JUDGMENT : I.M. Quddusi, ACJ. 1. The Petitioner who is a tax consultant has filed this writ petition by way of a Public Interest Litigation praying for issuance of a writ of mandamus directing the opposite parties to hand over the investigation of offences committed for erosion of Forex Reserve of the Nation to an independent agency preferably the Central Bureau of Investigation for threadbare investigation and book the culprits and punish them in accordance with law. He has filed the writ petition basing on the information and documents obtained from different print media as well as the electronic media which he has appended to the writ petition. 2. Facts of the case are that for almost every developing country, reserves of foreign exchange is one of the most prestigious and valuable asset, as same reflects, not only the country's respect, status and dignity, but also one of the essential requisites for imports, cultural exchange, free movement of its citizens to other countries etc. and for this reason, specifically, a law has been enacted to regulate/deal with the foreign exchange. FOREX hedging is insuring price of Dollar or any other Foreign Currency which means the exporter or importer who intends to deal with Forex will be allowed to exchange at a particular price upto a particular amount for a particular period despite increase or decease in Forex Prince in the market. The Contract created between Companies/persons for such exchange at a fixed price and dealers is called derivative contract. In India, Reserve Bank of India is the only authority to regulate Forest. Dealers are appointed by Reserve Bank of India who are only authorized to buy or sale FOREX. Any individual/ Company has. to buy or sale FOREX through dealers only. They cannot do it in open market. Because of frequent dropping in Dollar rate as against rupee, it was given to understand to different corporate houses and exporters that there would be further decrease in Dollar rate as against rupee. Thus they were hurried to enter into derivative contracts with Forex dealers. to buy or sale FOREX through dealers only. They cannot do it in open market. Because of frequent dropping in Dollar rate as against rupee, it was given to understand to different corporate houses and exporters that there would be further decrease in Dollar rate as against rupee. Thus they were hurried to enter into derivative contracts with Forex dealers. Learned counsel for the Petitioner has submitted that when Dollar rate rose substantially, all the business houses were forced to deal with lower rate because of derivative agreement, for example when they were supposed to get Rs.50/- for one Dollar for the price of goods exported, they were paid Rs.40/- as determined in derivative agreement, the differential price of Rs.10/- was taken by the dealers. When dealers were asked as to what they were getting, they replied that they were getting @ 10 paise per Dollar only. If that be so, where the rest of the money is going and who are the beneficiaries is required to be investigated. The further submission of the learned Counsel for the Petitioner is that some unscrupulous persons including officials of Bank and Reserve Bank of India and Union of India are hand in glove with some beneficiaries from which they are getting huge incentives at the cost of common citizens. The differential amount of money instead of coming to Forex Reserve of our country is going to Foreign Countries or unknown hands. There are many private and overseas dealers like Morgan and Stanley, Standard Chartered Bank, HSBC Bank, Thomas Cook, Indusind Bank, Citi Bank, ICICI Bank etc. Because of frequent dropping in Dollar rate as against rupee, it was given to understand to different corporate houses and exporters that there would be further decrease in Dollar rate as against rupee. Thus they were hurried to enter into derivative contracts with Forex dealers. Forex dealers entered into derivative contracts with the corporate and export/business firms on long term basis. As per exposure of Indian Economy, i.e. gross total export and import, they were permitted to cover only risk factor and up to 500 Billion Dollars. Interested dealers entered into contract worth 3 trillion Dollars, i.e. six times more than the exposure of India and the RBI merrily consented to this and by this process gambling started. As per exposure of Indian Economy, i.e. gross total export and import, they were permitted to cover only risk factor and up to 500 Billion Dollars. Interested dealers entered into contract worth 3 trillion Dollars, i.e. six times more than the exposure of India and the RBI merrily consented to this and by this process gambling started. When the business houses were required to enter into contract for 1 lakh Dollar, out of apprehension, they entered into contract for 2 lakh Dollars as a result when Dollar rate rose substantially, all the business houses were forced to deal with lower rate because of derivative agreement. Therefore, according to learned Counsel for the Petitioner, there is scam of about Rs.25 lakh crores. 3. On 23.7.2009, the opposite parties were called upon to show cause as to why the investigation of the case should not be handed over to the Central Bureau of Investigation. On 27.8.2009, the learned Assistant Solicitor General produced letter dated 18.8.2009 of the Director (Judicial) of Government of India, Ministry of Home Affairs addressed to the Director, CBI requesting it to take necessary action in the matter. This Court was of the opinion that the CBI should conduct an inquiry on the basis of the allegations made and also ascertain as to whether there is any violation of the Foreign Exchange Management Act, 1999 and the Regulations made thereunder. Extra copy of the writ petition was served on the learned Counsel for the CBI and the matter was directed to be listed on 4.11.2009 asking the CBI to submit a preliminary report on that date. The Reserve Bank of India was also required to keep track of the differential amount in respect of exotic derivative contracts, if any. 4. Pursuant to the aforesaid order, the CBI has submitted an inquiry report. The Reserve Bank of India was also required to keep track of the differential amount in respect of exotic derivative contracts, if any. 4. Pursuant to the aforesaid order, the CBI has submitted an inquiry report. In the report it has been averred that from a perusal of the relevant provisions of the FEMA, Derivative Contracts Regulations and the RBI Master Circulars, it transpires that derivative contracts in foreign currency, both rupee-foreign currency and cross currency are permissible under these provisions, subject to the following terms and conditions: I) The authorized dealer through verification of documentary evidence is satisfied abut the genuineness of the underlying exposure; II) Options contract involving cost reductions strategies such as the range forward and the ratio range forwards should be drawn in such a manner that there is no net inflow of premium to the corporate and further that such structures do not result in increased risks; III) All permissible derivatives including rollover restructure and innovation are to be conducted at prevailing market rate; IV) Any derivative as underlying to any other derivative transaction is not permitted; V) The management of derivative activities should be an integral part of the over all risk management policy and mechanism. It is desirable that the Board of Directors and Senior Management understand the risks inherent in the derivative activities being undertaken. VI) Market makers (banks) should have a "Suitability and Appropriateness Policy" vis-a-vis users in respect of the products offered, on the lines indicated in these guidelines. It is further stated in the report that in order to ascertain as to whether any loss was borne by the exporters/corporates and banks, as contended by the Petitioner and if so whether any violation of FEMA and the rules and regulations framed thereunder had taken place, a questionnaire was sent to the Reserve Bank of India and Directorate of Enforcement and their comments on the same were called for. Reserve Bank of India vide their letter dated 27.10.2009, enclosed as Annexure-F to the report, forwarded their comments on the questionnaire. The salient features of