S01E01 - Jain Hawala Diaries Part 1

[Music] You're listening to the first episode of Friend of the Court, a podcast series that explores important constitutional cases in India's judicial history. Brought to you by the Anil Devan Foundation in partnership with the School of Law, Governance and Citizenship at Ambedkar University, Delhi. I'm your host, Raghu Karnad. I'm a journalist and writer and I'll be taking you through the ins and outs of the groundbreaking work of Anil Devan, Supreme Court lawyer and a micest curator or friend of the court. This is Durdasha News, Good evening and welcome in the headlines. This is the makings of a massive corruption scandal. We begin this series with the Jane Havala case, formerly known as Venetna Ryan versus Union of India. At the heart of the case are scandalous diaries that made their way to the Supreme Court and triggered a political crisis. This scandal broke at a time when political uncertainty loomed large in the country. It set off what the BBC has described as the biggest political earthquake to have hit independent India. Journalists and lawyers conveyed the diaries from a dusty corner in the CBI's Malkhana or storeroom to the centre of a political drama that played out in the highest court of the land. This was one of the first high profile corruption cases heard as a public interest litigation by the Supreme Court. It presented an opportunity for reigning in the corruption and abuse of power that had spread throughout Indian politics by the 1990s. Good evening. The former Indian Prime Minister Rajeev Gandhi has been assassinated. He and at least 14 other people were killed by a bomb. The country hadn't seen a stable government since Rajeev Gandhi's tenure ended in 1989. The coalition government that followed was led by two prime ministers before it fell in early 1991. Rajeev Gandhi was hoping to stage a strong electoral comeback but he was assassinated while campaigning in Tamil Nadu. His party, the Congress, still emerged as the single largest party in the 1991 elections and formed a minority government under the prime ministership of P.V. Narsimharau. The Narsimharau government inherited multiple problems including a major balance of payments crisis that led to sweeping economic reforms and there were other domestic issues such as the insurgency in Kashmir, reservation politics and a rising Hindu dva movement. On top of all of this, the diaries, which named a number of rouse colleagues from his cabinet and party threatened to delegitimize his government if they ever became public. Whom did these diaries belong to and what were the consequences of their discovery? We find out in this episode. It was 1991. The violent insurgency in Kashmir was approaching its peak and a new terror organisation called the Hizbul Mujahideen was moving into the forefront. Deep divisions between the groups have sharpened with the reported killings of pro-independent JKNF carers by pro-Pakistan Hizbul Mujahideen, the strongest militant outfit in Kashmir today. More than any separatist group before it, the Hizbul Mujahideen was fighting for Kashmir's unification with Pakistan and was fueled by foreign funds. To aid the efforts of the army to combat militancy in the valley, the CBI had been investigating these terror financing networks. Here is Sanjay Kapoor, who in 1991 was a young journalist with a Bombay tabloid newspaper called Blitz. He played a critical role in breaking the Jain Havala case and would become the first to report on the story. They were trying to assert how does the terror get funded and it's an old inquiry where was the money coming into by arms or to even feed protest and some people who were arrested in Delhi, a Mr. Gauri, a student from Jain U and then they finally found that the money they got was from a Havala dealer. In late March of 1991, the CBI arrested and alleged Hizbul operative, Ashfa Kosaan Lone and the student Shahabuddin Gauri, who was a middleman as well as a Havala agent, Shambhudayal Sharma. Havala is a parallel banking system in the Black economy used to move funds from one entity to another without scrutiny. During his interrogation, Sharma gave up the names of 25 people to whom he had delivered various Havala amounts, including Rupees 94 Laks to a Delhi resident, JK Jain. Acting on this information, on May 3rd, 1991, the CBI rated JK Jains farmhouse in South Delhi. Here's Kapoor telling us what they found. They had found two diaries, a lot of cash, a lot of foreign exchange, some andrabic aspects. The time of the raid when it took place was the third of May. Third of May, this is about 19 days before Rajiv Gandhi was assassinated when the entire Kosa politics and election changed. The man in charge of the CBI investigation was a deputy inspector general named OP Sharma. Sharma's team marked the diaries with their signatures as a way to verify them as evidence. When they interrogated JK Jain the next day, he said that he maintained these