Puri Commission reports on controversial gold auctions during Janata regime turn out to be series of half-truths

Puri: sweeping allegationsEnquiry commission reports in India have become the meatiest of all the official probings. The majority of them - over a dozen since 1977 - have discovered ''financial bungling and misuse of official machinery by those in authority for personal gains".Since political considerations have been paramount, most of these reports have turned out to be more hallucinations than the objective recording of the events. The latest to fall in this category are the two reports submitted by Kanwal Raj Puri, former Reserve Bank of India governor, on the controversial gold auctions during the Janata regime.Puri, who began his career as a junior official in one of the insurance companies owned by his in-laws, rose to become the chairman of the Life Insurance Corporation of India. Later on, due to his close association with Sanjay Gandhi, he was appointed chairman of the Reserve Bank of India. Puri came under a cloud during the Janata regime when the then prime minister Morarji Desai denied him extension. Even the former finance minister C. Subramaniam deposed before the Shah Commission that Puri was a poor administrator.The one-man commission headed by Puri was appointed by Indira Gandhi's Government in May last year to look into the gold auctions conducted between May 3 and October 27, '78 in which 12.95 tonnes of gold was sold for Rs 86.5 crore to 3,010 bidders. The 250-page report, submitted five months ago, indicted the Janata Government for allowing a handful of successful bidders to make a profit of over Rs 5 crore in the six months of the auctions.The major findings of the Puri Commission were:Gold auctions were conceived neither in the public interest nor on sound economic considerations.Gold was auctioned at prices lower than the market prices.Gold sales policy was favourable to the rich dealers.The top 20 dealers were able to corner over 4 tonnes of gold worth over Rs 26.7 crore by financing over 1,101 bidders.The reserve price was leaked out to enable the prospective buyers to cluster their bids close to the minimum the Government was willing to accept.Though the two-part report has not yet been discussed by the Government or made public, it was deliberately leaked prematurely in bits and pieces over the last six months to bolster the Congress (I)Government's contention that the auctions were in fact meant to benefit a handful of people and that they failed to achieve their ostensible aims. The Janata Government, concerned, that low international price of gold was encouraging smuggling into the higher, priced Indian market. On August 1, 1978, when the gold auctions were about half-way through gold was selling for Rs 538.89 per 10 grammes in the London market, compared with Rs 693 in Bombay.The Scheme: Though there were no reliable estimates of the demand for smuggled gold in India, the Janata Government estimated that if four tonnes could be made available each month, it would meet demand and encourage prices to decline, choking off the demand for smuggling. Thus was born the scheme to auction gold - but at an average of two tonnes a month - since at the higher rate, the Government's stock of gold outside of its currency reserves would otherwise be exhausted in less than two years.In the event, the gold auctions turned out to be a failure: far from reducing the domestic price of gold, they were abandoned when the international price shot through the roof. At the last auction, on October 23, 1978, the average price bid, strongly influenced by the rising world price, was Rs 839.44 per 10 grammes, higher for the first time than the Bombay market price of Rs 834.15.Last fortnight the ruling party, berated by the Opposition on the Antulay affair, chose to launch an attack on its adversaries with the Puri report, in spite of the fact that its findings were yet to be confirmed.Last month, Congress(I) members of the Rajya Sabha were given a detailed briefing in the office of Parliamentary Affairs Minister Bhishma Narain Singh following a high-level strategy session at 1 Akbar Road attended, among others, by Minister of State for Finance S. S. Sisodia, Deputy Finance Minister Maganbhai Barot and twenty selected members of Parliament including Rajiv Gandhi. Patel : awry schemeIn Parliament, later, in what was to be a sensational disclosure. Finance Minister R. Venkataraman told agitated members from his party that Puri in a still-secret report, had alleged that a syndicate consisting of 20 Bombay-based dealers had financed the purchase of over four tonnes of gold - one-third of the total quantity auctioned - worth Rs 26.7 crore through 1,101 bidders.While refusing to disclose the names of the syndicate members and lay a copy of the secret report on the table of the House Venkataraman stated that "a prima facie strong suspicion is created that the 1,101 bidders had been mere name lenders in relation to the purchase of around four tonnes of gold and the above mentioned quantity of gold can be said to have been cornered by the syndicate."He went on to add that various investigation agencies had been ordered to unearth the racket in its entirety. The Congress(I) was quick off the mark. Said H. K. L. Bhagat, the fiery president of the Delhi Pradesh Congress Committee(I): "There is plenty of circumstantial evidence to prove that the gold sales were undertaken with unclean intentions. It was the greatest scandal of the century."Half-truths: India Today, which obtained a list of the 20 people who had allegedly cornered the gold, found on investigation that the facts were entirely different and that Puri's report was at best a series of half-truths. Contacting the top names in the list who are accused of having dealt in several crores of rupees, India Today found that none had the capacity to raise anywhere near