Finance Minister to think of BCCI and financial institutions in the manner in which we are trying to put it.

Please do not think that we are motivated by the concern any other than those that motivate you.

I have a few clarification's to seek, a few questions to ask to the hon. Finance Minister and then I will conclude. I would have to repeat that the original, official statement of the Finance Minister was very unsatisfactory. I would request of the Government to come with complete details, full facts on this matter. Did the Government of India have any intelligence, any information, any appreciation of what was happening in BCCI? I am not merely referring to BCCI, Bombay because the hon. Finance Minister will take shelter behind that BCCI, Bombay was a branch of much larger organism called the BCCI.

BCCI, Bombay in particular, is a solvent bank and the figures that have appeared in the papers show that the deposits far exceed the loans granted. Some suggestions have been made to me. That some of these loans granted are in fact against hawala securities given in London. I do not have to go into a detailed explanation of hawala securities. The hon. Finance Minister would perfectly understand that a loan of Rs. 10 crore, without security, granted in India would have a corresponding security in London of a similar sum of money made available to BCCI, London. I am sure an audit has been carried out.All the papers are now with the State Bank of India. Would the hon.

Finance Minister share the real state of affairs of that kind of loan position of BCCI, Bombay?

151 Motion re. collapse of B.C.C.I.

[Sh. Jaswant Singh]

A mention has been made earlier and it appeared in print also about the misuse of moneys by BCCI, Bombay of pilgrims wanting to go on Haj and the collection of EDS.

The BCCI, Bombay was lending itself to misuse on the scheme called FCNR. There are some details with us. I do not want to give those details merely as speculation or on account of rumours. I did like the hon. Finance Minister to share with us his worries and whether this FCNR deposit was a source of misuse of this bank.

I would like too know from the hon. Finance Minister about the oft-repeated questions of misemployment of these banks for laundering of drugs and narcotics money. Did the Government receive any report at any stage from the Narcotics Bureau, from the Intelligence Bureau or from any other Intelligence Agencies however imperfect or unsatisfactory the Intelligence Agencies might be? I had some occasion to do some looking into all these Intelligence Agencies when I was the chairman of a Committee. I am not greatly enamoured of their efficiency but nevertheless if they are as efficient or inefcient as the rest of the country is, then that being the collective norm, what is the information that the Government of India had in this regard, particularly, with a view to the reported meetings that the founders and former chairman of BCCI had with various known drug.........What am I to call?


SHRI JASWANT SINGH: Barons would raise them to the level of political leaders and therefore I hesitated from using that word.

SHRI SOMNATH CHATTERJEE: Drug barons are more powerful than some of the political leaders.

SHRI JASWANT SINGH: In that case, barons would be appropriate. I am very much concerned about the reports that the BCCI was lending itself and indeed lent itself as a kind of an agent, an attorney holder, collector and a tool for all seasons, for all

152 Motion re. collapse of B.C.C.I.

purposes of acquisition of weaponry by Pakistan, nuclear know-how or anything that Pakistan wanted to do including finance, BCCI was being employed for it. What information does the Government of India have in that regard? I would like the Government of India to share with us what information they have about this very alarming report, that the black network of BCCI was indeed inseparable from or indistinguishable from the ISI of Pakistan. If it was indistinguishable and if the black network operated throughout the world, then I am not ready to believe that it did not operate in India. If ISI is indistinguishable from that black network, then I would like to know, does the Government of India have any information in this regard?

I want to spend a little time on Indian interests so far as totality of BCCI is concerned and BCCI, London in particular. Here I would seek your indulgence to take a minute or two. Because this is a very worry some aspect. Here perhaps the Government could very easily, without embarrassing any of the industrialists or bankers could have done it.

I am informed that the people of Indian origin have lost somewhere between threefour billion US dollars because of the failure of BCCI; and if this is the amount of money that the overseas Indians - whether residing in London or elsewhere-have lost surely the Government of India ought to have initiated some action. I have apprehensions that the role and conduct of the Bank of England in this whole matter is not satisfactory. What action did the Government of India take? I know that the Bank of England is not at the back and call of the Government of India or the Reserve Bank of India. But for the sake of those overseas Indians who have lost three-four billion US dollars, did the Government initiate any action at all with the Bank of England? I think the whole conduct of the Auditors of this Bank is really most perplexing. Here is a firm of auditors, who, year after year, have said that this Bank is all right and suddenly this Bank becomes not all right. Was the government not aware of what was happening? After all, those three-four billion

153 Motion re. collapse of B.C.C.I.

US dollars that have been lost by overseas Indians, each one of those overseas Indians have got their relatives in India; and it was the responsibility, indeed the duty of the Government of India to have addressed itself to this task.