accounts for his employers. The powerful Jain brothers, the owners of Bilay engineering cooperation, JK Jain told Sharma's team that the diaries recorded financial transactions which took place between 1988 and 1991. The numbers against each initial appeared to be funds transferred by the Jains to politicians, bureaucrats and heads of public sector undertakings. The total sum recorded was 65 crore rupees, which today would amount to 500 crore. OP Sharma's investigation report had also stated that the cash found on the premises was unaccounted for, and that the Jains could be booked under the Foreign Exchange Regulation Act. If convicted, the public servants involved could be looking at imprisonment for anywhere between six months and seven years. The story of the Jain brothers is a story of enterprise intrigue and corruption that is also emblematic of post-independence India. They originally held from the industrial town of Bilay in Chattiska, then part of Madhya Pradesh, where they ran a business in engineering works. Off the forebrothers too moved to Delhi to look after the political interests of the family. Remember, this was in the late 1980s when India was still under the license charge, a system that made it extremely hard to run businesses without patronage from bureaucrats and politicians. Surah Indra Kumar Jain, the youngest of the forebrothers, was a man of ambition and wanted to emulate the success of India's newly minted industrialist, Dharubayam Bani. The younger Jain brothers, who were sent to Delhi to advance the family's business interests, were rubbing shoulders with the who's who of the political class, often at lavish parties that they hosted at their South Delhi farmhouse. The Jains became influential. Through lucrative contracts from coal India, alongside donations and gifts that they gave to politicians. Professor Arun Kumar, who has done extensive research on the black economy in the 1990s, helps us understand the informal license charge system. They cornered licensees and how did they corner licenses through Kronizam? So Kronizam in India started developing in the '50s and the '60s. It grew further in the '70s. So this Havala channel and payment to the politicians was an important part of developing this Kronizam. That's why I say that it's the triad which underlies the black economy, the triad consisted of the political class. the political class, the business class, and it co-opted the bureaucracy and the judiciary and the police in it. The invisible link between the aspirational business classes and the political class was that of finance, which political scientist Stanley Kochanik calls briefcase politics. The diaries had blown the lid of this network of black money bribery and the role of Havala Brokers in moving cash. Arun Kumar explains the Havala system. I think for a Havala operator, there's no terrorist. There's no politician. It's just that he's transacting to a business channel. Just like a bank. If it doesn't know what your antecedents are, it's just transferring money. And it can be used by a terrorist. It can be used by a politician. It can be used by a teacher in a university. So I think Jan probably did not care who was transferring money through him. So it's not that he was involved in any terrorist activity. So Havala would transfer anybody's money. And I think, you know, terrorists do use Havala channels to transfer money internationally. They use the process of layering to transfer money from one to the other. And it's very difficult to track it, you know, because these are all shell companies, which are closed down. So, you know, one to the second to the third. And beyond that, it usually becomes very difficult unless there's a persistence. The source of funds itself was not as big an issue as the fact that large sums of money were being received by those in the political establishment. The central issue was that corruption had crept into public life by way of deeply criminalized politics. Arun Kumar elaborates on this point. When I was writing my black army book in 1998, I interviewed 14 members of parliament who were successful in the 1998 elections. You know, and these were very good friends, including former prime minister and so on. And they all said that we know that we started the day with a lie. Now, after I said that, a lot of other people have also said, because, you know, we exceeded the election expansion limit. And how do we finance the funds? And they said one of the important component was the executive. The corrupt policeman, the corrupt bureaucrats, the corrupt judges, because they have the quit pro quo involved. They knew that once we get to power, we'd give them, you know, favorable postings, etc. So that's how they got an access. And the businessmen were involved, local businessmen were involved, and the big businessmen were involved. In fact, one person who fought from Bihar told me that one of the big business houses had a lies officer in