an internet search for scams and scandals since India's Aindependence seventy-seven years ago reveals about two hundred and fifty-seven events. From modest single digits between the 1940s to '80s, the numbers jump to twenty-three in the '90s, and 218 in the 21st century. Since we wrested our sovereignty from the British in 1947, scams have grown exponentially, encouraged perhaps by opportunism, an effete justice system for white-collar crimes, and a fair share of political indulgence. Barring a few indiscretions like the Jeep scandal case or the Cycle scam in 1948 and 1949 respectively, the first corporate scam to be recorded was the Haridas Mundhra (Mundhra) event, which erupted in 1957.
Surprisingly, Ramkrishna Dalmia's (Dalmia) name doesn't figure anywhere in this long and unenviable list. Dalmia was the patriarch of the Dalmia-Jain group, which saw a meteoric rise in fortunes since the 1930s and was a major contributor to the industrialization efforts of independent India. The group was able to build a conglomerate with interests in varied industries, and at one time, the Dalmia-Jain empire ranked third after the Tatas and the Birlas. Dalmia was accused of fiscal misdemeanours. of pauperizing wealthy joint stock companies by financial manipulation and integral fund transfers through a labyrinth of interlocking companies into his private entities, and of embezzling funds from his insurance company. Notwithstanding. Dalmia's contribution to India's industrialization efforts post-independence remains undisputed, unlike Mundhra's devilry of fundamentally.
being a corporate raider, with self-aggrandizement being his only driver.
Mundhra hailed from a family of traders and went from trading commodities to trading companies with consummate guile and ease. Mundhra's is the story of wheeling-dealing in publicly listed shares and the leveraging of commercial banks to borrow large sums for his acquisition against the pledge of shares (including forged ones) of companies acquired. He kept repeating the process until he had built a tottering Ponzi scheme, which devolved into a crisis with the falling fortunes of his companies. His crowning of evil glory was his ability to influence the government and make Life Insurance Corporation (LIC) invest in his companies at irrational premiums. The aftermath and the revelations caused the first significant financial and political scandal in free India.
Dalmia and Mundhra were as different as chalk and cheese.
Where Dalmia had established himself as an industrialist with diverse business interests, Mundhra was a 'nobody from nowhere". Strangely, though, the twin episodes of Dalmia and Mundhra in exploiting the managing agency system, and India's fragile banks and capital markets were linked.
This book explores the trajectory of their wrongdoings and the strange connections that their separate lives had. These include the nationalization of the insurance business in India (prompted principally by the adverse findings in Bharat Insurance, a Dalmia company) and the formation of the LIC, an institution under government ownership, exploited by Mundhra only a year later! We will discuss the role played by parliamentarian Feroze Gandhi, (Pandit Jawaharlal Nehru's son-in-law) in heaving the Dalmia and Mundhra crimes into political and public consciousness, converting the scams to scandals. Inquiry commissions instituted by Prime Minister Nehru for Dalmia and Mundhra, respectively. were both chaired by the same justice Vivian Bose, though in Mundhra's case, primary investigations were helmed by the Chagla Commission. Ironically, despite Mundhra's charges being adjudged far more serious than those of Dalmia, and him being awarded a prison term of twenty-two years, he managed to secure release in three years, closer to Dalmia's awarded and served prison term of two years. Notwithstanding these curious connections, the modus operandi and the driver for these two founding fathers of frauds in India were quite different.
The Indian economic and political landscape in the years before and after 1947 presented myriad opportunities. Indian policy makers sought to harness these opportunities and desired a self-reliant and vibrant industry based on Nehru's socialistic approach of wealth distribution away from the capitalist approach. Many Indian entrepreneurs (albeit grudgingly) supported this as well. Our stories are, however, about the deviants who exploited the opportunities.
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