Independent India’s First Big Financial Scam: Mundhra Scandal

The Logical Indian

March 19th, 2016 / 4:51 PM

Image Courtesy: pbase | frontline

Today, we see scams worth thousands crores of rupees happening in India. But exactly 59 years ago in 1957, took place Independent India’s first big financial scam. It was called the Mundhra Scandal.

Haridas Mundhra, a Calcutta-based industrialist and stock speculator got the government owned Life Insurance Corporation (LIC) to invest a sum of Rs 1,26,86,100 (one crore, twenty-six lakh, eighty-six thousand and hundred) in the  shares of six of his troubled companies. This investment was done under governmental pressure and without consulting LIC’s investment committee.

Meanwhile, Feroze Gandhi, son-in-law to the then Prime Minister Jawaharlal Nehru, and a Member of Parliament from Indian National Congress, demanded an explanation for LIC’s decision. There was a well-known rift between Mr Gandhi and his father-in-law, which sensationalized the matter when Feroze Gandhi raised the issue in the Parliament and charged the principal Finance Secretary, H.M. Patel and Finance Minister,  T.T. Krishnamachari of pressurizing LIC’s investment.  He also claimed that he had possession of confidential letters between Mr. Patel and Mr. Krishnamachari regarding this investment. Seeing such allegations, Mr. Nehru appointed former chief justice M.C. Chagla as a one-man commission of inquiry.

In one of the most transparent investigations ever, Mr. Chagla worked remarkably fast and submitted his report in just 24 days. The hearings of the Chagla commission were conducted in public. Several leading stockbrokers who were in the LIC Investment Committee testified that the investment could not have been made for the purpose of propping up the market, as was claimed by the Finance Ministry. They also stated that had the LIC consulted the Investment Committee, they would have pointed out Mundhra’s forged shares episode from 1956.

After Mr. Chagla filed his report Mr. Krishnamachari resigned from his post of Finance Minister on February 18, 1958. Mr. Mundhra was also arrested and he went to jail for 22 years.


The Logical Indian applauds the speed with which the enquiry was conducted in a transparent manner, leading to nabbing of the culprits. In contemporary India, such a case goes on for years, with the culprits moving freely at large. We wish the same transparency and speed would be seen in the matter of all such present day scandals!


Contributors

Written by :

Edited by :

Related Stories

Kamal Haasan Hindu Terrorist

“Independent India’s First Terrorist Was Hindu,” Says Kamal Haasan In An Election Campaign

This Is How Officials Tracked Down Independent India’s First Voter, 102-Yr-Old Shyam Saran Negi

Vyapam Scam: MD Of Medical College Involved In 2012 Pre-Medical Test Scam Surrenders Before Court

write-off

Public Sector Banks Write Off Rs 55,356 Crore In First Six Months Of Financial Year 2017-2018 In A Move To Clean Balance Sheet

Telangana Private Schools

Telangana: In A First For India, Private Schools Will Have To Put All Financial Details Online

Gorkhaland

Gorkhaland: A Cry For Recognition As Citizens Of Independent India

Latest on The Logical Indian

News

Hindu Priest Attacked Near A Temple In New York’s Queens Area; One Arrested

Get Inspired

Power Of RTI: Five Times Right To Information Act Helped Unearth Major Scams

News

Men Are Migrating For Marriage More Than Ever, Figure Doubles In The Last Decade

News

Nirbhaya Rapist’s Photo Appears On Poll Hoarding, EC Issues Notice To Punjab CEO

News

Health Ministry Bans Use Of Antibiotic Colistin For Animal Food Industry

News

First In India: Andhra Pradesh To Reserve 75% Private Jobs For Locals

x

Stories that deserve attention, delivered to your inbox!

Handpicked, newsworthy stories which deserve the attention of a rational generation.