Gadkari, Vadra and Pawar Saga

October 26, 2012

Winner takes all in this legal world

Vidya Subrahmaniam
Legal world -winner takes it all
What stands proved already is the ability of the powerful to secure express delivery from the system, for themselves
Measured for clout and power, Indian citizens fall broadly into four categories. At the very top, and outranking others by a colossal margin, is the creamiest layer from the political-civil service-corporate class. This elite force can prise open the toughest doors, bend any and all rules, and pull off the choicest bargains.
Systemic bottlenecks that torpedo the ordinary folk slink out of sight when a club member wants a wish fulfilled. Whether it is a fancy vacation, one or more luxury apartments, a share in business contracts, or a political favour in return for the contracts, there is no product that cannot be express delivered in this world: Because business here is by compact and networks forged within each segment and across the segments.
It is not beyond the imagination of the velvet set to get an entire hillside for the asking. In a November 3, 2010 interview to DNA newspaper, Union Agriculture Minister Sharad Pawar offered a fascinating account of how he came to be associated with the controversial Lavasa project in Maharashtra: “It is 100 per cent true that I selected the site for Lavasa,” he said, adding that he spotted the picturesque backwaters of the Varasgaon dam while overflying it on a helicopter. Mr. Pawar, who was then Chief Minister, introduced the site to friend and industrialist Ajit Gulabchand, and with permissions and paperwork a mere, internally-arranged trifle, things went swimmingly for India’s first privately built and managed hill station in which his family held and sold lucrative shares.
The point of this narration is not to insinuate illegalities in the project. Indeed, distinguished names have celebrated the Lavasa vision. Yet through last year, the township was engaged in a pitched battle with the Union Environment Ministry over a range of violations. More serious charges were recently levelled by former IPS officer and activist Y.P. Singh. But leaving aside all this, one thing is indisputably clear: When the powerful decide to conjure up magic out of nothing, the laws will conspire to create that magic.
In second place are the salaried people, some of them with comfortable incomes but nonetheless bound within an accountable system that lops off taxes at source and limits opportunity for financial profligacy. The less fortunate in this lot will scrimp and save to buy a home, accepting the punishing lending conditions of banks, including finding guarantors and paying monstrous equated monthly instalments. If, at the end of this, the dream home vanishes like a dream, there is no recourse because while the buyer is obliged by draconian contracts to pay up on time — or face a penalty — nothing binds the builder to deliver as promised. In the absence of real estate regulation, the buyer inescapably gets caught in a pincer between the nightmare of his iffy property and the high interests he continues to pay on his loan.

Favouring some

Just how skewed the system is can be seen from DLF’s differentiated treatment of its clients — those with lineage like Robert Vadra who can get impossible sums as advances and those whose lot it is to be harassed by delays, non-delivery and price escalation. In August last year, the Competition Commission of India slapped a fine of Rs.630 crore on DLF on complaints from buyers. DLF went in appeal and secured a stay order. DLF home owners were fortunate in that they could mobilise the resources to fight the realty giant, not so the millions of ordinary householders who face ruin because their entire savings are invested with dubious builders.
The third category is formed by the lower rungs of the middle and working class. Aspirationally mobile, these men and women desperately crave a better future, the starting point of which is being able to save minuscule amounts in a bank. Yet opening an account can be an ordeal with banks insisting on address proof and other documentation. A decade ago, I took my domestic help to a nationalised bank assuming my introduction would help her open an account. The bank manager was livid: his bank was not “for ayahs and maid servants.”Today, political correctness has ensured that there are standing instructions from the Reserve Bank on allowing the poor to open zero-balance (now basic) accounts with minimal conditions. But the guidelines have been lost on banks, and the plight of the domestic help who has no permanent address and therefore no proof, remains the same. Her only saviour then is the unsafe chit fund with its fantastic penal clauses. As the Sachar Committee found out, banks have designated red zones, among them Muslim-majority and low income colonies, where they don’t like to provide services.
Any property purchased by this section can only be in unauthorised colonies because buying a proper home means borrowing and elaborate bank documentation. From where does a driver or a cook or a menial worker get a salary certificate? But life in an unauthorised colony has its own threats — of papers being questioned, of demolition, stigmatisation and being refused services. It is a vicious circle where the victim is first forced to commit an illegality and then punished for committing that illegality. This is the mirror opposite of what happens to the club class whose members get interest-free loans for property which they sell back to the lender for a profit.
And finally, the landless labour class that forms the overwhelming majority of India’s working force. Property and bank accounts can seem surrealistic to a people engaged in livelihood struggles. Consider the unbeatable irony of Mr. Vadra hitting the headlines for his property adventures in the same week that tens of thousands of people set out on a march to Delhi to demand their right to land.

