The complainant, Prakash Yardi, had informed his seniors in September, 1990, that the bank was exposed to substantial credit-risk. The bank was, he had pointed out, also contravening the central bank's regulatory controls.

Hearing an application by Bhupen Dalal, a notified party in the multi-crore securities fraud, justice Variava told the Stanchart counsel that, "I would like to see what steps were taken to rectify the wrong things happening in the bank."

Should Stanchart fail to prove the contention, Variava said, the motive is clear that the bank was voluntarily flouting regulations in return for assured gains. The bank will furnish its report on May 4. At Tuesday's hearing, Variava heard CBI counsel VC Gupte. The watchdog was instructed, at the last hearing, to provewhether Stanchart had given crores of rupees to Hiten Dalal, a scam-tainted broker, against an assured return of 15 per cent. The bureau was also to certify up to what level of executives was aware of the "assured-return transactions". Gupte told the court that criminality was detected by the bureau in "the mode of implementation of contracts" and not the way in which they were entered into.

According to him, the back office of the bank was not following the instructions of its front office, and money was given to Hiten Dalal without taking possession of the securities.

The judge observed that the criminality was confirmed in the transactions between Hiten Dalal and the bank as there was no breach of trust. According to Variava, Stanchart was flouting the guidelines only to earn 15 per cent assured returns. Dalal, in his application seeking direction from the court to ask CBI to further investigate Stanchart's transactions during the scam, has wondered how the bank's Rs 889 crore could have disappearedwithout a trace when all securities' transactions were routed through banks.

According to Dalal, the modus operandi was to buy certain securities in switch by selling some others.

The cost of purchases and sale proceeds were netted off and net amount was settled.

The bank either short delivered securities or delivered securities which were repurchased `without payment' at a later date. Stanchart has withdrawn civil cases involving a money claim of around Rs 749 crore, but the Central Bureau of Investigation case based on a SCB complaint is pending before the court.

CBI has opposed Dalal's application stating that "an accused in a criminal case cannot demand an investigating agency to examine the very case against him in any manner".