the reply, inter alia, are as under: i) Derivative contracts in foreign currency, both Rupee-Foreign Currency and Cross Currency are allowed under provisions of FEMA and rules & regulations framed thereunder, subject to the terms and conditions mentioned in the Regulations, Master Circulars and Comprehensive Guidelines. The salient features of the reply, inter alia, are as under: i) Derivative contracts in foreign currency, both Rupee-Foreign Currency and Cross Currency are allowed under provisions of FEMA and rules & regulations framed thereunder, subject to the terms and conditions mentioned in the Regulations, Master Circulars and Comprehensive Guidelines. While offering foreign exchange derivative products to their clients, banks are required to be guided by general principles laid down by RBI, particularly those related to "Suitability and Appropriateness Policy. ii) Authorised Dealer (AD) category I banks are authorized to enter into Foreign Exchange Derivative Contracts. As on July 1, 2007, there were 84 AD Category I Banks. iii) It was observed that 11 banks and unrealized dues from customers to the tune of Rs.755.45 Crores during the period April, 2008 to December, 2008 on account of derivative contracts entered into by them with customers. iv) The unrealized dues of Rs.755.45 Crores were primarily due to customers failing to meet their obligations under the contracts or disputing the same. v) Many exporters entered into structured cross currency derivative contracts to hedge their exposure to exchange rate risks. The transactions were undertaken basically to hedge currency risk on their Current and Capital Account transactions. Most of these contracts were structures designed to reduce the hedging cost to the users and were primarily based on a view on the direction of movement of various currencies. Such structures are known as risk transformation structures where the user looks to shift the currency risk from one currency to Anr. or where the pay off is based on movement of one currency against Anr. . vi) Most of the aforesaid structured cross currencies contracts were based on the common view that US Dollar would be appreciating against rest of the currencies in near future. However, the sub prime crisis in US aggravated during the latter part of 2007 with the worsening of credit and liquidity conditions and slow down of housing market. The US economy was suddenly faced with a recessionary condition. The Federal Reserve Board of USA, in a bid to improve the credit market and liquidity conditions and to provide psychological support to the markets started reducing policy rates aggressively while simultaneously injecting liquidity into the system. The US economy was suddenly faced with a recessionary condition. The Federal Reserve Board of USA, in a bid to improve the credit market and liquidity conditions and to provide psychological support to the markets started reducing policy rates aggressively while simultaneously injecting liquidity into the system. vii) The above factors led to US dollar depreciating against major currencies and the exchange rate levels envisaged in the structured cross currency contracts signed by the exporters, which were though to be unattainable hitherto, were breached. As a result, most of the options sold by the users as part of the structured contracts were knocked in and exporters and other customers had to face negative Marked to Market (MTM) position and obligation to pay crystallized losses (in case of completed contracts). viii) Similar losses in derivative contracts were also suffered by exporters in other countries like South Korea, China, Hong Kong, Indonesia, Singapore, Thailand etc. on account of the same reasons. However, the MTM positions (losses) actually show the present value of transactions based on the current prices. Most of the aforesaid structured contracts were long term contracts and, therefore, the MTM position shall remain dynamic and subject to the movement in exchange rates of various currencies. Moreover, apart from incurring MTM losses, the customers also suffered substantial losses in plain vanilla (Indian Rupee-Foreign Currency) contracts due to sudden depreciation of the Indian Rupee vis-a-vis the other currencies. ix) Marked to Market (MTM) losses are basically an accounting concept wherein the financial institution records the value of outstanding financial contracts at fair value (market value) while preparing financial statements. MTM value, therefore, fluctuates with change in value of underlying currency rates/ interest rates. The MTM is, therefore, dynamic in nature and changes in line with the market movements and represents the replacement cost of the derivative contracts. As against this, the actual payment/receipt on account of its loss/ gain on the derivative transaction will take place at the maturity of the contract depending on the market rates prevailing on the date of settlement. The MTM, therefore, signifies only the current value of the contract and consequently its replacement cost, but not the realized gain or loss. x) Reserve Bank of India has been monitoring the gross MTM losses incurred by the Banks. The MTM, therefore, signifies only the current value of the contract and consequently its replacement cost, but not the realized gain or loss. x) Reserve Bank of India has been monitoring the gross MTM losses incurred by the Banks. As in December, 2008, the gross MTM gains (corresponding losses to the customers) of 22 banks active in the business of derivatives were Rs.31, 719 Crores, but the crystallized losses (unrealized dues to the banks) were only Rs.755.45 Crores as enumerated above. Most of the contracts were signed for long term maturities and therefore, the MTM profile of such contracts is likely to undergo changes over the period till maturity of the contracts. xi) xx xx xx xx xii) Some users/customers also undertook hedge transactions in excess of their exposures (Genuine Underlying) in violation of FEMA provisions by making a false declaration under the past performance route or the underlying route. This compounded their losses. The provisions of FEMA and rules made hereunder are Applicable to banks and their customers alike. xii) xx xx xx xx xiii) Losses suffered by the customers may not represent the gains made by the banks. Banks are allowed to take open positions in the forex market, including derivative market, within the limits prescribed by Reserve Bank of India. The Banks are not allowed to take open positions on cross currency contracts. However, banks which meet the specific prudential-criteria are allowed to run foreign currency-Rupee option book within the overall net open position and Aggregate Gap Limits approved by Reserve Bank. All other transactions are required to be covered by the banks back to back with Anr. bank in India or an overseas bank. Therefore, the MTM losses indicated above do not reflect the profits made by the banks. xiv) RBI had constituted an inter departmental Committee to create suitable regulatory environment for derivative transactions. Based on recommendations of the committee, the "Comprehensive Guidelines on Derivatives" were issued by RBI in April, 2007. The guidelines detailed the general principles for undertaking both rupee and foreign exchange derivatives and addressed various other issues relating to derivatives such as board principles for undertaking derivatives transactions. Risk Management and Corporate Governance Aspects, Suitability and appropriateness Policy, Documentation, Identification of Risk and risk measurement etc. xv) Reserve Bank of India carried out special scrutiny in selected banks active in derivative transactions. Risk Management and Corporate Governance Aspects, Suitability and appropriateness Policy, Documentation, Identification of Risk and risk measurement etc. xv) Reserve Bank of India carried out special scrutiny in selected banks active in derivative transactions. A Portfolio approach was adopted towards the derivative business offered by such banks, during the course of Annual Financial Inspections 2007 and 2008 Cycles. The RBI held discussions with Chief executives of 22 banks active in the field of derivative transactions to assess the systemic impact. The RBI has concluded that this is not a Systemic Issue. xvi) Based on the information