Gadkari and Vadra

Arvind Kejriwal was dead right when he alleged collusion between the political big bosses. It is a law of nature that those feeling the same threat will unite. Politicians know that their carefully built empires of wealth are models of each other, and if one crumbles so will the rest. Sushma Swaraj, the sharp-witted leader of the Opposition whose tweets are eagerly watched for the political signals they could convey, tweeted every hour on the day the Vadra news broke — but on all subjects except on the doings of the First son-in-law. That same day, Bharatiya Janata Party (BJP) chief Nitin Gadkari was on TV admitting knowledge of the Vadra papers but arguing that they did not constitute evidence.
It is an interesting piece of news that Ajit Pawar, the Union Agriculture Minister’s nephew, has turned out to be the common factor in two recent exposés— the Maharashtra irrigation scam and Lavasa, both of which happened when the nephew held powerful positions in the State government. So when Mr. Kejriwal charged Mr. Gadkari with wrongdoing in the first, the senior Mr. Pawar rushed to his defence. The BJP chief returned the favour when the Pawars were questioned for facilitating Lavasa.
Since then Mr. Gadkari has landed himself in more serious trouble with allegations that he has set up a maze of dummy and benami companies. But significantly, the sharpest attacks on the BJP chief have come, not from the Congress, but from a BJP faction that wants Mr. Gadkari replaced by Narendra Modi.
It is not a coincidence that the same justification gets offered each time a new web of deceit is uncovered. The Congress’s single defence with respect to Mr. Vadra was that he committed no illegality. Lal Krishna Advani has similarly argued that l'affaire Gadkari is about “standards of business” and not corruption. This is in fact the crux of the problem: that the standards of business are horribly different for one set of people. Whether or not the charges against Mr. Vadra and Mr. Gadkari are ever proved in a court of law, what has already been proved is the ability of the power elite to lubricate the wheels of delivery to the exclusion of all but itself. If unsecured, interest-free loans are legitimate, why do they unerringly reach only those already powerful? If Mr. Vadra is rich enough to “legitimately” own dozens of high-end apartments, why cannot the SPG guard him in one of these locations, rather than in prime government housing presumably paid for by taxpayers?
The pessimism can only deepen when Team Kejriwal too cites “legality” to defend its members against counter-allegations. Whether it is Prashant Bhushan acquiring vast tea estate land via rules relaxed by the Himachal Pradesh government or Anjali Damania admitting to commercial use of farm land, India Against Corruption’s fiercest defence has been that its members acted within the four corners of the law.
Cattle class victims would be entitled to ask: why does the law constrict us while it bends and crawls before you?
II
October 26, 2012

