The Nagarwala Case: How a ₹60 Lakh Bank Fraud Involving Indira Gandhi and an Ex-Army Officer Remains Unsolved Even 50 Years Later

Key Points

One of the most puzzling financial scandals in India’s history unfolded on 24 May 1971, when ₹60 lakh cash was withdrawn from the State Bank of India’s Parliament Street branch in New Delhi after a phone call that appeared to come from the Prime Minister’s office. The incident, known as the Nagarwala case, involved Rustom Sohrab Nagarwala, a former army officer who allegedly impersonated Prime Minister Indira Gandhi over the telephone.

According to accounts of the event, the call was received by Ved Prakash Malhotra, the chief cashier of the bank branch. The caller, claiming to be the PM, reportedly said that ₹60 lakh was urgently required and asked Malhotra to hand the money to a courier. The request was described as a matter of “great national importance.”

Malhotra complied with the instructions. He withdrew the money and later delivered it to Nagarwala, who claimed he had been sent to collect the cash on behalf of the PM. Some reports suggested the funds were intended for a “secret mission to Bangladesh,” while others said they were meant for a person connected to Bangladesh.

The unusual transaction soon unravelled. When Malhotra later went to the PM’s residence to obtain the receipt he had been promised, officials informed him that no such request for funds had been made. Realising he had been deceived, he reported the matter to the police.

Authorities moved quickly. Within less than a day, Nagarwala was located and arrested at the the Parsi dharmshala, where he was staying. Most of the money was recovered soon after. Two days later, on 26 May 1971, Nagarwala allegedly confessed to the crime.

The legal proceedings that followed were unusually swift. Nagarwala was tried and convicted in what observers described as a remarkably brief hearing. He was sentenced to four years in prison. Investigative journalist SK Aggarwal later described the speed of the trial as “unique in legal history.”

However, the case did not end with the conviction. Nagarwala died in custody less than a year later. The official cause of death was reported as a heart attack. Oddly, the investigating officer leading the case also died in a car accident in November 1971. These instances have fuelled further speculation about whether the full story had ever been revealed.

Questions surrounding the scandal persisted for years. Critics wondered how a single phone call could persuade a senior bank official to release such a large amount of money without verifying the request. Others questioned how Nagarwala could convincingly imitate Indira Gandhi’s voice. Some even doubted the investigation itself.

Conspiracy theories have swirled since, resurfacing every few years when the case revives public interest. Some have suggested the money might have been linked to covert intelligence funding related to the Bangladesh Liberation War. Other observers have argued that Nagarwala was simply an opportunistic fraudster who managed to exploit institutional weaknesses. And some have even pointed to a much larger conspiracy being covered up by the police.

See Also: The Story of a Perfect Crime: How Albert Spaggiari’s 1976 Heist Became One of the Biggest Bank Robberies Without Weapons or Violence

Reddy Commission Report on the Nagarwala Case

In 1977, after a change in government, a commission of inquiry headed by Justice P Jaganmohan Reddy was established to examine the case in detail. The commission’s report, released in 1978 and running more than 800 pages, scrutinised both the bank’s procedures and the police investigation.

The inquiry highlighted several serious procedural lapses at the bank. According to the commission, inspection practices were irregular and internal controls were weak. The report noted that surprise inspections of the vault were “almost nil,” and that records such as the currency chest register were not being maintained according to rules.

The commission observed that such lax procedures could make large-scale fraud possible. It stated that when rules are not followed strictly and oversight is absent, “any fraud can take place.”

The report also questioned several statements made during the investigation. It concluded that many accounts given by key individuals, including Nagarwala and Malhotra, were unreliable. The commission rejected the claim that Nagarwala had successfully mimicked Indira Gandhi’s voice, calling that explanation unconvincing.

At the same time, the commission found no evidence that the PM herself had any financial connection to the money withdrawn from the bank. It noted that there was no account in Indira Gandhi's name or jointly operated by her that could explain the ₹60 lakh payment.

The inquiry also criticised the police investigation, suggesting that it had focused primarily on recovering the money rather than exploring the broader circumstances of the case. According to the report, this limited approach left several important questions unanswered.

Witness statements collected by the commission suggested that the episode might have involved more people than officially acknowledged. Nagarwala himself reportedly hinted to friends that the story behind the incident was more complicated than it appeared.

In conversations shortly before his death, he is said to have told acquaintances that he would eventually reveal the full truth. One friend recalled him saying that the episode was “a very long story” that he would explain later. That explanation never came.

The commission ultimately concluded that the available evidence was insufficient to establish a definitive alternative narrative. While it rejected several elements of the official version, it also acknowledged that crucial links in the chain of events were missing.

As a result, the Nagarwala case remains unresolved in several respects. More than five decades later, it continues to be remembered as one of India’s most unusual financial scandals. Despite inquiries, speculation, and periodic public interest, the full story behind the ₹60 lakh withdrawal of May 1971 has never been conclusively established.

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