gathered during discussions with the CEOs of 22 banks, further actions were taken by RBI, which included i) monitoring of derivative exposures of all banks, ii) strengthening of prudential framework for derivatives and iii) the constitution of Inter-Departmental Group (IDG) to review the derivative transactions of the banks and recommended appropriate supervisory action. xvii) The IDG examined the observations relating to violation of regulatory guidelines in the AFI reports relating to the year 2007 and 2008 in respect of 22 banks and special scrutiny reports of banks. These violations generally related to failure to verify the underlying of derivative transactions, offering structures resulting in increase in risk and receipt of net premium by the corporate, booking of contracts under past performance route beyond the eligible limits, offering leveraged products etc. xviii) The IDG has identified violations, which are serious in nature, and they are being examined for further action against the banks concerned. In the light of findings of special scrutiny, AFIs and meetings with banks, the FEMA Regulations and Comprehensive Guidelines on Forex Derivatives are being revisited. It has been announced by RBI in the Second Quarter Review of the Monetary Policy 2009-10 that the draft guidelines in Forex Commodity and Freight are being placed on Reserve Bank web site by end-November, 2009 for wider dissemination and comments/views. xix) RBI has pointed out the following irregularities/deviations in compliance of FEMA notifications and Guidelines: a) Offering structures that were in violation of extant regulations viz structures that resulted in accordance in risk and net receipt of premium. b) Offering leveraged structures, Leverage has also been used in many derivative structures by the banks and their customers. In such a structure, the customer buys and sells options to reduce his cost. b) Offering leveraged structures, Leverage has also been used in many derivative structures by the banks and their customers. In such a structure, the customer buys and sells options to reduce his cost. The national principal amount of the said option has been observed to be a multiple of the value of the underlying which compounded the MTM losses of the customers. c) Not verifying the underlying insufficient underlying exposures. d) Not obtaining declaration regarding amounts booked with other Ads on past performance basis. Users are observed to have utilized the total eligible limit with not just one bank, but a number of them without their declaring or apparently giving false declaration, on each occasion, about the amount of heading facility already utilized with other banks in this regard. This led to large scale leveraging of the same underlying exposures resulting in multiplying of losses. e) Booking of contracts, under past performance basis beyond 50% of eligible limit without obtaining CA Certificate. f) Not ensuring adherence to eligible limits under the past performance route. g) Not carrying out proper due diligence regarding user appropriateness and suitability of the product offered to the customer. h) Not obtaining written acknowledgement from the clients for understanding the risk disclosed. i) The periodical review reports and annual audit reports were not obtained by the banks from the concerned users. j) Even when the transactions were based on underlying exposure, the banks relied on photocopies of documents to ascertain the same. This led to misuse by the clients who used photocopies of the same underlying to enter into different contracts with different banks, which resulted into manifold increase in their losses. xx) Specific comments of the banks with regard to various supervisory issues/concerns arising out of derivative business are being obtained. Further as recommended by IDG, serious irregularities are being followed up with individual banks. xxi) The total national principal amount outstanding in respect of derivative contracts including forward foreign exchange contracts was to the tune of Rs.71, 71, 570 Crores (USD 1646 billions) as on March 31, 2007 and Rs.1, 17, 94.707 Crores (USD 2435 billions) as on December 31, 2008 respectively. The credit equivalent amount of these contracts was Rs.1, 44, 545 Crores (USD 34 billions) as on 31.3.2007 and Rs.4, 70, 304 Crores (USD 98 billions) as on 31.12.2008 respectively. The credit equivalent amount of these contracts was Rs.1, 44, 545 Crores (USD 34 billions) as on 31.3.2007 and Rs.4, 70, 304 Crores (USD 98 billions) as on 31.12.2008 respectively. However the total unrealized dues of the 11 banks on account of derivative contracts with customers, as mentioned earlier, was Rs.755.45 Crores (USD 0.16 billions) during the period April, 2007 to December, 2008. xxii) Similarly questionnaires were also sent to the Head Offices of following 8 banks to elicit their responses on the current issues raised by the Petitioner in W.P.(Crl.) No. 344/2009. i) State Bank of India. ii) HDFC Bank. iii) HSBC Bank. iv) Standard Chartered Bank. v) Citi Bank. vi) ICICI Bank. vii) ABN Bank. viii) Axis Bank. 4.10. At the time of writing this preliminary report, responses from the aforesaid banks are awaited. Most of these banks have sought time to furnish the requisite data and information. 4.12. During the course of inquiry, it was learnt that several exporters of Tirrupur, Tamil Nadu had incurred heavy loses in the forex derivative contracts. His statement is enclosed as Annexure-H. 4.14. Some exporters have also claimed in their civil suits that they were made to sign the contracts through coercion, misrepresentation of fact and therefore, the contracts are void under provisions of Section 19 of the Indian Contract Act. They have also maintained that the contracts are void u/s 30 of the Indian Contract Act being wagers in nature. 5.2. Further, there are in built provisions in FEMA for initiating action against the defaulters, in case the provisions of FEMA and regulations made thereunder are violated by an individual or concern. FEMA also specifically identifies the Enforcement Directorate and the Reserve Bank of India as the authorities who have been entrusted with the responsibility of making regulations and enforcing the law. 5.3. The Petitioner has contended that officials of Reserve Bank of India, Banks and Govt. Officials, in conspiracy with unknown foreign entitles/persons make international and willful projections/forecasts which indicated that the Indian Rupee will strengthen against the US Dollar. By such projections/ forecasts, a hype was created in the foreign exchange market. By such projections and forecasts, Banks trapped gullible investors/importers/exporters and sold specially engineered products (foreign exchange derivatives) to fritter away the precious foreign exchange out of the country. By such projections/ forecasts, a hype was created in the foreign exchange market. By such projections and forecasts, Banks trapped gullible investors/importers/exporters and sold specially engineered products (foreign exchange derivatives) to fritter away the precious foreign exchange out of the country. However, this apprehension of the Petitioner does not seem to be based on any logical conclusion drawn on an in depth examinations of the facts pertaining to derivative transactions. The Petitioner has not even named any official from RBI or the concerned banks, let alone cite any instance which indicates a conspiracy to defraud the national exchequer. RBI's response has clarified that the phenomenon is not restricted to Indian alone and losses have also been suffered by banks and clients in many other countries such as Indonesia, China, South Korea, Hong Kong etc. For this the Reserve Bank of India has already initiated action under the inherent powers available with them. The angle of criminal conspiracy, however, does not seem even a distant possibility in the entire matter. 5.4. However, from the data received from the Reserve Bank of India, it is clearly seen that the extent of unrealized dues to the banks, during the relevant period was only Rs.755.45 Crores, which is not such a huge amount so as to cause such a big negative impact on the national economy as apprehended by the Petitioner. The MTM position though indicates as major loss suffered by the banks/clients, but the fact remain that MTM position does not reflect the actual unrealized loss and is merely a projection of the current position. 