Ashwin Mehta, brother of 'big bull' Harshad Mehta has been sentenced five years of rigorous imprisonment and a fine of Rs5 lakh in a case related with diversion of funds from state-run ONGC Ltd. VN Deosthali, who was assistant manager at UCO Bank when the fraud took place, was sentenced to 16 years of rigorous imprisonment and a fine of Rs4 lakh. Since the sentence is over three years, he has been sent to Tihar jail on 2nd November, after the judgement was pronounced.
This is nearly 26 years after the securities scam of 1992. In a strange mix of fortunes, Ashwin Mehta and eight officers of State Bank of India (SBI) were acquitted in another case in Mumbai just over a week ago. Funnily, the Times of India Mumbai front-paged the acquittal of Ashwin Mehta today, when, in fact, he has been in Tihar jail since 2nd November.
In the ONGC matter, that led to his conviction, Justice Anju Bajaj Chandana from the Special Court of Central Bureau of Investigation (CBI), Delhi said, "The defence version put forth by Ashwin Mehta has no merit or substance. According to him, it was obligatory for ONGC to engage the services of registered broker and for this purpose even ONGC entered into contracts with Harshad Mehta and agreements were reduced into writing. However, no such agreement is produced in evidence and even witnesses of ONGC have not been questioned on this aspect. It is clear that Ashwin Mehta has no reasonable defence in his favour. To conclude, Ashwin Mehta has been actively involved through conspiracy and actually participated in the crime with full intention and knowledge of large scale diversion of ONGC funds.”
The CBI charge sheet filed during July 1989 and March 1991 says, MC Nawlakha, former member for finance at ONGC entered into criminal conspiracy with Harshad Mehta and Mr Deosthali to obtain undue pecuniary advantage for themselves by illegally diverting funds of ONGC.
According to CBI, surplus funds of ONGC amounting to Rs730 crore were made available to Harshad Mehta by crediting his current account in UCO Bank at Mumbai. He utilised the funds in money market and thereby earned huge profits from the same. VK Joshi and RK Singhla, who were working as deputy directors for finance and accounts at ONGC in Delhi and Mumbai were also involved in the transactions.
Ashwin Mehta, who was share and stockbroker was authorised to operate the UCO Bank account of Harshad Mehta during that time.
Mr Nawlakha with the help from Mr Joshi diverted funds of ONGC through transfer advices, which were used to issue banker's cheques from State Bank of India (SBI) in favour of UCO Bank. The Mehra brothers handed over the banker's cheques to Mr Deosthali at UCO Bank, who credited the amount in Harshad Mehta's account.
"Accused Mr Deosthali, knowing fully well that said banker's cheques were in favour of UCO Bank and on the respective dates no transactions of securities were carried out, issued bank receipts (BRs) against the banker's cheques stating that funds have been received by UCO Bank and invested in the purchase of various securities whereas the funds were directly credited by him to the current account of Harshad Mehta, who utilised the said funds for his own benefit," the CBI had said.
Mr Nawlakha also received shares of Apollo Tyres Ltd and Bharti Telecom Ltd, in the names of his family members without any authorisation.
Harshad Mehta expired on 31 December 2001 and Mr Nawlakha died on 30 October 2012, and proceedings against them were abated.
In the judgement, Justice Bajaj Chandana said, Mr Nawlakha abused his official position and approved proposals for investments against rules and also arranged delivery of bankers’ cheques to representatives of Harshad Mehta, and thus was guilty for large scale misappropriation of ONGC fund.
“Mr Deosthali wrongfully passed credit vouchers for crediting the proceeds of the banker cheques to the account of Harshad Mehta and in this way, diverted ONGC funds in favour of private broker and unauthorisedly issued bank receipts. Ashwin Mehta assisted his brother Harshad by signing the important documents about delivery of securities and maturity amount to ONGC and also separately provided illegal benefits to Mr Nawlakha and Mr Deosthali, through their family members,” the court said.
“Corruption is a serious menace, anti-social and anti-development. It poses threat to the stability of the society. No form of corruption is acceptable. The economic offences involving huge loss of public funds are required to be viewed seriously as it affects the economy of the country as a whole and adversely affects the financial health of the country. The offences are serious when it involves public money and more serious when they are committed in respect to valuable security through banking system,” Justice Bajaj Chandana concluded.
Coming to the SBI case, where Ashwin Mehta was acquitted last week, Justice Dr Shalini Phansalkar-Joshi of the CBI’s Special Court in Mumbai, said, "The prosecution has however not made any attempt to prove the sanction by examining the subordinate officer or the staff, who has seen the sanctioning authority signing the sanction order or who is acquainted with the signature of the sanctioning authority. Merely, filing the order purported to be the sanction order alleged to have been signed by the competent authority, does not discharge the burden on the Prosecution of proving the sanction, according to law. No explanation is offered at all by the Prosecution for non-examining any of the witness on this aspect, at-least to state that the sanctioning authority was the competent authority to grant such sanction. The Prosecution has not even proved this sanction through the evidence of Investigating Officer, who had obtained the said sanction.
"Therefore, the fact remains that there is no sanction proved on record for the prosecution of the R Sitaraman and in the absence thereof, the entire trial conducted against him becomes vitiated as he did not get any opportunity to challenge the said sanction for non-application of mind, absence of competency in the sanctioning authority to accord such sanction," the court said.