The CRB Scam



Themes: Corporate scams / Controversies
Period : 1993 - 1997
Organization : CRB Group / SEBI
Pub Date : 2002
Countries : India
Industry : Financial Services

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Case Code : FINC008
Case Length : 09 Pages
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The CRB Scam | Case Study

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"Every single drop of my blood is for the depositors."

- Chain Roop Bhansali in 1997.

The CRB Scam: The Doomed Depositors

May 18, 1997 - hundreds of angry, frustrated and scared people stood outside the Reserve Bank of India's (RBI) Mumbai headquarters under the scorching sun. They were waiting for Chain Roop Bhansali (Bhansali), the head of the CRB Group of companies to arrive. Three days earlier the RBI had given Bhansali 72 hours to come up with a plan to repay his liabilities following over 400 complaints from depositors in his company's financial schemes.

Most top officials of CRB were untraceable from the second week of May itself. The Central Bureau of Investigation (CBI) locked and sealed the offices of the CRB Group and arrested six persons, including four directors (two from Bikaner and two from Mumbai) of the satellite companies of the group, a financial controller in Mumbai and a relative and close associate of Bhansali in Delhi. The CBI also conducted simultaneous searches at 16 places in Mumbai, three in New Delhi, one each in Chennai and Ahmedabad and two places each in Calcutta, Jhunjunu, Sujangarh and Bikaner. The CBI froze the bank accounts of the group companies and seized incriminating files and other documents from the residence of the vice-president of the CRB group in Mumbai.

Following rumors that Bhansali had fled India and was hiding in Hong Kong or Canada, the CBI sought Interpol's assistance to trace his whereabouts. RBI filed a winding-up petition claiming that the continuance of the CRB Group was not in the interest of the public and depositors. The order prohibited CRB from selling, transferring, mortgaging or dealing in any manner with its assets and from accepting public deposits. In response, Bhansali sent a letter to the RBI. Though it was not signed by him, the letter said that the RBI order had led to the deterioration of the company's financial position. It added that the company was facing tremendous problems with payments to fixed depositors. The letter further said that 'we have, also expressed that in view of the precarious situation which is fast going out of our control, before it becomes unmanageable, our case should be considered sympathetically.' This letter led the investors to believe that Bhansali would come out of hiding and work out a way to get out of the mess.

However, Bhansali did not show up.

With the expiry of the RBI deadline, the CRB Group collapsed, shattering the dreams of thousands of investors across the country.1

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1] The total money involved in the CRB scam was Rs 932 crore, which included Rs 133 crore to banks, Rs 6 crore to the Unit Trust of India, Rs 100 crore to corporates, Rs 229 crore through the CRB Mutual Fund, Rs 186 crore to individual depositors and Rs 258 crore raised through equities.