Additional Director-General of Police had recommended a CBI probe into Shah's role in Madhavpura Bank case

For five years the Narendra Modi government has failed to act on a recommendation by its own police department that a CBI probe be conducted into allegations that Amit Shah — who resigned on Saturday as Minister of State for Home — helped convicted stock market scamster Ketan Parekh in the Madhavpura Bank case after receiving a hefty bribe from him.

On August 1, 2005, Kuldeep Sharma, Additional Director-General of Police, CID, sent a 3-page report to Sudhir Mankad, Chief Secretary, Gujarat government, recommending a CBI inquiry into the bribe allegation after establishing there was prima facie evidence of wrongdoing. The report was not acted on and Sharma was quickly shunted out of the CID and put to pasture. Today, he is serving as Managing Director of the Gujarat Sheep and Wool Development Corporation (GSWDC).

The inquiry by the CID in Gujarat was initiated after an Ahmedabad resident, Hasmukh Shah, filed a written complaint alleging that Mr. Parekh paid a bribe of Rs. 2.5 crore to Amit Shah to help keep him out of jail.

Accused by the CBI in 2001 of cheating the Madhavpura Bank in Gandhinagar of Rs. 1,030 crore, Mr. Parekh was arrested and bailed out on the condition that he deposit Rs. 380 crore in the bank within three years. In 2003, the bank filed a Special Leave Petition (criminal) No. 1701/2003 in the Supreme Court pleading for cancellation of bail to Parekh.

In its report, the CID notes that Amit Shah, who was a director of the bank, held a meeting on August 31, 2004 with the DGP and other police and bank officials in which he “directed … that Ketan Parekh had not paid back Rs. 380 crores to the bank [within three years] and thus his bail was liable to be cancelled.”

But in the first week of October 2004, the CID says a “political broker” named Girish Dani allegedly organised a meeting between Mr. Shah and Mr. Parekh. Soon after that, as per the Supreme Court's records, the SLP relating to cancellation of Mr. Parekh's bail was “disposed of” as the SLP was withdrawn by the bank.

The result was Mr. Parekh remained out of jail with no threat of cancellation of bail by the Supreme Court.

In its report, the CID said Ketan Parekh “had flown to Ahmedabad on 1st October 2004 and remained present [in the city].” Citing details of phone calls placed between Mr. Dani, Mr. Parekh and Mr. Shah, the CID report notes that “in this way … the persons alleged in the application had remained in contact with one another. And the time of taking of bribe is corroborated.”

Noting that in the August 31, 2004 meeting, Mr. Shah, as Home Minister and director, Madhavpura Bank, decided that Mr. Parekh's bail must be cancelled, the CID said, “thereafter, the decision to prematurely withdraw the SLP for cancellation of bail before the [Rs. 380 crore] was paid back could not be taken by another officer.”

The CID report said “Amit Shah [holds] an important position in the government and therefore there should be no cause left for suspicion about his conduct.” Accordingly, it recommended the CBI be asked to probe the matter as the Central agency was already handling the larger Madhavpura Bank collapse case. But the Gujarat government chose not to take any action.

Bank still not revived

Leader of the Opposition in the Gujarat Assembly Arjun Modhwadia told The Hindu over the telephone on Saturday: “The Madhavpura Bank scandal was a Rs. 1,200-crore scam. Thousands of depositors who had more than Rs. 1 lakh as deposits in the bank have not yet got back their money. The bank has not yet been revived despite a revival package from the Reserve Bank. About 75 smaller cooperative banks which had large deposits with Madhavpura Bank were bankrupted.”

He demanded that even at this late stage this matter should be thoroughly investigated by the CBI along with the ongoing investigations into the murders of Sohrabuddin Sheikh, his wife Kauserbi and friend Tulsi Prajapati. “The main issue is why did Narendra Modi deliberately bury the CID report? If Mr. Shah is innocent, why shy away from a CBI probe that could establish his innocence?”

Senior BJP leader Arun Jaitley, who held a press conference on Friday criticising the ongoing CBI probe into Mr. Shah, was Mr. Parekh's lawyer in the case relating to the bank scam. Although Mr. Parekh got a light sentence in 2008, he has mostly remained out of jail.

Soon after he submitted his report to Chief Secretary Mankad — with copies sent to the Home Secretary and the Director-General of Police — Kuldeep Sharma of the CID was transferred out as Additional Director-General of Police (Training) where he served for 3 years. Then, after a short posting in the United Nations, he was kept without a post for several months before being posted to the GSWDC in November last year.