Dhirubhai could not wield the same power over the big metropolitan newspapers. But he could and did cultivate their journalists and editors. The Indian press tends to be like most of the other key institutions in the country: free, but in many parts corrupt except at the very top. Bombay’s lowly paid financial journalists were used to receiving gifts from businessmen wanting publicity, and their proprietors are happy to have their salary bill subsidised in this way. Press conferences were followed by buffet meals and drinks and envelopes containing cash or gift vouchers handed around by public relations officers on the way out. The envelope system flourished most intensely during bull runs on the stock exchange when new company floats and issues have come thick and fast, and even a paragraph in a big English-language newspaper means recognition for a new company promoter. In Paris, waiters are known to pay the proprietors of certain fashionable restaurants for the privilege of being able to wait at the tables and collect tips. In Bombay some would-be business correspondents are willing to eschew salary altogether or even offer a monthly fee to the newspaper in return for being accredited as its reporter.
Reliance was a pioneer of envelope journalism. A senior commercial journalist in Bombay recalled that journalists would get vouchers worth up to Rs 2000 for goods at a Vimal shop called Laffans. Some in senior positions would get regular monthly payments, or issues of Reliance shares and debentures at par. ‘Ambani’s moles in the press were known as the “Dirty Dozen”,’ the journalist said. ‘The point man was Rasikbhai Meswani. He was a thorough gentleman. His door was open twenty-four hours a day for journalists. People would go to collect on first of the month.’
Dhirubhai also realised that the reporter was not the final arbiter of what was published. He also cultivated desk editors and even editors. One who accepted Reliance debentures for himself, and help in arranging bank finance to pay for them, was Girilal Jain, editor of the Times of India for much of the 1980s.
The close journalists in the ‘Dirty Dozen’ would not only be used to get favourable news about Reliance printed prominently. They also became an extension of Dhirubhai’s intelligence network, asking rival businessmen for their frank views ‘off the record’ about Reliance, then reporting them back. On the theory that rumour and gossip are more keenly heeded because they carry an aura of exclusivity, the pressmen would be used to plant opinions about the merits of Reliance activities and the failings of other companies. Occasionally the journalistic network would turn up details of illlegal or embarrassing activities by rivals that could be used to obtain peace or, failing that, turned over to authorities for punitive action or harassing investigation.
Many of the journalists regarded by their colleagues as being in the Reliance pocket would indignantly deny being bought. Indeed, some would have simply fallen for the perennial trap of getting too close to a source that had given them many good stories – then having too much friendship or ego involved to admit any negative news. And especially for the news magazines that were the liveliest and fastest-growing section of the Indian media in the 1980s – the last decade before privately owned television arrived with satellite broadcasts – Dhirubhai and Reliance were a colourful and fast-changing story. It was a highly effective image-making operation. But, perhaps inevitably, some accidental slips allowed the public glimpses of Dhirubhai’s secret manoeuvres.
The opening developed in 1983 when Finance minister Pranab Mukherjee began giving some details in parliament to the response by non-resident Indians to the new sharemarket investment rules he had announced in his first budget, in February 1982. Previously NRIs had been allowed to make portfolio investments in Indian shares but were not allowed to repatriate their funds. The new system allowed NRIs, or companies and trusts owned at least 60 per cent by NRIs, to put money directly into Indian shares and to repatriate funds after selling their shares. It was implemented by the Reserve Bank of India in April that year – just as Dhirubhai was marshalling his response to the bear attack on his share price.
In a written answer, tabled on 10 May 1983, Mukherjee said that between April 1982 and April 1983, eleven overseas Indians had purchased shares and debentures worth a total Rs 225.2 million (then about $22.5 million) in two Indian companies. It was widely believed that the two companies were Escorts and DCM, targets of the raider Swraj Paul. On 16 May 1983, however, the Business Standard reported that in fact all the investments had been made in one company, Reliance, by investment companies overseas. ‘It is believed that all these investment companies belong to Mr Dhirubhai Ambani himself, the promoter of Reliance Textiles.’
Answering questions from the left-wing opposition figure Professor Madhu Dandavate on 26 July, Mukherjee listed the eleven companies allowed to invest in Reliance, all of which he said were companies registered in the United Kingdom. Among the conventional names, two of the eleven stuck out for their cheekiness: Crocodile Investments and Fiasco Investments. The investments in Reliance accounted for 98 per cent of all investments made by NRIs under the new scheme – suggesting to critics that here was yet another policy tailor-made for Dhirubhai.