Patna. So, you know, there was that kind of lies between the politician and the businessmen and the executive, you know. So this triad begins to form at the time of elections. And, you know, B.V. Kumar's book, which came later in 1990, it said that this criminal element started entering the triad after 1983. And why did he win 1983? He said that to the time that, you know, a lot of smugglers were given amnesty. So, Haji, Mastan and others started entering politics. So, what was the triad was outside of the criminal elements until 1983. But then the criminal elements started entering. So either the businessmen or the criminal or the politician was a criminal. So the criminals started directly entering, you know, the nexus. So, you know, the nature of Indian politics changed. And that's why large number of criminal cases are there against politicians, against the legislators and so on. So, criminalization of politics to place as a result of this. This nexus between politics, business and the criminal underworld might never have been exposed at all. If the CBI hadn't discovered the Jain Havala diaries while investigating a terrifying financing network. Around this time, Sanjay Kapoor, the journalist with Blitz, heard murmurs about the CBI's discovery. Kapoor tells us how he found out about these transactions. After the elections, when Rajiv Gandhi died, there was a big gap. A subsequent election campaign started and then PV North Samaraw came to power. Once the government was in place, the turmoil in a certain way remained. And I was meeting my usual contacts in the government and in the CBI and others. And I was told by a very senior minister that time in the government that there is a case on where the CBI is sitting. And because it involves many politicians and many bureaucrats. So, what I did, I began to get a corroboration. I went to the director of information in the CBI told me about the existence of the diary. So, there was one confirmation that I get that there was indeed such a case that was happened. I also checked out with him whether anybody had got to know about it. And I was told that firstly nobody knew about the rate, nobody knew about the existence of the diary. And also nobody would have the guts to carry a report like that. So, in a certain way the report continued to be buried in what is called the malkana or the CBI. The reason the report was buried was this. Just a month after the raid, OP Sharma, the man in charge of the investigation, was himself accused of taking bribes from the JN brothers. He was arrested in June of 1991 and charged with having accepted 19 lakhs from SKJN. The documents which recorded the JN's dealings with politicians and bureaucrats were sealed as evidence in the bribery case against Sharma. I got in touch with Mr. OP Sharma also. So, OP Sharma was very unwell and he seemed to be totally disturbed by how the circumstances had panned out for him. He had been paraded by the CBI. He was accused of accepting bribes. And you know much happened to undermine his credibility as an investigator because he was shown to be corrupt. And once the cop is shown to be corrupt, all the cases that they normally hold also get blighted by the allegations that are normally leveled against an individual. But OP Sharma's troubles were Sanjay Kapoor's opportunity. Sharma had made personal copies of the diaries and according to Kapoor, he was ready to share. In August of 1991, blitz carried Kapoor's report on its front page. Under its iconic brand name in red lettering, the paper ran bold headlines like shady deals of top politicals and the police. And multi-crow hervala racket. Blitz described how entries in the JN diaries alluded to corruption across party lines. Implicating members in the previous Chandrasek her cabinet, sitting ministers in the Congress government and leaders in the opposition BJP. It also informed the public of the CBI's own failure and the bribery case against the disgraced OP Sharma. Soon after the report came out, Kapoor began receiving threatening phone calls from influential lawyers on behalf of the people allegedly named in the diaries. And according to Kapoor, the story which had created a huge stir in the establishment suddenly went quiet. So I was actually bewildered. I did not realize the full implication of how this is all tannered. After that, you know, the whole matter from August, I think it was August or September. But thereafter, the entire issue kind of disappeared from everywhere because no newspaper followed up and there was no television and there was no mad people chasing stories like you have now nothing really happened. And I would not go other stories also. No other major newspaper covered this story. With the lack of media attention or action by law enforcement agencies, the story fizzled out. During this time, the CBI continued its investigation into the terrorism funding case and they filed a charge sheet on March 23rd of 1992. It included charges