CBI must apologise if enquiry fails, says former SEBI Chairman C.B. Bhave.

Mar 17, 2014

MUMBAI: CB Bhave, the former chairman of capital markets regulator SEBI, has said CBI Director Ranjit Sinha should be prepared to apologise if a preliminary enquiry against him and former SEBI official KM Abraham failed to unearth any evidence.

"A statement by the CBI director that this is merely a PE (preliminary enquiry) and that no raids or arrests have been conducted is disingenuous at best. Do we wait to be raided or arrested? It is not that every other day PEs are opened against the chairmen of regulatory authorities..."

"If CBI finds that it erred in filing such a PE and in giving it publicity without carrying out proper diligence, then the director must apologise through the same media on behalf of his organisation," Bhave told ET on Sunday.

Commenting on the substance of the case, Bhave, who headed SEBI between 2008 and 2011, defended his decisions and asserted that allegations of irregularities in approving a currency exchange promoted by the Jignesh Shahled Financial Technologies group did not hold water.

The charges against Bhave and Abraham, which the investigating agency is probing, are that they gave permission to the FT group to set up an exchange despite a report from the finance ministry on a tax raid against the group in 2007.

Defending his decision, Bhave said the original letter from the finance ministry regarding the income-tax investigation came during the tenure of his predecessor, M Damodaran. Further, in 2007, SEBI had taken a policy decision that a mere probe was not enough to deny approval.

Instead, the regulator should go by actual findings of any governmental agency or a regulatory authority. "I agree with that (2007) decision. But following its own reasoning...the director, CBI, should tell us why CBI has not filed a case against my predecessor also. If three SEBI chairmen take the same view and only one is honoured with a PE against him, what does it say?" Bhave said.

Further, according to the former SEBI chairman, the incometax department had closed the case against Shah quite a while ago. "Did you find a mention of that in CBI's description of the case (to the media)?" he said. He also picked holes in CBI's decision to include former SEBI member Abraham in the preliminary enquiry, describing the move as "deliberate but wrong".

There were many people who participated in the decision and Abraham cannot be singled out, Bhave said. "The record will show that I approved it. The buck stopped at my desk and the responsibility should rest there.

CBI needs to carry out whatever investigation it wants against me and me alone," he said. Bhave said CBI appeared to be selectively picking and choosing when it came to approvals for Jignesh Shah.

Last year, SEBI permitted Shah to continue to run the exchanges under SEBI regulation when there was a show cause notice issued to him for declaring him not "fit and proper" by the commodities market regulator.

"This was in the context of a .`5,000-crore loss to investors. Despite the knowledge of this serious investigation, SEBI allowed Shah's exchanges to run. This is all out in the public domain. Does it mean that CBI should open a preliminary enquiry against the current chairman?" he countered.

The Economic Times