5.5. It is submitted that RBI has also reported that some of the products, especially the cross currency derivative products violated the provisions of FEMA and regulations made thereunder. As regards the counter parties, for the clients, the counter parties were the concerned banks, whereas for the banks, the counter parties were other Indian/foreign banks. 5.7. It is submitted that Reserve Bank of India (or the Govt. of India) had issued clear cut guidelines and the provisions of such guidelines were applicable to both banks and the users (exporters) alike. Violations of the guidelines were committed by banks/exporters, who, in many cases entered into derivative contracts far in excess of their genuine underlying exposure and also tried to use the hedging tools as Profit making tools. of India) had issued clear cut guidelines and the provisions of such guidelines were applicable to both banks and the users (exporters) alike. Violations of the guidelines were committed by banks/exporters, who, in many cases entered into derivative contracts far in excess of their genuine underlying exposure and also tried to use the hedging tools as Profit making tools. In the end it was their greed that proved to be their undoing and not the policy guidelines of RBI or the Govt. of India. If the guidelines had been adhered to, the losses would have been contained, especially in such instances, where the cost reducing strategies led to increased risk profile or where contracts far in excess of the genuine underlying exposures were made. It may be said that there is enough in this world for every one needs but not for any one's greed. 5.8. The Petitioner has contended that the Derivative contracts are financial scandals and are wagers and hence not permitted under law. This is a question of law and does not need any comment to be made by CBI, which has been entrusted with the task of conducting any inquiry into the matter and not to make comments on legal issues. 5.9. It is apparent that violations of FEMA and regulations made thereunder have taken place in the forex derivative contracts signed by various banks. It may be appreciated that no instance of criminal conspiracy or offences of cheating or other IPC Sections or the offences under Prevention of Corruption Act has been disclosed during the course of inquiry conducted into the n atter. If from such action, the RBI and/or the Directorate of Enforcement draw a conclusion that any specific case requires investigation by CBI as it involves commission of offences under IPC or PC Act, 1988 or legal provisions for which they are not empowered, they may make a reference to CBI for taking up investigations of that specific instances of instances. 5. In para 6.1 of the report, it has been prayed that the derivative contracts entered into by various banks may be looked into and examined by Reserve Bank of India and/or Directorate of Enforcement on bank to bank basis with the objective to identify and pin point the violations of FEMA and rules/regulations made thereunder and take appropriate action. 5. In para 6.1 of the report, it has been prayed that the derivative contracts entered into by various banks may be looked into and examined by Reserve Bank of India and/or Directorate of Enforcement on bank to bank basis with the objective to identify and pin point the violations of FEMA and rules/regulations made thereunder and take appropriate action. Further, if such an exercise reveals commission of offences punishable under IPC, Prevention of Corruption Act, 1988 and/or other legal provisions for which the RBI or the Directorate are not empowered to take cognizance, such specific instance or instances may be referred to CBI for investigation. 6. During the course of enquiry, the CBI recorded the statement of Raja M Shanmugam, President of the Forex Derivatives Consumers Forum, Tirupur, Tamil Nadu, who has inter alia stated that an exporter has a commitment to export goods worth one million dollar in dollar terms. The dollar rupee exchange rate is Rs.49 to a dollar. However, if the rupee appreciates and the dollar depreciates, to say Rs.40 to a dollar, the exporter stands to loose rupee 9 per dollar and his loss will be Rs.9 millions on an export of USD 1, 000, 000.00. To protect himself against this fluctuation in currency rates, the exporters hedges his exposure against the possible fall in dollar value whereas his income arises. Such protection is secured through a forward contract. In a forward contract, the exporter foresells US$ 1 million (receivable against the export made) for delivery on an agreed future date at the present prevailing prices of Rs.49.00 per US$. By such contracts he has ensured himself against the fall in value of dollar and covered his risk for fluctuation in rates of currency. Usually, Indian exporters are familiar with forward contracts. All categories of risk management instrument are known as derivatives and Forex Forward Contracts are also termed as derivatives in Foreign Exchange. He further stated that the guidelines also specify that before undertaking derivatives transactions, the banks should ensure that the derivative instrument being applied are permitted to be used and further the suitability and appropriateness policies is required to. be applied by the banks in derivatives contracts and derivatives transactions. However, the banks never carried out any exercise to ascertain the suitability and appropriateness of the products to the concerned clients. be applied by the banks in derivatives contracts and derivatives transactions. However, the banks never carried out any exercise to ascertain the suitability and appropriateness of the products to the concerned clients. The banks failed to apply the suitability and appropriateness principle to the products and in violation of guidelines went for aggressive marketing. In his statement, he further stated as under: On perusal of the contracts presented before you in paper book at flag-D which shows that this contracts are purely one sided. In case the exporters gains, the profit will be limited to a certain amount which would be determined by the contract itself. For example, profit in the contract at Flag-D would be restricted to US$ 8000. However, in case of appreciation of Euro the loss, that would be suffered by the exporter is unlimited and depends on actual spot rate of Euro as on the date of maturity. Further more the contract stipulates that the client is to sell twice the number of Euro hedged with the Bank and therefore, his loss is doubled. In the illustration given on margin of Flag-B, the actual loss suffered by the exporter is Rs.2.38 crores. The exporters in Tirupur were familiar with forward contract in rupee dollar terms ever since derivatives were allowed. However, starting from April-May 2006 several banks namely ICICI Bank, Axis Bank, SBI, HDFC, Abn Amro starting campaign for Forex Derivatives products. In the initial stages they offered products to the exporters for smaller amounts. The exporters entered into the contracts and gained small amounts in these transactions. This encouraged them to enter into fresh Forex Derivatives Contracts for cross currency transactions other than Rupee-Dollar). This became an ongoing process and while the banks aggressively marketed the said exotic products, almost all leading exporters signed various contracts with these banks, some of them far in excess of their genuine underlying exposure. The aforesaid exotic contracts were signed on the terms to minimize their losses on account of fall in value of dollar vis-a-vis the Indian Rupee. Signing contracts in excess of the genuine underlying was also a strategy advised by the bank and adopted by the exporters. No one i.e. the exporters in Tirupur or perhaps even in the country could fully understand the products and none was fully conversant with the financial upheavals and the likely trends in the international currency market. Signing contracts in excess of the genuine underlying was also a strategy advised by the bank and adopted by the exporters. No one i.e. the exporters in Tirupur or perhaps even in the country could fully understand the products and none was fully conversant with