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Subramanyam, 3 others remanded to police custody till July 27

Priya Ganapati in Bombay
and Onkar Singh in New Delhi

Special judge S R Mehra on Saturday remanded former UTI chairman P S Subramanyam to police custody till July 27.

Unit Trust of India executive directors M M Kapoor and S K Basu, and Stockbroker Rakesh Mehta of Renaissance Securities were also remanded to police custody till July 27.

Subramanyam and the others were arrested on Saturday in Bombay by the CBI's economic offences wing for the alleged Rs 328-million misappropriation of public funds.

Sources said that UTI general manager Prema Madhuprasad too has been taken in for questioning by the Central Bureau of Investigation sleuths.

CBI has registered a case of conspiracy, cheating, misuse of office by public servants and misappropriation of public funds against Subramanyam, Kapoor, Basu, Madhuprasad and Mehta.

The CBI has named Cyberspace Infosys director Arvind Johari as accused no. 1, followed by P S Subramanyam, M M Kapoor, S K Basu and Rakesh Mehta.

The accused were produced in the special court on Saturday evening. Special judge Mehra in his order said that "considering the serious nature of the case and the case having far-reaching effect on the investors, it is desirable that in the interest of the UTI, the state and the investors that the CBI be given some more time to unearth the details of the role played by the accused in the UTI fraud".

The CBI has alleged that the accused connived with a private firm, Cyberspace Infosys, leading to a loss of Rs 328 million to the UTI.

The CBI sleuths had arrested Subramanyam, Kapoor, and Basu at 2.00 p.m on Saturday, while broker Rakesh Mehta was arrested at 1.30 a.m.

The CBI also alleged that Rakesh Mehta acted as the conduit between the Cyberspace directors and the UTI officials.

In its remand application, the CBI alleged that Rakesh Mehta paid Rs 5 million on behalf of the Cyberspace directors - the Joharis - to the UTI officials to prevail upon them to subscribe to the company's shares.

Mehta has also been charged with having acted on behalf of the Joharis to rig up Cyberspace share prices.

'They are blaming each other'

Arguing on behalf of the CBI, prosecutor M R P Babu said that it was necessary that the accused be remanded to police custody as they were not co-operating with the investigators and were instead blaming each other.

Adv Satish Manshinde, representing Subramanyam, pleaded that the step taken by Subramanyam in his capacity of the UTI chairman was a purely business decision. He argued that the CBI has not been able to establish any malafide intent on the part of the former UTI chief.

He further said that even the searches that the CBI conducted did not yield any incriminating documents and as such his client should not be remanded to police custody.

However, the judge said that in the interest of the people it is necessary that the state be given every chance to investigate till the UTI officials are proven to be totally above board.

The accused have, however, been allowed to have home food, medicines and their own clothes while in custody.

Documents seized

Subramanyam was earlier taken in for questioning on Friday night, but later allowed to go home. The Central Bureau of Investigation sleuths again summoned him on Saturday for further interrogation.

Subramanyam and the others will be produced in a special court later on Saturday, informed CBI sources.

Documents seized from the residence of P S Subramanyam, who was asked to put in his papers by the finance ministry recently, were taken to the CBI office.

''We will assess the documents in detail,'' CBI sources said. ''Reams of papers were scanned at the residence of the former UTI chairman.''

Among the nine premises raided by the CBI officers were office and residence of Renaissance Securities chairman and stock broker Rakesh Mehta, and director of Cyberspace Ltd Arvind Johari.

The CBI raids followed a case (RC-3/E/2001 by CBI, Bombay) registered against them under sections 120 B, 409, 420 of the Indian Penal Code read with sections 13(ii) and 13 (i)(c) (d) of the Prevention of Corruption Act.

The CBI, sources said, registered a case of conspiracy, cheating, misuse of office by public servants and misappropriation of public funds.

The genesis of the problem

The matter came into light when the UTI suspended the sale and repurchase of its flagship US-64 scheme on July 2.

The sources said the UTI, with the former chairman's approval, had invested Rs 328 million in private placement of shares with Cyberspace Ltd at a price of Rs 930 a share against the recommendations of the UTI equity research cell.

Following this, the company's share prices tumbled to Rs 2 and the trading was then suspended by the premier bourse of the country, the Bombay Stock Exchange.

The Economic Offences Wing of the CBI has alleged in the FIR that the UTI lost Rs 328 million due to private placement of 345,000 shares of Cyberspace despite adverse reports by the UTI itself.

Following the raids, executive director B G Daga rushed to Bombay from Madras, but refused to make any comments. K G Vassal, who was made interim chairman before bureaucrat M Damodaran took over, also refused to take calls.

Damodaran was also away in New Delhi to attend a meeting with finance ministry officials.

The raids had an impact on the market as the activities of the mutual funds came to a grinding halt. The UTI avoided the market on Friday, leading brokers said.

In a related development, the Securities and Exchanges Board of India ordered an inquiry against 31 brokers, including 12 from the BSE, for their alleged involvement in manipulating prices of Cyberspace Ltd.

Additional inputs: Agencies

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