The Mundhra affair

Almost exactly 51 years ago on December 16, 1957, to be exact there took place in the Lok Sabha one of those memorable debates that have, alas, become a thing of the past. The subject was the Mundhra Scandal. At this distance of time, that needs to be explained. Haridas Mundhra was according to the report of a Commission of Inquiry consisting of the then celebrated chief justice of the Bombay High Court, M. C. Chagla "not an industrialist at all, but an adventurer" whose "passion" was to "swallow as many firms as possible". Mundhra's business methods, noted the commission, were "dubious, to say the least". This, the commission said, as did the legendary Attorney-General M. C. Setalvad, whose remit it was to help the commission "get at the truth", was well known to the then finance minister, T. T. Krishnamachari generally known as TTK, and to all concerned in the departments of finance and company law.

Yet some months earlier, the Life Insurance Corporation bought shares of several Mundhra firms located in Kanpur, for Rs. 1, 26, 86, 100 (Rupees one crore, twenty-six lakhs, eighty-six thousand and one hundred). Today when nobody talks of less than several thousand crores of rupees, the amount involved may seem chickenfeed. But by those days' standards, it was huge. In fact, it was then the largest single investment by the LIC since the nationalisation of life insurance less than two years earlier. As Setalvad wrote in his autobiography published in 1970, "From December 1957 to February 1958, the sensational Mundhra scandal was at the centre of the political stage. It led to the resignation of T. T. Krishnamachari and shook the Nehru government". A newspaper that got wind of the tainted transaction made the mistake of describing the "questionable" shares bought as those of "Kanpur-based private firms". In fact, these companies were listed on the stock exchange. So, to a parliamentary question about this press report, the finance ministry gave a written answer that was technically correct but factually disingenuous. Later, at the Chagla Inquiry this dissembling became TTK's undoing. The deliberately misleading answer infuriated Feroze Gandhi, Nehru's son-in-law. After painstakingly investigating the whole affair, he initiated the December 16 debate. So devastating was his exposure of wrongdoing and so voluminous the support to him by other MPs, that Nehru spoke of the "majesty of Parliament" and announced a judicial inquiry.

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