that kind of money. Most of them turned out to be modest commission agents who worked in modest premises, buying and selling gold on behalf of their permanent clients. Some have been in business for over four decades. Claims Rammurthi, 54, a Punjabi settled in Bombay and owner of Ms Gianchand Parbraham which took the delivery of 682 kg of gold worth Rs 4 crore on behalf of 156 bidders: "Since none of my clients belonging to Delhi and Punjab could stay in Bombay, they authorised me to take the delivery on their behalf. The entire money was given to me by them. I earned only the commission and handling charges at the rate of 20 paise for every Rs 100." Adds Ram Dass of Chotalal Dhanjibhai which financed the purchase of 554 kg of gold worth Rs 3.29 crore: "We are in this business for years.Each and every bid form was filled and signed by the actual buyer of gold. Even the form contained the addresses of the bidder and gold control inspectors checked the stock registers of the dealers to whom the gold was sent."Gold dealers are surprised over Puri's findings that the majority of the bidders were only namelenders and were not financially sound enough to buy the gold themselves. Says a gold dealer of Bombay: "Puri seems to be unaware of the gold control laws. Everyone of us has to furnish quarterly returns and he could check our records which are with them for the last three years."According to the Gold Control Order, 1968, every licensed gold dealer has to maintain a record regarding the sources of purchase of gold along with names and addresses of the parties to whom the gold is sold. Asks a dealer of Jullundur: "Has Mr Puri gone into the stock registers of all the 3,010 bidders who bought gold from the Reserve Bank of India (RBI)? All the stock registers bear the signatures of gold control inspectors."Jittery: While the syndicate members maintain that the entire gold was delivered to the actual bidders, even some of the retail gold dealers and jewellers who were interviewed by India Today admitted that the gold was actually delivered to them by the commission agents to whom they paid advance money. Says Darshan Lal, 34, a fair-complexioned proprietor of Darshan Jewellers of Amritsar who purchased two kilogrammes of gold: "What is wrong in buying gold through the commission agents? My records and sales registers are open for everyone to verify. Each and every gramme of gold has been accounted for."Gold dealers and businessmen are jittery, having been subjected to harassment soon after the gold auctions. Says Niranjan Dass Dhawan, an executive member of the All India Shraffa Association: "We faced more inquiries during the Janata regime than we are facing now. Over 20 different agencies have ordered us to supply information on the subjects like monthly income to the number of clients to whom we have sold gold during the last five years." Adds a commission agent: "We have spent more money on getting the photostat copies of our documents that the commission earned by us."Besides, the amount of business done by the members of the syndicate is not more than what was before. The Puri Commission states that the "financing by the syndicate was made possible by the active connivance and assistance of a group of financially-strong and powerful bullion merchants of Bombay. This group advanced large sums of money to the tune of several crores to the syndicate during the auction period.The bullion dealers who have provided money to the syndicate members in the gold purchase were: Chandrakumar Amichand-Rs 2.27 crore, Jugraj Kantilal- Rs 66 lakh, Kirtilal Jaisinghlal-Rs 96 lakh, Navnit Lal Bros-Rs 17 lakh, Chenaji Narsinghji-Rs 1.14 crore and Tribhuvandas Bhimji Zaveri-Rs 40 lakh."But the commission agents deny that the money was meant for financing the gold purchases. Says one of the agents: "All these gold dealers and jewellers have been buying through us for the last 20 years and these payments were made for the normal business transactions."Moreover, the annual turnover of all these dealers and members of the syndicate was quite substantial earlier. The amount of gold sold by each one of them during 1976 was: Mathura Dass Gopal Krishna 1,607 kg, Gianchand Parbraham 1,238 kg, Chenaji Narsinghji 2,269 kg, Chandu Lal Kushalchand 821 kg, Suraj Mai Gaouti 714 kg and Chotalal Dhanjibhai 531 kg, which means none of them barring Dhanjibhai bought gold through the auctions which was more than usual business turnover.Admission: Interestingly the report itself, while making explosive revelations, admits that "it has not been possible to verify how much of the gold purchased, by the leading merchants related to the auction gold" Since Puri could not secure any evidence about the finding of the gold purchase by the leading dealers it states that: "It is to be seen whether the transactions entered into by the members of the syndicate and the leading merchants of Bombay as also those of the 1,101 bidders financed by the members of the syndicate are genuine or not."It was precisely due to the gaping holes in the report that the Central Government chose to keep a low profile on it. The report along with the top secret note has been forwarded to the five-member cabinet committee headed by Finance Minister R. Venkataraman, Commerce Minister Pranab Mukherjee, Foreign Minister P. V. Narsimha Rao and Law Minister P. Shivshankar as its members. In fact, the committee, after four meetings, could not find any material which could nail down the previous government. At one stage, the committee decided to close the report, but Puri came forward with a new report. And the Congress(I) leadership decided to use the unpublished secret report to embarrass the Opposition who had scored over the ruling party on the Antulay affair.In his report, Puri makes the sweeping allegation that "the decision of Shri Morarji Desai and Shri H. M. Patel to sell gold, including the gold