The tantalising dues were taken up by the Calcutta-based Telegraph, whose reporters found on 16 September that the companies named did not exist. Two months later, on 16 November, the Telegraph found that eight of the eleven named companies had appeared in the UK registry – but that the applications to register had not been lodged until 27 July 1983, the day after Mukherjee’s reply in the Indian parliament. All were made through one channel, on the instructions of a single client.
On 22 November, just as parliament was about to rise for a week, Mukherjee tabled a correction to his 26 July reply: the companies were actually registered in the Isle of Man, the small island community in the Irish Sea. Mukherjee could have said he was technically right: the island is a British protectorate and part of the United Kingdom. But like the Channel Islands between Britain and France, it has its own tax laws and derives much of its income from providing tax shelters for foreigners.
Editorials asked how closely the central bank had scrutinised the eligibility of the eleven companies under the NRI scheme if the Finance minister could not even get their domicile right. ‘Pranab Mukherjee: Minister of Finance or Reliance?’ went the headline in the Telegraph’s editorial. On 14 December Mukherjee insisted that the different place of incorporation ‘did not make any material difference’ to eligibility and appealed to MPs not to ‘kill the scheme’. The RBI had seen certified statements about the majority shareholders, but their identities could not be revealed on grounds of banker–client confidentiality. If ‘black money’ was being laundered through the NRI scheme, there were other laws to take care of it.
The press soon followed up the Isle of Man clue. In January 1984 it was revealed that company searches showed the eleven companies had been registered between 1979 and July 1982, initially with various English names as directors. In July 1982 the ownership and directors had changed: suddenly 60 to 80 per cent of the share capital in each company belonged to people with Indian names, mostly with the surname Shah. In ten of the eleven companies, common directors were two accountants domiciled in the Channel Island of Sark, Trevor Donnelly and his son John Donnelly, both well-known ‘facilitators’ believed to hold thousands of directorships in holding companies in various tax havens around the world.
In eight of the companies, the biggest shareholders were found to be one Krishna Shah, a resident of the English Midlands city of Leicester, and his family. In five companies, a couple called Praful and Nalini Shah, living in Flushing, New York, were directors. Four companies had one or other of two residents of Djibouti, Chimanlal and Jyoti Dhamani, on their board. Only in one company, Tricot Investments, were Indian names not on the board.
A mystified India Today reported that Krishna Shah was a former Leicester city councillor, born in Kenya, who had come to Britain in 1959 and had worked since as a railway guard and small businessman. Shah told the magazine’s reporter he knew nothing about any companies
in the Isle of Man.
Someone in the companies was remarkably well informed on investment conditions in India, however. On 20 August 1982, the RBI had lifted a Rs 100 000 ceiling on share investments in any one company by non-resident Indians. Three days later, three of the Isle of Man companies applied to the central bank to invest Rs 20 million each in Reliance. Four other companies applied together on 24 September. Six companies made their share purchases on the same day, 15 October, at the same share price, which was a significant discount to the then market price.
While each company had paid-up capital of only £200, three of them had managed to talk the European Asian Bank to lend identical sums of $1.65 million to each, through the bank’s branch in Colombo, Sri Lanka, on 26 October 1982. All three bought Reliance shares at the same price, Rs 128.4
It was a sound piece of investigation, but no link with Dhirubhai had been found and many questions remained unanswered. Had the reporters spread their questions wider in the Gujarati diaspora, they might have discovered a very old connection. The leading name in Crocodile, Fiasco et al. was the same Krishna Kant Shah and fellow student activist whom Dhirubhai had helped spring from jail after the 1947 communal riot in Junagadh. After finishing his education, Shah had gone back to join the family business in Kenya. In 1959 he moved to Britain on his own, working for an engineering company for two years, then as a railway guard for eight years. In 1970 he quit British Rail and set up his own shop in Leicester’s Hartingdon Road, selling hardware, saris, utensils and religious statues, and living in a flat upstairs.
