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The Money Interview/ CBI Superintendent of Police Hemant Nagrale

'Ketan Parekh accepted making mistakes'

White House at 91, Walkeshwar Road -- with its spectacular view of the Arabian Sea -- is hardly the kind of location one would expect the Central Bureau of Investigation's office in Bombay to be located at.

The CBI's Bank Securities and Fraud Cell, headed by Joint Director J C Davas, operates out of this setting. On Friday, leading stockbroker Ketan Parekh was brought to White House for interrogation. Nearly nine years ago, another leading stockbroker at the Bombay Stock Exchange, Harshad Mehta, had been brought here in nearly identical circumstances.

The office itself wears a sarkari look, until, that is, you enter the cabin occupied by Davas and Hemant Nagrale, superintendent of police, CBI, who is investigating the case.

In an exclusive interview to Senior Editor Sheela Bhatt, Nagrale claims that Parekh is 'co-operating' and has admitted to having committed mistakes.

How would you describe the case in a nutshell?

In simple terms, when you purchase something from me, you'll give me a cheque or a draft, if not cash. And, if your bank refuses to pay up, it is a criminal act.

Here, the Bank of India sold credit to Ketan Parekh and his bank, the Madhavpura Mercantile Co-operative Bank refused to honour it. The Bank of India is a complainant.

So where did the buck stop?

In the second week of March, when Bank of India sent the pay orders to the Reserve Bank of India, which is a clearing house for transactions between banks, the Madhavpura bank stopped appearing at the clearing house. They simply didn't have the money.

The bank's money had been diverted to many of Ketan Parekh's companies, like Panther Fincap and others.

How did Ketan Parekh operate?

It seems when the share market started falling his stocks were in the doldrums. To clear up his liabilities with the stock exchange and the banks, he needed money. So he started taking credit.

We do not know how long he was doing this. But apparently, this had been going on for quite some time.

He started using the overdraft facility offered by the Madhavpura bank, and with the help of the pay orders he got from the bank, he took money from the Bank of India and invested in the share bazaar.

On the face of it, he had been doing this for at least 6 months or so.

How did he get trapped?

Parekh says he was incurring losses for the since last 5, 6 months. Recently, the market hit him really hard. His money, acquired via the way I have just explained, was in circulation. When his stocks dipped, the chain snapped and it created a big hole in the Madhavpura bank's kitty. This eventually led to his arrest.

Are other banks involved?

We don't know yet. We have yet to investigate that aspect. That's the reason we wanted the court to remand him to our custody for a few days.

Parekh says the Bank of India was the only nationalised bank with which he held an account; the rest were private banks or multinationals.

For instance, he had accounts with Global Trust Bank. We will not probe that angle. The CBI looks only into fraud involving nationalised or co-operative banks.

We are investigating Parekh's links, if any, to the bullion scandal of Ahmedabad, too. In the case of the Classic Co-operative Bank, one of its directors could not honour the pay orders.

It is possible that some funds from Classic were also transferred to the Madhavpura bank and ultimately found its way into Parekh's bag.

In that case, why have Madhavpura bank officials not been arrested?

Our team is looking for Ramesh Parekh (chairman, Madhavpura Bank), but he is absconding.

Will the CBI arrest anyone else?

May be. We are interrogating Parekh's cousin and partner, Kartik Parekh. (Kartik Parekh was arrested thereafter.)

Do you think the scam might exceed the projected sum of Rs 8.43 billion?

It may not.

How did you arrive at Rs 8.43 billion?

>From Madhavpura bank sources. Parekh took credit from the co-operative bank, as he enjoyed an overdraft facility. With this facility, he raised his liabilities with the Bank of India. Finally, a situation arrived when the Madhavpura bank could not pay back Bank of India simply because it didn't have the money. Ketan Parekh's companies had created a huge hole in the bank.

Will you attach any of Parekh's properties?

It is too premature to say (that). We will have to check if the proceeds of the crime have gone in acquiring property. We have not yet investigated the case to that extent.

Are Bank of India employees involved in the scam?

We have mentioned in the FIR that an 'unknown officer' from the BoI was involved. We have not yet identified him. But we do think someone from the bank may be involved.

Is this scam a replica of the 1992 securities scam involving Harshad Mehta?

No, I would not say that. Harshad Mehta was using the monies differently. Cheques raised by one bank in favour of other were deposited in his account. He was using that public money in the stock market.

Here, Ketan Parekh's credit with the banks exceeded such an extent that he could not pay up in the end.

Some brokers argue that the Madhavpura bank officials are the main culprits, not Ketan Parekh.

How can you say that? Who is the beneficiary of the failed transactions? For the last several months, the Bank of India discounted pay orders out of Ketan Parekh's bank accounts with the Madhavpura bank.

This is a case of dual liability. If Ketan Parekh was genuinely concerned, he should have returned the amount to Bank of India when Madhavpura refused to honour the pay orders.

Ketan Parekh has been in your custody since Friday evening. What has he said?

He is a soft-spoken man. He is accepting his mistakes. He says he took money from the banks, traded in the share market with those funds and lost.

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