MUMBAI, June 23: The Investors' Grievances Forum public interest litigation (PIL) on the CRB scam will be heard by the Mumbai High Court tomorrow. This is for the first time that the government of India, all the financial sector regulators and guardians have been named as respondents in a PIL.

On the respondents podium are: the union government of India, ministry of finance, Reserve Bank of India, Securities and Exchange Board of India, State Bank of India, the investment credit-rating agency, CARE, CRB group of companies and its auditors DP Bhaiya, department of company affairs, Central Board of Direct Taxes, Central Bureau of Investigation and the commisioner of Mumbai police.The PIL filed in the Mumbai High Court by Kirit Somaiya's Investors Grievances Forum has been prepared by Chaitanya Mehta of Dhruve Liladhar & Co., advocates and solicitors, and is settled by Navroz H Seervai, advocate, Mumbai High Court.

Somaiya said that he expected the Mumbai High Court to admit the PIL, appoint a three-member expert panel and also give an order for an interim relief to all affected parties in the "scam".

The PIL filed by the forum notes that the respondents failed in their duties which affected scores of investors as they parted with their monies. It said the regulatory negligence gave CRB group the halo of a clean company and helped CR Bhansali to defraud innocent investors.

As a respondent, the Reserve Bank will have to defend its act of giving an in-principle banking licence to CRB Caps' bank -- CRB Global. The PIL said "the RBI did not deem it fit and proper to publicise that it had issued a show-cause on December 9, 1996 asking CRB Caps as to why the in-principle banking licence granted to it should not be revoked. This resulted in the CRB group mobilising huge funds from the unsuspecting public".

The writ petition also mentions that the four-month delay by RBI to cancel the licence resulted in Rs 100 crore being siphoned off from the public.

"The inescapable inference is that certain officers of the RBI were involved with the CRB group of companies and deliberately did not do anything ... and permitted the CRB group of companies to siphon off funds," says the PIL.

SEBI has been charged with the grant of a merchant banking licence to CRB Caps, and the permission to float a mutual fund. "SEBI on the one hand passed remarks and imposed restrictions against CRB Mutual Fund and on the other hand renewed the licence of the CRB group as merchant bankers," says the PIL.

The finance ministry, department of revenue and CBDT have been named as respondents for giving a tax-free status for CRB Caps' power bonds under Section 88 (2) (xvi) of the Income Tax Act, 1961. Power bond holders are now holding junk paper as no security was created, and will have to queue along with all unsecured creditors.

CARE has been named a respondent for giving A+ ratings to CRB Caps' fixed deposit programme which misled depositors into believing that their monies were safe. "It is surprising that within four months of credit rating of A+, the entire CRB group went bankrupt", goes the writ petition.

According to Bharat Kotecha of Investors Grievances Forum, both the regulators -- RBI and SEBI -- have let down the investing public by their negligence of duty. Others like CARE, DCA and the auditors have done enough damage to investor interest.

The CBI has been named a respondent in the PIL on the grounds that the case has not been handled in a less than transparent manner. The PIL has urged the Mumbai High Court to ask CBI to forthwith commence investigations with all CRB employees and directors.

Further, that the Mumbai police be asked to look into all complaints made against the CRB Group.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.