The Nagarwala Scam (1971)

The Nagarwala Scam (1971)

Author:  Md.Sameer Ul Ain, a student at Damodaram Sanjivayya National Law University (DSNLU)    


Contextualizing Political Corruption: The case is set against the backdrop of political corruption prevailing during the 1970s, marked by the nationalization of banks and the emergence of ‘briefcase politics.’ Indira Gandhi’s administration faced allegations of using coercive tactics to extract funds from businesses, contributing to the growth of corruption and illicit financial practices.


 On May 4, 1971, Ved Prakash Malhotra, who held the position of Chief Cashier at the State Bank of India, became involved in an intricate financial plot referred to as the Nagarwala Mystery. The sequence of events began with an alleged phone conversation originating from the office of Prime Minister Indira Gandhi, directing Malhotra to disburse a sum of Rs. 60 lakhs for a covert operation in Bangladesh. Mrs. Gandhi instructed Malhotra to provide the money to Rustom Sohrab Nagarwala, who then told Malhotra to go to the Prime Minister’s residence to get a voucher for the same amount.

Nagarwala fled with the money, and Malhotra, upon realising the fraud, reported the event to the police. Following that, Nagarwala admitted to the offence, resulting in his conviction and a four-year incarceration. Following the event, Malhotra was removed from his job, prompting inquiries into the potential complicity of governmental officials in the fraudulent scheme.


  1. Impersonation: Nagarwala allegedly impersonated a government official and misled the Chief Cashier into releasing a significant amount of funds.
  2. Conspiracy: Mrs. Indira Gandhi’s alleged involvement in the scam, either directly or indirectly, has raised questions about her knowledge and potential orchestration of the incident.

Political Context:

 Political Context: The Nagarwala Scam unfolded in the backdrop of a larger political environment defined by corruption and the rise of “Briefcase Politics.” Under Nehru’s leadership, the Congress party established the foundation for political corruption, which escalated throughout the tenures of Mrs. Gandhi and her son Rajiv. The implementation of bank nationalisation in 1969, along with limitations on corporate contributions to political parties, contributed to the surge of illegal activities like as avoidance of taxes, black market activities, and unlawful transactions.

Indira Gandhi’s  tactics, designed to strengthen her control, resulted in the concentration of power inside both the Congress party and the government. The era of Briefcase Politics evolved as a technique of raising finances, with trade and industry leaders pushed into paying certain sums under fears of regulatory action by organisations acting under the Cabinet Secretariat.

Impact on Business and Economy: Briefcase politics facilitated the growth of businesses aligned with the political agenda, particularly those associated with the Congress party. Many small enterprises transformed into business dynasties, enjoying monopoly access to domestic markets and imported raw materials. The 1970s witnessed a surge in the size and profitability of Indian businesses, positioning them as major controllers of non-banking and non-governmental assets in the country.

Emergency and Legal Consequences: Doubts surrounding the credibility and morality of Indira Gandhi reached a pinnacle when she declared a nationwide emergency from 1975 to 1977, suspending the regular democratic process. Accusations of corrupt electoral practices were levied against her by the High Court, citing the arrest of numerous individuals during this period. The emergency further underscored the entanglement of political power and corruption, raising serious questions about the democratic fabric of the nation.

In conclusion, the Nagarwala Scam of 1971 stands as a stark example of the intersection between political power, corruption, and economic manipulation during a critical period in India’s political history.

Legal Proceedings:

  1. Charges Brought: Nagarwala is charged with impersonation, fraud, and conspiracy. Mrs. Indira Gandhi might face charges of conspiracy and abuse of power.
  2. Investigation: The police investigated the incident, obtaining statements from Malhotra, witnesses, and possibly tapping into communication records to ascertain the authenticity of the phone call.
  3. Trial: The legal proceedings involve presenting evidence, including Malhotra’s testimony, phone records, and any other relevant documents. The defense may question the credibility of the alleged prank and the involvement of Mrs. Gandhi.


In conclusion, the Nagarwala Scam of 1971 stands as a stark example of the intersection between political power, corruption, and economic manipulation during a critical period in India’s political history. The Nagarwala Scam not only sheds light on an audacious prank with severe consequences but also unveils the murky waters of political corruption during the early 1970s in India. The trial will likely unravel the extent of Mrs. Indira Gandhi’s involvement in the incident and provide insights into the broader issue of corruption within the political machinery of the time.

Leave a Reply

Your email address will not be published. Required fields are marked *