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India’s Top Court Slams Government Interference in Coal Probe

April 30 (Bloomberg) -- India’s Supreme Court rebuked federal investigators for allowing the government to vet the findings of a probe into alleged corruption in the award of coal blocks, setting off parliament protests and demands for the resignation of Prime Minister Manmohan Singh.

The top court said the decision by the Central Bureau of Investigation to share the investigation report with the government was “not ordinary” and said it would seek to free the Central Bureau of Investigation from political interference.

“The investigation has to be independent without any extraneous influence,” the three-judge bench headed by R.M. Lodha said. “The very foundation of the investigating process is shaken by political interference.”

Today’s court statement is the latest in a string of embarrassments linked to charges of corruption that Singh has faced for more than two years. A cabinet colleague resigned in 2010 to face trial for the 2008 sale of spectrum that the nation’s auditor said was “arbitrary” and may have cost the exchequer $31 billion. Singh was in charge of the coal ministry for part of the period under the probe and has been personally blamed by opposition parties for irregularities.

Indian shares fell after the court sought details from the CBI. The S&P BSE Sensex was down 0.2 percent at 1:04 p.m. in Mumbai after rising as much as 1.2 percent earlier.

“The market is worried about how much this will damage the government,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd. at Kochi in southern India. “This threatens to create more political gridlock and instability.”

‘Cover Up’

India’s Comptroller & Auditor General told lawmakers in August that the government’s policy of allocating coal mines without auction favored some private companies and may have cost as much as 1.86 trillion rupees ($34 billion) in potential revenue.

The CBI, which is looking into allegations of graft in the award of mining rights, told the Supreme Court on April 26 that the status of the investigation was shared with the federal law minister and two officials of the prime minister’s office and coal ministry.

The top court’s observations today prompted opposition lawmakers to demand both Singh and Law Minister Ashwani Kumar quit. “This has been the most corrupt government since independence,” Sushma Swaraj, leader of the main opposition Bharatiya Janata Party, said in the lower house of parliament. “It is not only indulging in corruption, it is trying to cover it up.”

Swaraj said that while her party would not prevent passage of the finance bill in parliament, there would be no other cooperation on the government’s legislative agenda.

To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; Pratap Patnaik in New Delhi at ppatnaik2@bloomberg.net

To contact the editor responsible for this story: Hari Govind at hgovind@bloomberg.net

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