the financial upheavals and the likely trends in the international currency market. The exporters of Tirupur, therefore, based their decisions on "the advise of the bank and also the statements and articles appearing in various section of the press and media, which projected a continued fall in dollar vis-a-vis the Indian Rupee as also the other major currencies. In this background the exporters of Tirupur entered into Forex Derivatives Contracts in excess of rupees 1000 crores. However, these figures need to be verified. In all approximately 150 contracts were signed by various exporters who are the members of Tirupur Derivatives Forum. These Contracts were are due for maturity one year to three years meaning thereby a contract signed in June-July 2007 would attain maturity in corresponding month of 2008, 2009 or 2010. However, despite the rosy picture presented/pointed by the banks and the projections in media, the dollar started strengthening from January 2008 onwards and its value vis-a-vis the Indian Rupee as well as major currency of the world rose substantially. As a result the knock in options of the contracts meaning thereby the specified fixed value of the hedged currency vis-a-vis the dollars was touched when the exporters was pledged to deliver outright the hedged currency amount to the bank at the spot prevailing prices. Since the hedging was done at lower rates, the exporters were obliged to pay the difference in spot rate vis-a-vis hedged rate specified in the contracts and suffered heavy loss. In Tirupur alone, the members of our forum suffered losses to the tune of over Rs.300 crores. It was in the aftermath of this that we studied the contracts carefully and fund that the contracts were engineered in such a way that they were designed to benefit bankers rather than the exporters and this aspects has not been clearly explained to the exporters at the stage of signing the contracts. The exporters were kept in dark about the violation of RBI guidelines. The exporters were kept in dark about the violation of RBI guidelines. In view of the enormity of the situation, we approached the banks to annul the contracts but they advised us that in case we do so, we would be required to pay MTM (Market to Market) loss amounts to the banks. The MTM denotes the sport price of the hedged currency as on the date of MTM. Since the knock in options had been triggered, this amount is also running into several hundred crores of rupees. At this stage we founded the Forex Derivatives Consumers Forum. Tirupur and collectively presented our grievances to the Governor RBI Shri Y.V. Reddy and Dy. Governor Mr. Leeladharan and also before the Parliamentary Committee on finance. We also sought option on the legality or enforceability of the contracts signed by various banks Flag-F is copy of option given by Justice Mr. V.N. Khare, former Chief Justice of India wherein he has opined that the structured currency option agreement presented before him is an agreement by way of wager which is void as per Section 30 of the Indian Contract Act 1872, The agreement is void under the Indian Law. 7. A preliminary counter affidavit has been filed by the RBI contending that the writ petition is not maintainable either in law or on facts and is liable to be dismissed in limine. This writ petition being a PIL is not maintainable at the behest of the Petitioner who is no way related or affected by the alleged transaction. It is submitted by the Petitioner that the writ petition has been filed without any valid cause of action/any supporting documents and the Petitioner does nothave any locus standlio file the writ petition. Therefore, the Petitioner isnot entitled to any relief. It has been inter alia averred in the preliminary counter affidavit that the opposite party -RBI has advised banks through its guidelines, the basic principles of a prudent system to control the risks in derivative activities. Banks have been advised that they should undertake derivative transactions with a sense of responsibility and circumspection that would void, among other things, mis-selling. It has been inter alia averred in the preliminary counter affidavit that the opposite party -RBI has advised banks through its guidelines, the basic principles of a prudent system to control the risks in derivative activities. Banks have been advised that they should undertake derivative transactions with a sense of responsibility and circumspection that would void, among other things, mis-selling. Banks should offer derivative products in general, and structured products, in particular, only to those clients who understand the nature of the risks inherent in these transactions and further that products being offered are consistent with clients' business, financial operations skill and sophistication, internal policies as well as risk appetite. Banks should carry out proper due diligence regarding 'clients apropriateness' and 'suitability' of products before offering derivative products to them. Each bank should adopt a Board-approved 'Customer Appropriateness and Suitability Policy' for derivatives business. It has been further mentioned in the counter affidavit that the banks have also been advised that while selling structured derivative products to a client, they should document the pricing/valuation aspects, including a dissection of the product into its generic components to demonstrate its permissibility in terms of extant guidelines. Besides, they should share with the client, (i) the analysis of expected impact of proposed derivatives transaction on the client; (ii) the analysis of future scenarios. They may also, ascertain whether clients have the appropriate authority to enter into derivative transactions and whether there are any limitations on the use of specific types of derivatives in terms of the client's board memorandum/ policy, level at which derivative transactions are approved and the involvement of senior management in decision-making and monitoring. It is further stated that the RBI is empowered to conduct periodical on-site inspection of banks and also special scrutiny of the affairs of the banks and its books and accounts under the provisions of Section 35 of the B.R. Act, 1949. RBI supervises the Authorized Dealer Category-I banks through combination of on-site inspections (Annual Financial Inspections of AFIs), need-based scrutinizes, off-site surveillance and periodical meetings with the banks. The conduct of derivatives portfolio of banks viz. compliance with the RBI guidelines, FEMA regulations, risk disclosures, derivatives policies, including policy on customer appropriateness and suitability of the products etc. are being covered during the AFIs of RBI. The conduct of derivatives portfolio of banks viz. compliance with the RBI guidelines, FEMA regulations, risk disclosures, derivatives policies, including policy on customer appropriateness and suitability of the products etc. are being covered during the AFIs of RBI. Various supervisory issues/concerns relating to the derivative business that emerge during AFI are discussed with the GEO of the individual banks and specific comments/commitment are obtained and followed up. The matter is being given its due importance, as in the case of all regulatory and supervisory issues. In cases where transgressions of guidelines by banks are notices, the Reserve Bank takes appropriate regulatory and supervisory action. The derivative products offered by banks are required to be in compliance with the extant regulations on derivatives. The total notional principal outstanding in respect of derivatives including forward foreign exchange contracts were to the tune of Rs.71, 71, 570 crore (USD 1646 billion) and Rs.1, 17, 94, 707 crore (USD 2435 billion) as on March 31, 2007 and December 31, 2008 respectively. The Credit Equivalent amount of these contracts was Rs.1, 44, 545 crores (USD 34 billion) and Rs.4, 70, 304 crore (USD 98 billion) as on respective dates. Based on the information reported by the banks, it was observed that 11 banks had suffered losses to the tune of Rs.755.45 crore (USD 0.16 billion) during the specified period on account of derivative contracts with customers. In view of the above, the contention of the Petitioner that there has been a wrongful loss of 25 trillion rupees is misconceived. As