against the his bulmujahidine's operatives and people involved in the Havala network. But the charge sheet left out any mention of the Jain brothers. Their funding of political corruption through Havala or the raid conducted on the JKJN residents. Except for one cryptic line buried deep in the document on paragraph 17, which stated, "Some others who figured during the course of the investigation of this case, the others they were referring to were the Jain brothers." The story was that the Harshat method was made from the state bank of India. It was 500 crores and it was not in a position to pay it back. A month after the CBI filed their charge sheet, the country's attention shifted to another scandal. The 1992 Harshat method security scam. Even more dramatic events followed in 1993. communal riots tore through Bombay, India's government. capital, followed by multiple bomb blasts, including at the Bombay Stalk of the Strait. PV Narasemarrao's Congress Minority Government, while trying to implement economic reforms, was plagued by accusations of corruption and cronism. Through this time, the CBI continued to investigate the Jains in secret. Shantanu Sen, an ex-joint director of the CBI, who led the Havala investigation briefly in 1993, tells us more about the CBI's pursuit of the Jains. In March 1993, investigation on the diaries had commenced, but the commensement was confidential and not reported to the president in any manner. The idea was to find out the source of these funds. Where was this money? The foreign exchange coming in? Because if you look at the diaries or I call them books of account, there are devit and creditorate trees. So the DID of AC Anticaraphrin II was asked to follow up leads and try to find out the foreign sources of these funds which were coming to Mr. Jain, and then he was passing on to various persons, not only terrorists, but politicians of all who's, whether of the Congress, the BJP, the Jantathal. They were all their acronyms fitted their names, where mentioned in the diary. On the surface, it appeared that the Jains had paid off powerful politicians. Inside and outside the government, using illicit funds. The CBI would have to probe if the Jains were receiving favors in exchange for funneling this cash. By September of 1993, two of the Jain brothers were interrogated and their passports were seized. But the CBI was no closer to discovering where the Jains got their illicit foreign funds from and where those funds were going. The actual diaries themselves, that is, the people whose names appeared as initials, were not investigated. As these events unfolded behind the scenes, the press once again began to take an interest in the case. On August 23rd, the Hindi Daily Jainsatta reported on the diaries. Just a week after Jainsatta's peace, high profile lawyer and Rajasaba MP Ram Jait Malani wrote to the Prime Minister drawing his attention to a massive cover-up of the diaries by the CBI. A week later, Jait Malani stepped up the pressure by giving a press conference from his home. At this conference, he released a sensational expose on the diaries by Vinith Narayan, an investigator journalist who ran the video magazine Kallchakra. He showed his true face, and he could tell the VPs the truth. Or he saw the evil spirits of the temple, the spirit of the Dalit. But Kallchakra is the reason why the people are trying to prove the truth without the help of the Dharis. The people who are trying to prove the truth and the people who are trying to prove the truth. Only Kallchakra is the truth that the Durdarshan is connected to this team. At the age of 36, Narayan was a young journalist who had left Durdarshan to set up his own video news distribution service. Until the mid 1990s, newspapers were the primary source of news for most Indians. But with the rapid spread of TV and video, Narayan had sensed an opportunity. Kallchakra, which was mainly distributed on video cassettes through libraries, had previously broken stories on the exploitation of women and the adulteration of food. The reports were a catchy mix of interviews, animated sequences and direct monologues to camera. Through Kallchakra, Narayan, a serious, curta-clad presence, had broken free from the government controlled broadcaster to do more independent, impactful journalism. And the Jain Havala Dairis were everything a young investigative journalist could have hoped for. Murky fund transfers an impossible trail of corruption leading to the country's top political figures. Narayan tells us how he got hold of the Dairis. I had a distant relation who was cousin of Jain Havala Dairis. And he rightly his name was also a sketchhead. He was an old man, 70 year old man. So he convinced me to do this story because he felt that this story could either finish me off for my life, they will kill me or I'll become a global hero. I said nobody risked life to become global hero but I accept the challenge. Provided I get the evidence. Then he