The move follows the remand application of the Central Bureau of Investigation (CBI) filed before the court seeking custodial interrogation of the two brokers.
Justice S N Variava yesterday ordered bail for Canbank Mutual Fund official K C Rao after CBI counsel stated that his interrogation had been completed. Rao was arrested by the CBI on August 17 along with Jhaveri.
Rao has been released on bail for an amount of Rs 10,000 with one or two sureties.
The brokers' role in transactions relating to ITC Bhadrachalam shares with Canbank Mutual Fund during the securities scam has come into question.
Variava ruled that the arrest of the two brokers had brought to light further material crucial to the case.
There is a possible siphoning of public funds into private hands. Even after all these years (following the scam breaking out in 1991), the ways and means of this diversion are not known clearly...Scrutiny of the documents, diaries and other books confiscated cannot reveal much at this stage. Hence the custodial interrogation of Pallav and Jhaveri is a must, he said.
Sheth, who was present in the court yesterday, will now be housed at CBI's White House office for further interrogation.
The main contention of the CBI is that there is a possibility of Pallav having done favours to other Canbank Mutual Fund officials either by way of loan or through proceeds of share transactions. CBI counsel argued that custodial interrogation was a must as the case diaries did not reveal much.
Pallav has been in custody for the past seven days, while Jhaveri has been in custody for the past 20 days.
According to Variava, it was not correct to say that CBI's stand is the same for both the remand applications.
The interrogation has definitely helped, he said.
The court, following Sheth's admission, observed that the broker had been the most favoured one in deals with Canbank Mutual Fund.
This has been revealed through documents and other details, counsel for Sheth, Mahesh Jethmalani, admitted.
Jethmalani argued that interrogation was not necessary as both the brokers had already been questioned on exactly the same issues by the police between November 1995 and January 1996.
Sheth, he contended, had been arrested earlier on July 9, 1994, where the court had inter alia observed that investigating agencies should not call for repeated arrests or have multiple interrogations with the accused on the same issues.
According to Jhaveri's counsel, the broker had been interrogated by the CBI over a period of 10 days.
K C Rao's release was on the condition that his passport be retained by the CBI and that he would not be allowed to travel outside the country without the court's permission.
Rao would also have to report to the CBI office as and when necessary, the court said.
