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Finance ministry influenced certain decisions: Subramanyam's lawyer

Special Central Bureau of Investigation judge S R Mehra on Friday rejected the bail application of former Unit Trust of India chairman P S Subramanyam, and three others, in the Rs 328 million Cyberspace Infosys private placement scam, and extended their police custody till August 3.

Significantly, while moving Subramanyam's bail application advocate Satish Manshinde said that the finance ministry had influenced some of UTI's investment decisions.

Rejecting the bail application, the judge asked the CBI to come out with a white paper so that no angle would be left out.

The CBI produced Subramanyam and former UTI executive directors M M Kapoor and S K Basu and Bombay-based stockbroker Rakesh Mehta before the special court following the end of their earlier remand.

The accused had earlier not moved a bail application, but after the judge asked them they gave a hand-written application which was rejected.

The judge, while rejecting their applications, said that the accused are involved in a shady deal and asked the CBI to bring out a white paper on the entire investment of UTI in Cyberspace.

Judge Mehra also observed that the accused are involved in a serious crime which has opened a Pandora's box and, therefore, bail cannot be granted to them.

While moving the bail application on behalf of P S Subramayam, advocate Satish Manshinde said that the former chief of UTI had co-operated with the CBI from day one and the raids at his residence did not reveal any disproportionate assets to his income.

He also said that his client is not going to abscond and, therefore, his custody is not required.

Finance ministry had a say in UTI's investment decisions, says Subramanyam's lawyer

Manshinde also said that the finance ministry had influenced some of the Trust's investment decisions.

Manshinde said that the Uttar Pradesh government and the Johari brothers of Cyberspace Infosys entered into a joint venture to set up an infotech park and the finance minister had asked UTI to invest in projects in the Uttar Pradesh and Bihar belt as it was a backward belt.

He said that this weighed on UTI while making investment decisions.

"It is not only about backward areas. He (the finance minister) spoke to my client on several occasions on several financial policies and decisions which my client has taken," Manshinde claimed.

According to media reports, Manshinde also referred to what "a hidden hand" involved in the deal. He refused to reveal any names in the court saying that he had already informed the judge. He said that he will make more revelations on August 3.

A few days ago Union Finance Minister Yashwant Sinha had said that the government has no direct role in UTI's management and supervision. He said that the government only appoints the chairman of the UTI in consultation with IDBI and that ministry of finance is not directly represented in the UTI board.

The court has now asked the central government to prepare a white paper on the entire Cyberspace deal. The CBI as part of its investigations will question more officials of UTI and SBI Capital.

The court also agreed with additional solicitor general S B Jaisinghani that the accused should be confronted with prime accused Arvind Johari, promotor of Cyberspace Infosys, to get full-fledged details about their role in the conspiracy.

CBI has alleged that Johari had induced UTI top officials through Rakesh Mehta to buy 3,45,000 shares of Cyberspace at an exorbitant price of Rs 930 per share, resulting in loss of Rs 328 million to the financial institution.

CBI counsel J Shinghani, while moving a remand application, told the designated court that the CBI had to confront the recently arrested accused Arvind Johari with the four present accused and, therefore, the custody of the accused is vital for the investigating agency.

He also said that the CBI does not want their custody for a longer period and they it may finish investigations by August 4.

'However, the accused are liable to be remanded to further police custody since there is a likelihood of the evidence being tampered with as the accused enjoy considerable clout and influence in the financial sector due to the high office they held.

The court was also informed that the criminal involvement of accused Rakesh Mehta is gradually emerging on the basis of information and documents collected so far including those from the Bombay Stock Exchange and National Stock Exchange, as well as from the Bank of Rajasthan.

He also said that a large number of witnesses are yet to be examined from various financial institutions and other firms, and the accused, if free, could use their clout to hamper their interrogation.

Advocate Shirish Gupte, arguing on behalf of another accused Rakesh Mehta, told the court that his client is only a broker and he did not deal with UTI alone but also with other financial institutions.

Advocate Gupte said that his client had received the shares on the basis of the research done by his company and had no malafide intentions.

While arguing on behalf of M M Kapoor and S K Basu, advocate Harish Jagtiani told the court that the CBI should show material against his clients, adding that his clients were ready to co-operate with the investigation agency and, thus, their bail plea should be granted.

UNI

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