brought someone to my office and shared the documents that mean that's how I investigated them. In my style of journalism, I don't trust somebody's plant story. If somebody gives me any document or evidence, I independently investigate and that's what I did in this case. I went to each and every Havala accused politicians of hero crest to ask in front of camera if they had accepted this point and three people cut it in very quickly, accepted the devil and shared it with me and separately, Madanal Khurana. That was former deputy prime minister Devi Lal and Janata Dallida, Sharad Yadav, confessing on camera. These confessions shocking as they were confirmed that those in power saw nothing wrong in their dealings with the Jens. But there were others who deferred. Ram Jait Malani featured prominently in Narayan's report. Here he is discussing the incriminating nature of the diaries. This document is genuine. If this document is genuine, then it is less than 1st phase. It can happen that after the Vegna Sahib, I can say that there is a lot of evidence of the Buddha, Jaffar Sharif, Kalpanaatra, Balram Jakhar, Rishi Chukla, Arun Nairu and Arke Dhawan. Jait Malani explains that the diaries implicated politicians such as former home minister Bhuta Singh, Rajiv Gandhi's confidant, Arun Nairu and former minister Visi Chukla. The CBITM had put their initials on the diaries which proved that they were indeed the documents seized in the raids. This counted as sufficient evidence to investigate the names mentioned in them. The public officials named here could face bribery charges under corruption laws. And if convicted, the Jains could face up to a seven year jail term for foreign exchange related offenses apart from the penalty under income tax. Narayan and his report with a burning question with such explosive material. Why was the CBIT not acting on these leads? We were asked by the public in the process of the 10th of August, the 10th of August, and we were asked about this matter. The public officials did not know whether the public was aware of the situation or the entire life. But this is a matter of the matter of the public. There is so much of a lot of evidence that the CBITM is not aware of the situation. But why was he doing that when the Prime Minister was not directly named in the diaries? Prime Minister is the cabinet minister in charge of the CBIT. The minister under the Department of Personal Reports to him, he is a minister of State. So he's fully in charge of CBIT and the director. CBI reports to and no director of CBI has survived without the goodwill of the Prime Minister. Very early on in 1970, I remember I was a young officer in the CBI. We had Mr. F.V. Arul as director of CBI and he was removed immediately because he had disobeyed the Prime Minister's action in starting some investigation about corrupt legislatures in Bihar. So the Prime Minister has full control over the CBI through director CBI. It is up to the director CBI to stand up to the Prime Minister and tell him where he can that it is the law which is superior to your director, where the director CBI cannot see that and then the second being starts. The CBI was created under the Delhi Special Police Establishment Act of 1946. The act gave the central government administrative control over the agency including appointing the CBI director. Over time, successive governments and especially Prime Ministers interpreted this power to control the agency's activities. In his letter to the PM in August of 1993, Jit Malani warned the government that he would approach the courts to seek action on the Jain Havala diaries. Jit Malani would ultimately work with other members of the legal fraternity, most notably Anil Diwan, to pursue a public interest litigation in the Supreme Court regarding these diaries. The petition highlighting political corruption and the CBI's inaction was a first of its kind. Vocal opposition leaders led by Ram Jit Malani and LKR Dvani stepped into the national spotlight and landed in the middle of the Jain Havala scandal. This case eventually shaped the political future of India and laid the foundation for the judiciary to monitor the executive. We'll continue the story next week in part two of the Jain Havala case on Friend of the Court, where we find out about hidden government documents and how this case shook Indian politics to the court. Until next time, I'm your host Raghu Karnat. Friend of the Court is a project by the Anil Diwan Foundation in partnership with the School of Law, Governance and Citizenship at Umbhadekar University Delhi. Thank you to our guests on this episode. Arun Kumar, Sanjay Kapoor, Shantanu Sen, and Venetna Ryan. The team at Anil Diwan Foundation and Umbhadekar University Delhi includes researcher and fact checker, Vipin Mittal, researcher and scriptwriter, Rambya Baudubali, script editor, Bhavya Dore, advisors, Lawrence Liang, Ranveer Singh, Charm Diwan and Vivek Diwan. Production by Made in India.