the derivative contract is meant for hedging a foreign exchange exposure, the plea that derivatives were intended for frittering away foreign exchange out of the country is incorrect, baseless and arising out of figments of imagination. It has been submitted that the derivative transactions are undertaken by Authorized Dealers Category I banks acting as Intermediaries by attending to the requirements of their customers (imports/exports) and cannot run open positions. Hence, in some contracts the banks have to buy foreign currency while in other contracts they have to sell foreign currency at agreed rates. Therefore, the contention of the Petitioner that presently, bankers are earning Rs.8-10 per USD is not correct, the positive/negative MTMs with the customers are offset with the negative/positive MTM that the banks carry with their counter parties. Therefore, the contention of the Petitioner that presently, bankers are earning Rs.8-10 per USD is not correct, the positive/negative MTMs with the customers are offset with the negative/positive MTM that the banks carry with their counter parties. The income earned by the banks from such intermediation is limited to the margins quoted to the customers. These rates are extremely fine (usually quoted in few paise) in view of the intense competition amongst the banks. It is further averred that the losses incurred by the customers may not represent the gains by the banks. Banks are allowed to take open positions in the forex markets including derivative contracts within the limits pre-approved by the Reserve Bank. Further, banks are also not allowed to run open positions on cross-currency options. However, banks, which meet specific prudential criteria, are allowed to run foreign currency-Rupee options book within the overall Net Open Position and Aggregate Gap limits approved by the Reserve Bank. All the other transactions have to be covered by the banks, back-to-back, with Anr. bank in India or overseas. It is further stated that the losses, if any, suffered in the derivative contract should not be seen in isolation but seen holistically and incorporate gains made in the underlying exposure as well. As the structure is decided well in advance, when the possible outcome is not certain, the allegation of one party committing fraud on Anr. in such derivative contracts does not appear to be sustainable. The stand of the RBI is that the global financial crisis caused the subsequent depreciation of Indian Rupee. Therefore, the contention that the Reserve Bank did not allow appreciation of Indian Rupee beyond INR 40-42 levels against the US dollar is presumptuous and baseless. It is further stated that during the period 2007-08, Reserve Bank carried out special scrutinizes in select banks, which are active in derivative transactions. Further, a portfolio, approach was adopted towards the derivative business offered by some of these banks during the course of annual Financial Inspections of 2007 and 2008 cycles. During the latter part of 2008 the RBI held discussions with the Chief Executives of 22 banks that were seen to be active in the business to assess the systemic impact. The RBI came to the conclusion that this is not a systematic issue. During the latter part of 2008 the RBI held discussions with the Chief Executives of 22 banks that were seen to be active in the business to assess the systemic impact. The RBI came to the conclusion that this is not a systematic issue. Based on the information gathered during the discussions with the CEOs of 22 banks, further action were taken by the RBI which included (i) monitoring of derivative exposures of all banks (ii) strengthening of prudential framework for derivatives and (iii) constitution of Inter Departmental Group ("IDG") on October 17, 2008 to review the derivative transactions of banks and recommend appropriate supervisory action. The IDG examined the observations relating to violations of regulatory guidelines in the annual Financial Inspection Reports relating to the years 2007 and 2008 in respect of 22 banks and special scrutiny report of banks. These violations generally related to failure to verify the underlying of the derivative transaction, offering structures resulting in increasing risk and receipt of rent premium by the corporate, booking of contracts under past performance route beyond the eligible limit, offering levered products etc. The IDG has identified certain violations of the extant regulations and they are being examined for further action against the banks concerned. Further, in the light of the findings of the special scrutinizes, annual financial inspections and meetings with banks, the regulations framed under FEMA and the comprehensive guidelines on derivatives are being revisited by the Reserve Bank and are being released for consultation in November 2009. Some users/customers also undertook hedge transactions in excess of their exposures (Genuine Underlying) in violation of FEMA provisions by making a false declaration under the past performance route or the underlying route. This compounded their losses. The provisions of FEMA and rules made thereunder are applicable to banks and their customers alike. Some customers tried to use the derivative contracts as a profit management tool rather than using them as risk management tool. A further counter affidavit has been filed on behalf of Reserve Bank of India contending that no direction as stated in para 6.1 (i) of the report of the CBI, mentioned above, may be given It is averred in the counter affidavit that the allegations of fraud, conspiracy, financial scam, wrongful loss etc. A further counter affidavit has been filed on behalf of Reserve Bank of India contending that no direction as stated in para 6.1 (i) of the report of the CBI, mentioned above, may be given It is averred in the counter affidavit that the allegations of fraud, conspiracy, financial scam, wrongful loss etc. made by the Petitioner in the writ petition, is devoid of any merit and needs to be rejected in view of the report of the CBI that the Petitioner has not named any official from Reserve Bank of India or the concerned Banks, let alone cite any instance which indicates a conspiracy to defraud the national exchequer/The angle of conspiracy, however, does not seem even a distant possibility in the entire matter and that no instance of criminal conspiracy or offences of cheating or other IPC Sections or the offences under Prevention of Corruption Act.has been disclosed during the course of inquiry conducted into the matter. With regard to the prayer of the CBI in para 6.1 of the report, referred to above, the contention of the Bank is that the RBI is empowered to conduct periodical on-site inspection of banks and also special scrutiny of the affairs of the banks and its books and accounts under the provisions of Section 35 of the Banking Regulation Act, 1949 and at present Banks are subject to on-site inspection by the RBI on annual basis. Special scrutinizes are also conducted as and when any situation warrants. It is further averred in the counter affidavit that the inspection findings are furnished to the bank concerned for their compliance. Serious violations of Acts/Reserve Bank of India directions/guidelines observed during the course of such inspection and scrutinizes are advised to the Banks for their comments and if the commons of the banks are not found satisfactory, appropriate action as envisaged under the Banking Regulation Act, 1949/FEMA are taken against the Bank concerned. Though during the course of on-site inspection, RBI verifies, inter alia, whether the banks have formulated policies, as prescribed by the RBI for undertaking various activities including derivative transactions and whether the banks are complying with such policies/guidelines issued by it. It also looks into derivative transactions undertaken by a bank to identify violations, if any, committed by the banks. Though during the course of on-site inspection, RBI verifies, inter alia, whether the banks have formulated policies, as prescribed by the RBI for undertaking various activities including derivative transactions and whether the banks are complying with such policies/guidelines issued by it. It also looks into derivative transactions undertaken by a bank to identify violations, if any, committed