Later in May, National Housing Bank claimed that the cheques were not meant for Harshad Mehta, but were a ready-forward transaction: that it had lent securities to ANZ Grindlays Bank, that the payment was return of the loan and that it wanted the securities back.
NHBs line was pretty thin, considering that no one trucked about securities worth Rs 500 crore in repo transactions. There would at best have been a BR note; and if there was one, the claim of NHB for the note would have been against Harshad Mehta. But it never made a claim against Harshad Mehta. It may not have done so because the claim would have got it nothing: all securities belonging to Harshad Mehta had been confiscated by the ministry of finance and handed over to its own custodian, and by law, NHB would have had to cede the securities to the custodian as well. But it was equally possible that there was no BR note: that NHB had just invented a ready-forward transaction to squeeze some money out of ANZ. That is what ANZ claimed, and refused to acknowledge that it owed anything to NHB.
There was never a shred of evidence that it did owe anything. But the governor of Reserve Bank went out of his way to force ANZ to pay up. He even went and talked to the governor of Bank of England to put pressure. He finally made ANZ cough up the money, on the condition that there would be arbitration, and that if NHB lost the arbitration it would pay back the money with interest. Unlike Enron, ANZ agreed to an arbitration panel consisting entirely of Indian ex-judges. They have ruled in its favour by a majority of 2:1; in the process they have revealed how incapable NHB was of managing its financial affairs.
The arbitrators verdict now goes to Justice Sam Variava, who will no doubt rule soon over it. But even before he does so, Mr Ravi Gupta, deputy governor of Reserve Bank, said, As per law, we can even go to the Supreme Court.
Note that we: the Reserve Bank obviously is speaking as the mother of National Housing Bank. This is utterly inappropriate. The Reserve Bank is the regulator of the banking system; it was and is none of its business to take sides between ANZ and NHB. It was wrong of the RBI to take NHBs side not just against ANZ but also against State Bank of India and State Bank of Saurashtra. It should swiftly correct its attitude and move to a neutral position in these disputes.
