The Power of an Honest Career

by puneinvestor

Bhave

C. B. Bhave, former chairman of the Securities and Exchange Board of India (SEBI) and  “Chandu” to his friends in the Indian civil services, is well-known in government circles as a man of high integrity. So when the Central Bureau of Investigation (CBI) launched a preliminary inquiry against him this month for alleged “irregularities” during his tenure at SEBI, the decision came back to bite the CBI and the government in the rear.

The inquiry relates to the renewal of a stock exchange license of a business group which is now embroiled in a serious fraud investigation.  Not only has Mr. Bhave been defended for his conduct by almost every upstanding official who knows his work, but it is now plain and clear to all of us who know the Indian financial sector, that there is something smelly about this whole business. The CBI has shown itself to be clueless in the financial domain or unwilling to look for the right clues and discard irrational, politically influenced lines of action.

This is a complicated and foggy story about Indian institutional failure so at the risk of oversimplifying, here are my takeaways so far:

Preliminary Inquiries

The CBI should stop disclosing preliminary inquiry information without having any hard evidence. The person against whom the inquiry is made may have the opportunity to cover his tracks. If the investigation yields nothing, the person’s name is tarnished (in Bhave’s case, he is such an exemplar that it is the CBI’s name that has been sullied). Also, any chances of gathering evidence by stealth, like the FBI got in the Rajat Gupta case through wire taps, reduce significantly.

Is the CBI being used by powerful forces against the interests of the people of India?

The CBI has always been perceived to be operating under strong political influences. The Bhave inquiry, more than any other case, gives credence to this perception. A number of SEBI actions had been initiated by Bhave and his team against powerful players in the financial markets and it is very disappointing to have reason to believe that some of these people may be using the state machinery to embarrass and harass competent, hard-working and honest officials.

Is the CBI or its masters trying to divert attention away from the fact that it is not able or willing to move aggressively against the true culprits in the fraud investigation of the shenanigans at the erstwhile National Spot Exchange Limited (NSEL)? Bhave’s inquiry got much more press coverage than the action in the same week by the CBI against the architect of the NSEL fiasco.

It’s easy to identify dignified conduct

In its inquiry, the CBI singled out, I don’t think coincidentally, one other person, a former full-time member of SEBI, Dr. K. M. Abraham, who was instrumental in bringing a huge behemoth to book for its shady business. In all his interviews on this matter to date, Mr. Bhave has spoken loudest not in defence of himself but of Dr. Abraham. Don’t know about you, but this looks to me like the conduct of a man on high moral ground.

India has a long way to go

Cry, Indian capitalists. India’s institutions have a long way to go before they become half-way decent in serving the interests of the people through free and fair markets and are not so malleable by dark forces as they are today.   The silver lining in all of this is the fact that a reputation as sturdy as Bhave’s allowed him to emphatically reject the might of the most powerful people in the country when they tried to throw muck at him.

Thank you, Bhave Sir, for allowing us, the people of India, to retain a shred of optimism for a better tomorrow.