by the banks. But it is their further case that they do not conduct audit of the bank and therefore verifying each and every transaction entered into by a bank on a day to day basis as part of their normal business activity is not envisaged or undertaken. The further case of the RBI is that the Petitioner having not specifically pointed out about any particular derivative contract or a particular bank in the writ petition, utilization of the resources of the RBI for a long period of time for undertaking a laborious exercise of examination of each and every derivative contract entered into by banks merely on the basis of some vague and omnibus allegations made by the Petitioner is not only uncalled for but also not in consonance with the Reserve Bank of India's role of a prudential supervisor of banks. RBI is in the process of initiating action against the banks which have been identified to have committed violations under the extant guidelines issued in this regard. Therefore, no direction as sought in para 6.1 of the report of the CBI may be given. It is further case of the RBI that foreign exchange reserves of the country comprise of foreign, currency assets held by the Reserve Bank of India outside India, in the form of foreign currency balances, investments in securities issued by foreign governments, supranational, foreign central banks etc., gold and Special Drawing Rights (SDR) of the International Monetary Fund (IMF) held by the Government of India etc. Movements in the foreign currency assets occur mainly on account of purchases and sales of foreign exchange by RBI in the foreign exchange market in India. In addition, income arising out of the deployment of foreign exchange reserves is also held in the portfolio of the reserves. External aid receipts of the Central Government also flow into the reserves. Therefore, the apprehension of the Petitioner regarding frittering of foreign exchange reserve is completely misplaced. 8. In addition, income arising out of the deployment of foreign exchange reserves is also held in the portfolio of the reserves. External aid receipts of the Central Government also flow into the reserves. Therefore, the apprehension of the Petitioner regarding frittering of foreign exchange reserve is completely misplaced. 8. The learned Assistant Solicitor General has produced before us a copy of the letter dated 20.10.2009 of the Director of Enforcement addressed to the Director, CBI with reference to the questionnaire of the CBI. The Enforcement Directorate with reference to question nos. 1, 2 and 5 of the CBI has replied that those are policy matters which relate to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000. RBI is the appropriate authority to provide necessary advice/inputs. In the said letter it has been suggested that it would be more appropriate for CBI to obtain further necessary details/ inputs from RBI in the matter. The learned Assistant Solicitor General has also produced the letter dated 15.12.2009 of the Enforcement Directorate addressed to him in which it has been intimated that intelligence was received from reliable source and press report that several banks have indulged in illegal forex derivatives resulting in huge losses. It was also gathered that RBI had taken inspection of some banks in this regard and therefore RBI was requested to furnish copies of the reports of inspection vide Directorate letter dated 13.8.2008 but till date no such data has been received from CBI. Therefore, the enquiry is at preliminary stage and no further progress has been made. 9. Shri Manoj Kumar Mishra, learned Counsel for the Petitioner, submitted that in para xii of the report of the CBI it has been mentioned that some users/customers also undertook hedge transactions in excess of their exposures (genuine underlying) in violation of FEMA provisions by making a false declaration under past performance route or underlying route. The report itself also reveals that FEMA provisions and Rules and Regulations were violated with active involvement of Public servants and this cannot be done without previous meeting of minds of the offenders. Report of the CBI also states that false declarations were taken into consideration obviously with the intention to cause wrongful gain to some one and wrongful loss to the customers consequentially public exchequer. Therefore connivance is apparent and ingredients of Section 420 IPC are made out. Report of the CBI also states that false declarations were taken into consideration obviously with the intention to cause wrongful gain to some one and wrongful loss to the customers consequentially public exchequer. Therefore connivance is apparent and ingredients of Section 420 IPC are made out. He also submitted that Section 120-A clearly says that when two or more persons agree to do or cause to be done an illegal act such act is termed as criminal conspiracy. In the instant case, element of criminal conspiracy is apparent from the fact that public servants performed/acted in deviation of extant regulation and defrauded the FOREX causing wrongful gain to the Counterparties. Referring to the paras x and xiv of the report of the CBI that customers suffered loss which may not be gains for concerned Banks, Shri Mishra submitted that third party is the gainer and therefore clear case of wrongful loss to the customers and wrongful gain to third parties who are Counterparties and authorized dealers has been made out. It is a complete criminal act because unless there is criminal conspiracy such act of wrongful gain and wrongful loss would not have occurred and hence offences punishable under Sections 120-B, 409 IPC and Section 13 of the Prevention of Corruption Act is clearly made out. Referring to para xx of the report of the CBI, Mr. Mishra submitted that the report itself suggests blatant violation of FEMA and Regulations and notifications issued thereunder. His contention is that violations cannot be done along by the customers. It presupposes active involvement and tacit consent of public servants in the helm of affairs. In other words the act of the public servants was unbecoming of a public servant and exhibited high degree of criminal misconduct as a result of which wrongful loss was caused and wrongful gain was made by certain counterparties. Such an offence is punishable u/s 13 of the Prevention of Corruption Act. The further submission of Mr. Mishra is that CBI report says that the offering structures were in violation of extant regulation. According to Mr. Mishra the Ads or their officials deliberately lured the gullible customers to enter into a particular product whereby culprits gain and wrongful loss in caused to the customers. This is nothing but cheating making out a prima facie case u/s 420 IPC coupled with criminal misconduct punishable u/s 13 of the P.C. Act. According to Mr. Mishra the Ads or their officials deliberately lured the gullible customers to enter into a particular product whereby culprits gain and wrongful loss in caused to the customers. This is nothing but cheating making out a prima facie case u/s 420 IPC coupled with criminal misconduct punishable u/s 13 of the P.C. Act. Mr. Mishra submits that it was the bounden duty of the public servants to look into the genuineness of the exposure which would be involved in FOREX market. But the erring officials with intent to make wrongful gain to themselves or to the counterparties with tacit involvement of public servants and members of counterparties did not verify the underlying/insufficient underlying exposures. No declaration regarding amounts booked with other Ads on past performance basis was obtained. Users were observed to have utilized the total eligible limits not just with one bank but a number of them without their declaring or apparently giving false declarations on each occasion about the amount of hedging facility already utilized with other Banks in this regard. Even when the transactions were based on underlying exposure the Banks relied upon photocopies of documents to ascertain the same. This led to misuse by the clients who used photocopies of the same underlying to enter into different contracts with different banks which resulted in manifold increase in their losses. By this process fraud has been played on the Banks by customers in connivance with Bank officials which is a criminal offence requiring investigation. Therefore, Mr. Mishra has prayed that the report of the CBI makes out commission of prima facie case punishable under Sections 120-B, 409, 465, 467, 468, 415, 420 IPC read with Section 13 of the Prevention of Corruption Act, 1988 and, therefore, the CBI may be directed to conduct the investigation into the complaint of the Petitioner. 