Long View: India's Very First Corruption Scandal The political media exposé, of the sort that invariably earns the suffix "-gate" in the United States, can come in a surprising variety of shapes and sizes. The coverage of Watergate, sustained in The Washington Post over more than 300 stories, sank a presidency. In 1987, India's own Watergate broke in The Hindu, which printed hundreds of documents in facsimile form to expose the Bofors corruption scandal, involving kickbacks received by politicians in exchange for a defense contract. On the other hand, independent India's first momentous political scam broke in 1957 with what seems, in comparison, to be a pebble hurled at the side of an ocean liner - and yet it forced the swift resignation of a finance minister, T. T. Krishnamachari. 4, 1957, Ram Subhag Singh, a Congress politician and Member of Parliament, rose to his feet in the Lok Sabha, the lower house of Parliament, and posed a question: Will the minister of finance be pleased to refer to a report in The Statesman (Delhi edition) of Aug. 3, 1957, to the effect that a sum of one crore [10 million] rupees from the funds of the Life Insurance Corporation had been invested in a private enterprise with its headquarters in Kanpur and state: (a) the name of the private enterprise... (b) the total amount invested so far; and (c) the reasons for investing the funds in a private enterprise? The report in The Statesman to which Mr. Singh referred remains astonishingly elusive. A microfilm search of the newspaper's Aug. 3, 1957, edition turned up no such article. One of the personnel at The Statesman's New Delhi office told me, with much chagrin, that there were no archives to speak of in that bureau. In the Kolkata bureau too, a helpful assistant editor came up with nothing. I could only discover a fleeting reference to it in a 2006 book review in The Telegraph, which suggested that the piece was authored by the journalist Prem Bhatia, who "mentioned" in his weekly column the gist of what would come to be known as the Mundhra Scandal. It emerged, over the next few months, that in June 1957 the public-sector Life Insurance Corporation (LIC) had bought 1.24 crore, or 12.4 million rupees, worth of fraudulent stock in six companies owned by Haridas Mundhra, a Calcutta-based businessman. The investment was the largest that LIC had made in its short history, but contrary to regulations, its investment committee had not been consulted on the decision. There was "ample evidence," the business journalist Sucheta Dalal wrote in her biography of the industrialist A. D. Shroff, that Mr. Mundhra "was bleeding the companies and siphoning off large chunks of money, while simultaneously operating in the market and rigging up prices as cover to his own sales of these scrips." Ostensibly, the shares were purchased by LIC to stabilize the market; in reality, they had the effect of bailing out a suspect businessman, and the puzzling order to do so seemed to have come from within the highest reaches of government. Mr. Mundhra benefited significantly; in an internal letter, A. Raman, a research officer with the Reserve Bank of India (RBI) in Calcutta, wrote in July 1957: "[T]he truth is that Mundhra is now on a slightly firmer ground although he is far from being out of the woods." The crusade to demand an explanation for LIC's decision was led, in an odd soap-operatic twist, by Feroze Gandhi, son-in-law to Prime Minister Jawaharlal Nehru. In hectoring speeches in the Lok Sabha, Mr. Gandhi charged that the principal finance secretary, H.M. Patel, and the finance minister, Mr. Krishnamachari, had pushed LIC's investment through. (The socialist leader Madhu Dandavate, in his memoir "Dialogue with Life," recalled a Congress Party member's weak riposte to Mr. Gandhi: "You are basing your allegations just on newspaper reports. This is not proper. Do you have evidence? In our age, when allegations are made on the basis of little else but media reports, this remark must sound sweetly naïve.) Mr. Gandhi said he possessed confidential correspondence between Mr. Patel and Mr. Krishnamachari and was willing to produce these letters. In response, in early 1958, Mr. Nehru appointed the former chief justice M.C. Chagla as a one-man commission of inquiry. Mr. Chagla worked remarkably fast. His report, submitted in less than a month, is still a marvel of transparent investigation and concise analysis; his questioning must have been just as robust. Mr. Krishnamachari dithered and dissembled during his interview; later, as Taya Zinkin revealed in her book "Reporting India," he would tell Mr. Patel: "I had not expected that the Judge would ask so many questions and I got flustered." Mr. Chagla pored over the letters of Mr. Raman, the RBI research officer who had industriously been studying Mr. Mundhra and who had recommended an inquiry even in September 1957. The last of Mr. Raman's letters, Mr. Krishnamachari observed, did not "make good reading." The hearings of the Chagla commission were conducted in public; such huge crowds attended that loudspeakers had to be set up for people who remained outside the court room, in the dilute sunlight of Delhi's winter. In several of these depositions, as Ms. Dalal wrote in her A.D. Shroff biography, Mr. Chagla learned about how obviously rotten Mr. Mundhra's companies were. Bhagwandas Govardhandas, a member of the LIC investment committee, told Mr. Chagla that he would not have touched Mr. Mundhra "with a pair of tongs." Mr. Shroff said about Mr. Mundhra that he had "an infinite capacity for not telling the truth. From my long experience I have learnt that when a man is in difficulties, if he comes to you, he will never disclose the truth about himself. After Mr. Chagla filed his report, Mr. Krishnamachari resigned on Feb. 18, 1958. When Mr. Nehru received the letter of resignation, he wrote back a note that was curiously dismissive of Mr. Chagla and that betrayed his deep fondness for Mr. Krishnamachari: "Despite the clear finding of the Commission so far as you are concerned, I am most convinced that your part in this matter was the smallest and that you did not even know what was done." Mr. Mundhra, arrested at a suite at the Claridges Hotel in New Delhi, went to prison for 22 years. There would be, not long after that, a rehabilitation of sorts for Mr. Krishnamachari, who became finance minister again in 1964, for a year. But his relationship with Mr. Nehru had fractured irrevocably. After the 1962 elections, when Mr. Nehru offered his old friend any cabinet position except for the Finance Ministry, Mr. Krishnamachari wrote back an anguished letter, railing against various malign forces that, he alleged at great length, had been behind his downfall. But he also wrote, of Nehru's decision to withhold the finance portfolio: In the course of the discharge of your obligations...it does happen that you might have to walk over the corpses of your friends. I realize it might be necessary and I, for my part, have no grievance. But I cannot be a good friend and unilateral though it might be I consider myself to be one...if I did not tell you that you do wrong. It was a bitter but moving coda to, as Ms. Dalal described it, the first scam of free India.