Gadkari and the business of politics

Sreenivasan Jain

The BJP president’s financial dealings reek of cronyism and conflict of interest, and could jeopardise his political career
The current shadow of controversy that hangs over Bharatiya Janata Party president Nitin Gadkari has its roots in the distinctive nature of Maharashtra politics, dominated by owners of sugar mills, cooperative banks, dairies, and educational institutions, sometimes by all four at once. It’s a trend which might cause alarm elsewhere but which Maharashtra’s politicians like to present with a benign spin, that there is nothing wrong with padding your political base and bank balances as long as it is also in the public good. Who knows, perhaps in its early years this formula might have made for a certain kind of progressive politics, absent in the cow-belt States. But 50 years down the line, those same cooperative banks and sugar mills have been milked dry and run to the ground. The State’s businessmen-politicians have expanded into areas of hard commerce like hotels, malls, and luxury apartments. As a natural corollary, builders and contractors have been made MLAs, MLCs and MPs. Today, Maharashtra regularly makes headlines as the perfect Petri dish for everything that ails contemporary Indian politics: cronyism, conflict of interest and sometimes, outright corruption.
Mr. Gadkari’s own business career reflects the perils of that model.
As a late entrant to Maharashtra’s politician-businessman club, Mr. Gadkari began with a sugar mill in Vidarbha in 2001, ostensibly to encourage the region’s distress-hit cotton farmers to turn to a less risky crop. Except he chose to locate his plant on the outskirts of Nagpur, somewhat removed from the cotton-growing, suicide-prone districts of Vidarbha. At any rate, his description of himself as politician-cum-social entrepreneur would apply, if at all, to Purti’s early days. Very swiftly, Purti expanded into areas that made it hard to justify outright social benefit, like ethanol and alcohol, which it supplies, among others, to Vijay Mallya’s UB Group. When Purti decided to expand into power, Vidarbha’s sunrise sector, it brought Mr. Gadkari in conflict with his own party, which opposed the diversion of water from Vidarbha’s irrigation dams to a rash of new power projects. On Purti Group’s website, one of his group companies, Avinash Fuels, says it has applied for coal mining in Maharashtra, Orissa, Madhya Pradesh and Chhattisgarh. (The website has since disabled all such pages). But it retains Purti’s basic description as ‘Vidarbha’s leading business group’, ‘a Rs. 3000 million company’ — which only shows how far Mr. Gadkari has come from his self-description as a patron of Vidarbha’s poor.
While all of this may have opened up Mr. Gadkari to questions of conflict of interest, our investigation has raised more serious questions about the source of the capital that financed Purti’s rapid growth.
In its regulatory filings, Purti Sugar and Power Pvt Ltd.’s start-up finance came from a paid-up capital of Rs. 68 crore, raised through the sales of six crore shares. About 70 per cent of these shares are owned by 18 companies. Their identity is impossible to ascertain since, as NDTV reporters discovered, none of them have given accurate addresses. For example, Earnwell Traders and Swiftsol India, which own shares for about Rs. 5 crore in Purti, gave their address as Govind Karman Chawl in Malad East. The residents of the chawlhad never heard of these companies. Similarly, another set of investors in Purti, Chariot Investrade, Regency Equifin and Leverage Fintrade, also gave a false address in Malad East. One company, Sterlight Fincom, has changed its address three times in five years. And so on.

Evasive

When we asked Mr. Gadkari in studio last week about the identity of his mystery investors, he was evasive. He first said Purti was owned by 10,000 farmers, and he cannot remember each of their names or addresses. We pointed out that these so-called farmers own only 10 per cent of Purti, and that the rest are owned by 18 companies. He then said he “approached many people from the society: industrialists, traders, businessmen and investors ... and also NRI people”.
But several of these companies have Mr. Gadkari’s personal staff as their directors. Ashwami Sales and Marketing, which invested Rs. 3.2 crore in Purti, has as its director Manohar Panse, Mr. Gadkari’s driver. Sterlight Fincom, which invested about Rs. 4 crore in Purti, has as its director Vishnu Sharma, Mr. Gadkari’s astrologer. Why would the cash-strapped president of a political party borrow money from his own (presumably even more cash-strapped) employees?
Moreover, Mr. Gadkari has advanced loans to at least one of these companies that he is borrowing from. The balance sheet of Regency Equifin, which bought about 40 lakh shares in Purti, shows an unsecured loan from Nitin Gadkari of Rs. 26 lakh in 2009, which is reduced to Rs. 16 lakh in 2010. So not only is Mr. Gadkari borrowing from companies run by his personal staff, he is also lending money to those companies.
In his defence of the BJP president, senior party leader Lal Krishna Advani has said the “allegations [against Gadkari] are about standards of business and not about misuse of power or corruption”. But in the words of a chartered accountant, companies that exhibit such features — ghost directors and addresses, cross-holdings, cronies as directors — fit the pattern of shell companies used to convert black money into white. According to this CA, somewhere, six layers back, these companies would be making cash deposits into a bank account, most likely in a bank with weak regulatory framework. And while these market practices, however dubious, are not unusual for businessmen looking for quick cash-to-cheque conversions, Mr. Gadkari is no ordinary businessman. Congress leader Digvijay Singh was quick to allege that Mr. Gadkari is routing kickbacks via these shell companies.
Mr. Gadkari has vehemently denied this. But one of the early investors in Purti (and the only one whose identity is known) is Ideal Road Builders, a subsidiary of Maharashtra’s biggest toll road company, IRB Infra Developers Ltd. During Mr. Gadkari’s stint as PWD Minister between 1995 and 1999, Ideal Road Builders received six contracts worth Rs. 63 crore. Just a year after Mr. Gadkari demitted office and started his sugar factory, Ideal picked up shares worth Rs. 1.85 crore in Purti, later increasing their shareholding value to Rs. 2.8 crore. D.P. Mhaiskar, a director in IRB, also picked up Purti shares worth Rs. 4 crore on an undisclosed date. In 2010, Global Safety Vision, a company with Mr. Mhaiskar as director, loaned Purti Rs. 164 crore, which Purti used to wipe out its entire debt. Global’s balance sheet shows a paid-up capital of only Rs. 1 lakh. Mr. Mhaiskar told The Times of India this week that he had raised the money by selling a chunk of his personal stake in IRB.

