January, 1996. The then West Bengal chief minister Jyoti Basu was in a bind. He knew his party, CPI(M), which had ruled the state for over two decades, could lose in the forthcoming national and state elections because of one minor, irritating factor: Peerless. Well, on the face of it, Peerless was just another finance company that had been in operation for over six decades (now seven) and had nearly 5 crore depositors. After a Supreme Court order, it had reached a state of bankruptcy and there was little hope for its revival. But closing it down could spell doom for the CPI(M).
As Jyoti Basu realised, there were lakhs of middle- and lower-class Bengalis in rural and semi-urban areas who had invested their life savings in Peerless. In addition, half of Peerless agents (who were also investors) came from among village school teachers, who formed an integral part of the party's cadre. So, if all these people lost their money, the CPI(M) could end up alienating a sizeable chunk of its vote bank. The Communist leaders also remembered a precedent: a few years ago when a smaller finance company had similarly gone bust, the middle class had sought its revenge by making sure that the then state finance minister, Ashoke Mitra, lost his seat.