given by the people of India, without there being any threat of external aggression amounted to a betrayal of trust reposed by the people in the Government." But if Puri set out to find the people he believes were behind the auctions, and as he alleges actually cornered the gold, he has not done his job properly. Listing commission agents and go-betweens acting in the course of what is a perfectly legitimate occupation, is no better than tilting at windmills.Puri's Find: Where he has scored, however, is in digging out specific cases in which parties to which gold was sold by retail gold dealers may well have been fictitious. For example, of the 33 clients to whom- gold was sold by an Amritsar dealer, only three could be located by the gold control authority officials. But the amount of gold which was misused is negligible.After months at the job, Puri is correct only on two counts: the gold auctions could not provide enough money to fill the budgetary gap - one of their ostensible aims - and the auctions made virtually no impact on the market price. The amount of Rs 86.5 crore accounted for only 8 per cent of the estimated budgetary deficit. And though the difference between the auctioned and market prices narrowed over the period of the sales, the actual level of prices was hauled up sharply by soaring world prices, from an average of Rs 632.75 at the first auction to Rs 839.44 at the last. Even while he was making allegations in Parliament about the cornering of gold, Venkataraman was obliged to keep a face-saving device handy by saying that the Government had yet to ascertain whether gold auctions were "an error of judgement or misdemeanour." Though he has ordered the creation of a separate cell in the Income Tax Department to locate all the 3,010 people who bought gold and reopen their income returns, it still remains to be seen if they can unearth anything more than the tenuous findings of the Puri Commission.MIDDLEMEN: IMAGINARY GIANTSOperating out of the bowels of Bombay, the bullion trading centre of the country. K.R. Puri's band of market-grabbers are a motley lot with little in common except the singularly unappetising offices they operate from. The small, congested tenements in the heart of the city's Jhaveri Bazaar and Kalbadevi areas, are spread with filthy white mattresses that serve as both squatting and working space. Ancient steel safes and strong boxes take up most of the cramped space, and rats scurry freely around the offices. Creaky wooden stairways propped up with bamboo rods and steel pipes lead to the cubby holes from which these "manipulators" allegedly masterminded a multi-crore swindle against the Union of India and its people, India Today profiles some of the top 20 gold peddlers:On a makeshift mezzanine floor overlooking the Sheikh Memon Street, the office of Gianchand Parbraham and Company looks like a rickety set from a film about the village money-lender. Rammurti Ramdas, the firm's 54-year-old proprietor, squats on the floor behind a battered desk, a constantly ringing telephone set beside him. The dhoti-clad commission agent who is supposed to have cornered 680 kilograms of standard gold valued at over Rs 4 crore commutes daily to his office on a moped, the only vehicle he owns. Working on a flat commission of one-fifth of 1 per cent, 1 per cent for both buyer and seller, Ramdas filed a net income of Rs 75,000 for the financial year 1978-79, the year when he allegedly made windfall profits from his market manoeuvring. A caricature of the filmi loan shark, Ramdas is typical of the twenty bullion agents who are credited with pulling off a Bunker Hunt-style coup on the gold market. Chotalal Dhanjibhai, who rates second on the Puri list with over Rs 3 crore worth of gold to his credit, shifted to a temporary office after his 100 square foot quarters on the second Agiary Lane collapsed early this year. Chotalal and his son Manhar make the daily trip from their flat at Mahalakshmi either by bus or taxi-cab, since they own no automobile. Like most of the city's hardcore traders the diminutive Gujarati gold dealer seems to live far below the standard expected of a man with a declared annual income of Rs 75,000 on an average.Comparatively better off than most others on the list, Suraj Mai Gaouti nevertheless functions out of an office that is barely six feet by six. Although the office has an approach through a dark passage smelling of city sewage, it has an air-conditioner to keep the smell out. An agent who has been in the business for almost 50 years, Gaouti insists that he is primarily an agent who buys on commission for actual gold manufacturers and traders, only occasionally buying the commodity on his own account. Acting primarily on behalf of buyers in Kerala and Tamil Nadu, Gaouti charges a commission of one quarter of I per cent on all transactions.Pramod Parikh, owner of Rajnikant Vithaldas Parikh comes to work in the 1961 Fiat he bought for Rs 7,000 some years ago. His 600 square foot office in the refinery building owned by the Bombay Bullion Association is larger than the Warden Road flat he lives in, which runs to 500 square feet of carpet area. Dealing on behalf of clients in the eastern Maharashtra towns of Akola, Nagpur, Amravati and Naogaon, he also has a number of clients in Orissa, who he claims were among the buyers he represented during the gold auctions. Said Parikh: "This is all false, what they are claiming in these reports is bogus. We only bought four kilogrammes of gold on our own account, other than that every milli gramme reached the buyers whose names were on the bidding slips".Published By: AtMigration Published On: Oct 30, 2013 13:35 IST--- ENDS ---

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Puri Commission reports on controversial gold auctions during Janata regime turn out to be series of half-truths

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