Question of equity

Mr. Gadkari seemed aghast at the suggestion that ex-PWD Minsters should not accept investments or loans from road contractors. He said the tendering process to Ideal Road Builders was above board, a claim contested by the NCP. Mr. Gadkari also said “taking equity is not a fraud. Equity is not a corruption, equity is a shareholding.” True. But for a politician and an ex-Minister, it is important to explain the source of equity. Equity from a road contractor to whom he has awarded tenders carries a strong whiff of conflict of interest. Equity from sources whose identity he has not been able to explain carries more serious implications. Mr. Gadkari has offered himself and his companies up for an enquiry. The government has responded with far greater alacrity than it demonstrated in the case of Robert Vadra, ordering enquiries by tax authorities and the Registrar of Companies into Purti and its investors.
Regardless of the UPA’s blatant double standards, the very fact that he is being probed will do no good to Mr. Gadkari’s political career, poised as it is at a critical juncture. This is quite apart from the damage any potentially damaging findings would cause. Would he in hindsight agree, as some in his own party do, that business and politics do not make for a healthy mix?
(Sreenivasan Jain is Managing Editor, NDTV. He anchors the ground reportage show, Truth vs Hype on NDTV 24x7. E-mail: vasu@ndtv.com)
III
October 26, 2012

Gadkari’s house of cards

When, in December 2009, Nitin Gadkari eased into his role as boss of the Bharatiya Janata Party, he was widely believed to have brought a whiff of fresh air to an otherwise dour and hidebound organisation. So different was he that Mr. Gadkari went up on stage at a BJP event and sang a popular Hindi film song, whose lyrics described life as a puzzle that doled out laughter and tears in equal measure. Those words might have been penned for Mr. Gadkari considering his seeming transition from happy-go-lucky, genial chief to businessman whose past life seems to be catching up with him. Not that the BJP chief ever hid his entrepreneurial past. On the contrary, he leveraged it smartly, positioning himself as a doer as against the BJP’s squabbling, politicking second-rung. Indeed, it was this perceived aloofness from politics that won him the party chief’s post. Mr. Gadkari was far from being the quintessential Rashtriya Swayamsevak Sangh man; yet, such was his comfort level with the Sangh that the BJP amended the party constitution to place him in line for a second consecutive term as president. From that near invincible position to being at the centre of raging corruption allegations, it has been a precipitous fall for Mr. Gadkari whose promised second term now looks less and less certain.
Legal world -winner takes it allWhen Team Arvind Kejriwal outed the BJP president as a crafty entrepreneur who acted in collusion with the Maharashtra government to further his business interests, the revelations didn’t quite make the expected impact. So much so, a triumphant Mr. Gadkari was able to declare that he would quit politics if he was found to be corrupt. Little did he know that the story was still to reach its climax. While only an impartial probe can conclusively establish the nature and extent of Mr. Gadkari’s business dealings, astonishing details have emerged over the past week that prima facie indicate a range of irregularities involving front companies and dubious cross-holding and funding patterns. The sudden flow of documents against Mr. Gadkari also suggests that he has powerful enemies within his party. It seems an unlikely coincidence that voices seeking his resignation have grown in the days after Gujarat Chief Minister Narendra Modi and Ram Jethmalani met RSS chief Mohan Bhagawat. On the other hand, Lal Krishna Advani and Sushma Swaraj have come out in Mr. Gadkari’s defence and praised him for agreeing to an investigation of the charges. The BJP ought to have been in the enviable position of being seen as an alternative to the corruption-beset Congress. But the principal opposition has tottered equally from scam to scam, suggesting that the two national rivals are in a race to the bottom.

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