CBI follies: This is no way to check crony capitalism

The Supreme Court seeks to ensure a strong, independent Central Bureau of Investigation (CBI) to check corruption. Sadly, the CBI is using this enhanced power to pursue frivolous charges against honourable officials. This simply demoralizes and paralyses the bureaucracy, without catching the big fish.

The CBI has registered a preliminary enquiry (PE) against CB Bhave and KM Abraham, former chairman and member of the Securities and Exchange Board of India, for allowing equity trading by the trading exchange MCX-SX (whose related exchange, NSEL, is involved in a Rs 5,600-crore scam). Bhave had actually battled the MCX-SX promoter Jignesh Shah, combating pressure from influential quarters. Finance minister Chidambaram, former Comptroller and Auditor General Vinod Rai and several others have condemned the PE as a vacuous tarnishing of outstanding officials.

Last year, the CBI registered an FIR naming industrialist Kumar Birla and IAS official PC Parekh in the allocation of the Talabira coal block in 2005. Parekh had a high reputation for integrity, and had actually raised questions about the allocation. If the CBI is going to chase officials long after they retire, why will they risk taking quick decisions?

The CBI has now registered ten FIRs against six companies for defaulting on loans from public sector banks. How is loan default a crime? Maybe many loans were given because of political connections, but while that\’s undesirable, it isn\’t criminal. Even willful default is not criminal – the answer is to seize the assets of the defaulters through court action. If the companies in question gave bribes to obtain loans or debt relief, or if they cooked their books, that is certainly criminal. But it is not clear that the CBI understands these distinctions.

Few analysts think the CBI has enough specialized domain knowledge to tackle financial crime. In the West, financial companies are constantly probed and prosecuted, but this requires high financial expertise that can match the best on Wall Street. By contrast, the CBI\’s recent efforts suggest a sad lack of expertise, and even of basic financial understanding.

It must be able to distinguish between bad and criminal decisions, and between mere mistakes and crookery. Fast decision-making requires the use of discretion, short-cutting wooden procedures. To treat every use of discretion as criminal is plain wrong, and a recipe for paralyzing decision-making.

Part of the problem lies in a silly legal provision which says that if a decision benefits any private party, the bureaucrat concerned can be charged with corruption even if there is no evidence that he gained personally. A more stupid provision would be difficult to imagine. Can there be any decision that does not benefit somebody? And if indeed there are some decisions that benefit absolutely nobody, would such decisions be worth taking? The UPA government once drafted legislation to remove this provision but did not follow through.

As long as this clause remains law, the CBI can claim it is legally bound to prosecute virtually any decision-taker. Narendra Modi talks of improving governance if he comes to power. That approach must include an immediate ordinance to delete this stupid clause. Other political parties will surely support the conversion of such an ordinance into law.

Compounding these problems is the misuse of the CBI by successive governments to harass foes and protect friends. The UPA government would intensify or weaken CBI inquiries against Mayawati (Taj Corridor case) and Mulayam Singh Yadav (inexplicably large assets) as sticks and carrots to obtain their political support in Parliament as required.

When the UPA found itself embroiled in one scam after another, it tried to divert public attention by launching investigations against old decisions (as in telecom) taken by the BJP-led coalition in 1998-2004. The CBI has also proved willing to investigate frivolous private complaints, such as illegal privatization of Hindustan Zinc when it was privatized a decade ago.

The privatization was a Cabinet decision, followed by an open auction. There could hardly have been a more transparent process. Some parties claimed that privatization required a legal enactment, but the Supreme Court turned down a petition making this claim. So, the CBI should have dismissed as frivolous the complaint against former Disinvestment minister Arun Shourie and his former officials. Instead, it has been grilling Shourie, whose high integrity is not in doubt. This looks like sheer political vendetta, not an honest attempt to combat cronyism.

Meanwhile, because of legal delays, even those being prosecuted are not convicted and sentenced beyond all appeals (look at A Raja). We get only serial allegations and the tarnishing of reputations, not crooks in jail. This is no way to tackle crony capitalism.