I am also given to understand that the Sheikh of Abu Dhabi has not only sent 650 million US dollars just a fortnight before the closure of this Bank and written off the losses of 1990, indeed he agreed also to meet all the other losses as well. What initiative did the Government of India take to encourage this initiative of the Sheikh of Abdu Dhabi? It ought to have taken some initiative because so many Indians are involved, even if they are overseas Indians.

The courts in the UK have stayed the Receivership of this Bank until the Second of December 1991. I think the Government has got and some politicians, businessmen and former civil servants or present day civil servants have got a reprieve until Second of December because on Second of December when it goes to the Receiver and when the official liquidator publishes a list of all the accounts-holders, then I do not want my good friend, for whom I have the highest regards to be embarrassed, because that list which would been published only in December, might contain very embarrassing names and might contain a very embarrassing amount. Therefore, I would appeal to the hon.

Finance Minister that whatever he says, he must take into account that the Receivership of the Bank is yet to take place.

I have earlier submitted that I find it very perplexing when universally the conduct and the illegality of the BCCI is being condemned, it is only the Government of India and the Congress Party which seems to be supporting the BCCI and all that the BCCI has done.

SHRI DIGVIJAYA SINGH (Rajgarh): We never supported it.

SHRI JASWANT SINGH: You never supported it. I am so relieved to hear it. Then

154 Motion re. collapse of B.C.C.I.

don't support it further. My submission is that we have asked for a joint parliamentary enquiry into it and issue some guidelines That is why I say that the least that the government can do is to take a stand on this issue. We would like to know: are you for BCCI? Are you for corruption and illegality or are you against it? You cannot be both because if you shaddle the fence for too long then the fence enters you; and I would not wish that to happen.

There is an organisation called "British Organisation of People of Indian Origin." They have demanded an international enquiry into this whole scandal of BCCI; and I am told that the Chairman or somebody of this Organisation has perhaps requested the Prime Minister of India to support the request that he has already made to the British Prime Minister for a need of a proper enquiry into the collapse of the BCCI. Has the Government of India received any such request; and if it has, what is its action?

I would like to share with the hon. the Finance Minister and this too is worrisome to me, because I believe that the Western security services and the agencies like the CIA and others have misused this Bank. They employed it as a conduit, a laundering agency, whether it was Iran Contra affair or any other affairs, they have misused it. If they have misused, surely, the Government of India would have been in the knowledge of what was happening.

I would like to make one other request:That he must make a study of what impact the BCCI closure, even it is a temporary closure, what impact it would have in London and on NRI investments into India in the coming months. And I would request the Finance Minister to share his thinking on this subject with us.

I would also request the hon. Finance Minister to announce in Parliament what measures he is contemplating so far as the ordinary depositor or investor in the Bombay branch of the BCCI is concerned.

For how long is his money going to be locked up? And

155 Motion re. collapse of B.C.C.I.

[Sh. Jaswant Singh]

what is going to happen to all the employees of the BCCI, Bombay, who are currently neither here nor there?

I am saddened to have to refer to a letter which I have received.

It is from an organisation that calls itself, "The Indian Muslims Forum, U.K." and I find it objectionable not for any other reason, but for what it contains against my esteemed and good friend, Shri George Fernandes. And I would like to read out what it says about Shri George Fernandes I find it most objectionable I condemn it in the strongest terms and I would like the Government to tell me how they react to this particular letter, because I am sure that they have also received it.

"What is most regrettable and apprehensible", says this organisation, "is that such Indian political leaders as Mr.

George Fernandes, Member of Indian Parliament has even used the opportunity to insult and injure the religious sentiments of the Muslims by leveling false allegations that the BCCI was being used as a conduit for transferring funds overseas from India under the cover of Haz pilgrimage expenses."

This is a matter of investigation. Arises of the Government of India have already conducted. It is not a Hindu Muslim question. It is a question of banking propriety and it does not lie in the mouth of any organisation in the UK. to pass such comments on him; not merely because he is my good friend and esteemed colleague. But if on any Member of Parliament, any such remarks are passed, then I will, as always earlier, stand up and protest against it. (Interruptions) MR. CHAIRMAN: I do not allow you.

SHRI JASWANT SINGH: Just one or two additional questions.

The reports about the BCCI's questionable functioning had become public and

156 Motion re. collapse of B.C.C.I.

were public as early as in 1980. In fact, to the best of my recollection and knowledge, some of the South American branches of this Bank were closed on account of their nexus with drug laundering, and if I remember right, these disclosures took place in 1983. I find it very strange that the hon. the Finance Minister should have laboured so hard and protested so much that the Bank sanctioned in 1979 was not merely a representative office, but it was for a full- fledged banking operation. In 1983 when you finally permitted them to open a bank, in India was that not simultaneously with some of the South American banks actually being closed down for charges related to drug laundering? And if in South America BCCI was being closed down or elsewhere because it was laundering drug money, then what persuaded the Government of India in March 1983 to permit this Bank to open in India?