10. Mr.Ashok Mohanty, learned Senior Counsel appearing for the Reserve Bank of India, has referred to the decision dated 14.10.2008 of the learned Single Judge of the Madras High Court in Rajashree Sugars and Chemicals Limited v. AXIS Bank, OA Nos. 251 and 252 of 2008 arising out of Civil Suit No. 240 of 2008 and connected matters. 10. Mr.Ashok Mohanty, learned Senior Counsel appearing for the Reserve Bank of India, has referred to the decision dated 14.10.2008 of the learned Single Judge of the Madras High Court in Rajashree Sugars and Chemicals Limited v. AXIS Bank, OA Nos. 251 and 252 of 2008 arising out of Civil Suit No. 240 of 2008 and connected matters. In the said matter, the Plaintiff had come up with the following reliefs: (i) to declare that the deal confirmation of U.S. Dollar v. Swiss France structure dated 22.6.2007 in OPT contract No. 727 with the schedule thereon purportedly made by the CFO on behalf of the Plaintiff with the Defendant is void ab initio, illegal, violative of RBI Guidelines, opposed to public policy and unenforceable and not binding on the Plaintiff company. (ii) to declare that the deal confirmation of U.S. Dollar v. Swiss Franc contract dated 22.6.2007 in OPT contract No. 727 with the schedule thereon purportedly made by the CFO on behalf of the Plaintiff with the Defendant Bank is voidable at the instance of the Plaintiff and the Plaintiff has therefore avoided the contract and therefore the contract is not binding or enforceable against the Plaintiff. (iii) to declare that in the alternative to the prayers (a) & (b) the Court be pleased to declare that the contract is ultra vires the object clause of the memorandum of association of the Plaintiff and is, therefore, not binding upon the Plaintiff and/or is not enforceable against the Plaintiff. (iv) for a permanent injunction restraining the Defendants, their men, agents, servants from in any way acting in furtherance of contract in OPT No. 727 dated 22.6.2007 with the schedule thereon by initiating any proceedings for recovery any amount from the Plaintiff or seeking recovery or any amount from the Plaintiffs under the contract and/or initiating any measures or proceedings to recover any amount from the Plaintiffs under the contract. (v) for a permanent injunction directing the Defendants to deposit with the Registry of the Court all the papers and proceedings relating to the contract including transcripts of any tape-recorded conversation. Along with the suit, two applications, registered as O.A. Nos. 251 and 252 of 2008 were filed seeking interim orders. The Defendants had also filed several applications therein. (v) for a permanent injunction directing the Defendants to deposit with the Registry of the Court all the papers and proceedings relating to the contract including transcripts of any tape-recorded conversation. Along with the suit, two applications, registered as O.A. Nos. 251 and 252 of 2008 were filed seeking interim orders. The Defendants had also filed several applications therein. The Court, inter alia, considered the question of maintainability of the suit in which it was held that notwithstanding anything contained in any other law for the time being in force, contracts in derivative shall be legal and valid if such contracts are (a) traded on a recognized stock exchange; (b) settled on the clearing house of the recognized stock exchange in accordance with the rules and bylaws of such stock exchange. The definition of the word 'derivative' was also incorporated in Section 2 (ac) of the Securities Contracts (Regulation) Act, 1956, by the aforesaid amendment. The definition in Section 2 (ac) is as follows: 'Derivatives' includes (a) a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security, (b) a contract which derives its value from the prices, or index of prices, of underlying securities. For the reasons mentioned in that judgment, it was held that there was no merit, prima facie, in any of the grounds on which the Plaintiff assailed the deal as illegal and opposed to public policy. 11. Since the instant matter is quite different from the matter dealt wijh by the learned Single Judge of the Madras High Court, referred to above, which was purely a civil dispute, cannot be of any help to the instant matter where allegations as mentioned in the body of this judgment have been indicated. 12. The Enforcement Directorate has also sent intimation to the CBI for taking further enquiry vide its letter F.No. T-3/26-B/2009 dated 16.10.2009. Further reply to the questionnaire given to the Banks is awaited. 13. Upon perusal of the report of CBI, as mentioned above, and considering the facts and circumstances of the case, prima facie we are of the opinion that commission of offences of cheating, criminal conspiracy and fraud cannot be ruled out. This Court has not formed any opinion about the involvement of the officers of RBI. 13. Upon perusal of the report of CBI, as mentioned above, and considering the facts and circumstances of the case, prima facie we are of the opinion that commission of offences of cheating, criminal conspiracy and fraud cannot be ruled out. This Court has not formed any opinion about the involvement of the officers of RBI. Therefore, the apprehension of the learned Counsel for the RBI that this Court may not take the submission of the learned Counsel for the Petitioner for granted that there is involvement of the officials of the RBI has no relevance. 14. From the above mentioned facts and circumstances, it appears that besides serious irregularities as admitted in the report of the CBI, as indicated above, the following criminal actions cannot be ruled out (i) making false declaration deliberately by users/customers in making hedge transactions in excess of their exposures, (ii) IDG has identified violations which are serious in nature and appear to be intentional and deliberate which also forms mensrea in commission of offence, (iii) booking of contracts under past performance basis beyond 50% of eligible limit without obtaining CA Certificate, (iv) misuse of transactions by using photocopies of the same underlying to enter into different contracts with different banks. The CBI has specifically observed in its report that there was clear cut violations of the guidelines of RBI and "it may be said that there is enough in this world for every one needs but not for any one's greed. There are apparent violations of FEMA and if investigation is done by the CBI, the violation of FEMA can also be seen and on that basis criminal offences can also be found out. 15. From the fact that false declarations were made as also from the above mentioned actions, the commission of offences of cheating, fraud and criminal conspiracy cannot be ruled out. The CBI has conducted a thorough enquiry. The action of the CBI is appreciable. CBI is a reputed independent investigating agency and there is no other investigating agency of national level in the country. The instant matter is a matter of national interest. If the allegations are fund to be true, then the CBI would be busting a large financial scam affecting the economy of the country. The culprits should not, therefore, be allowed to go free. The instant matter is a matter of national interest. If the allegations are fund to be true, then the CBI would be busting a large financial scam affecting the economy of the country. The culprits should not, therefore, be allowed to go free. Considering the facts and circumstances we think it appropriate that the matter should be investigated by the CBI and action in accordance with law should be taken. 16. In the result, we allow this writ petition and direct the CBI to investigate into the offences on the basis of the above observations. Copy of this order shall be handed over to Mr. S.K. Padhi, learned Counsel appearing for the CBI for the needful. There would be no order as to costs. Sanju Panda, J. 17. I agree. Final Result : Allowed