His customer base was the fellow Gujaratis then congregating in Leicester after their expulsion from Uganda by Idi Amin at forty-eight hours notice in 1972 and the more gradual squeeze out of Kenya by Jomo Kenyatta’s ‘Africanisation’ of commerce. By the mid-1990s about a quarter of the city’s 400 000 population were immigrants, about 80 000 of them South Asian. Almost all the 65 000 Hindus were Gujarati. Shah was not very interested in making money from his fellow immigrants. Instead he sought their votes. In 1973 he got himself elected to the Leicester City Council, becoming the first South Asian on a city council in Britain, and served for ten years. ‘He was not a great businessman,’ recalls S.B. Khandelwal, proprietor of the Sari Mandir emporium in the city. ‘He would often close up shop early to go on council business.’
Clearly Shah did not have millions of dollars to put into Reliance shares, or the financial knowledge to set up elaborate ownership arrangements through the Isle of Man, where he had never been, or to take out loans from a foreign bank in Sri Lanka to finance the purchase of shares in India through an Isle of Man company. He had, however, kept in touch with Dhirubhai, and his wife Induben had become a friend of Dhirubhai’s wife Kokilaben. On trips to buy textile machinery in Britain, Dhirubhai would take Shah along, while Shah introduced Reliance’s export manager Rathibhai Muchhala to many of the South Asian retailers in Leicester. In 1972 Dhirubhai brought his wife and children to Britain for a holiday, and the two families spent some time together. Later that year Shah’s oldest son Sailash, who had just completed a diploma in textile manufacturing, went to a job at the Reliance factory in Naroda, where he stayed five years before returning to Leicester to help his father set up a new knitwear business. In 1977 Dhirubhai provided two cars for Sailash’s wedding.
Krishna Kant Shah died in 1986, in the midst of a fresh controversy about the mysterious Isle of Man companies. At a meeting in 1995 Sailash Shah maintained that there had been no business connection between his father and Dhirubhai. Asked how it was that the Indian press and investigators had singled out his family as Dhirubhai’s fronts, he would say only, ‘I don’t know how.’
That Dhirubhai did have a connection with the Isle of Man was indicated by the appearance in India during the mid-l990s of one Peter Henwood. An accountant running a company on the Isle of Man, Henwood had been instrumental during the 1980s in arranging layers of ownership for Dhirubhai’s offshore holdings through several tax havens. Dhirubhai had become close to Henwood and his attractive wife, on whom he showered expensive gifts. Much later, Henwood tried to market his services to other Indian businessmen. Dhirubhai became alarmed and had Henwood followed on his visits to India. To protect his business interests, Henwood consulted a leading firm of lawyers in India.
• • •
Over the years 1982 to 1984 Dhirubhai also met problems within the ‘Reliance family’. In 1982 junior office staff in Bombay petitioned the Reliance management about low salaries and being obliged to work long hours and on holidays without overtime pay. Then they attempted to join a trade union, the Mumbai Mazdoor Sabha run by R.J. Mehta. Some 350 were dismissed without notice, ostensibly on grounds of a ‘reorganisalion’, while others were transferred to Reliance offices in Gujarat. The dismissed workers said goondas (hired thugs) had beaten up one activist, and a deputy personnel manager had waved a pistol at a typist.
In December 1983 Dhirubhai had hosted a special lunch for all his 12 000 factory staff at Naroda to celebrate the wedding of his daughter Dipti to Dattaraj Salgaocar, the heir to a prosperous iron ore mine in Goa. It was a love match – Raj Salgaocar had been staying in the same apartment building in Bombay’s Altamount Road as the Ambanis when he met Dipti – but a prestigious one for Dhirubhai, just as he had emerged as a tycoon himself.
The bonhomie at the wedding covered some mixed feelings on the factory floor. The Naroda workforce was seething. Within a few months, the textile hands were agitating for a wage increase, payment of overtime and removal of contract labour. Dhirubhai effectively nudged aside his elder brother Rainnikbhai from management of Naroda and put his younger son Anil in charge. In August 1984 the company suspended 160 of its workers and announced formation of a company union, the Reliance Parivar Pratinidhi Sabha (Reliance Family Representative Union), including 6700 workers and 1800 staff. ‘The concept of unions has no place in our set-up,’ the company’s personnel manager told a newspaper. ‘We believe in participative management.’ Agitation continued within the plant. On the morning of 25 August the company announced suddenly that work was stopping and the plant was closed. Squads of Gujarat police waiting at the gate stormed in and charged the protestors with lathis (long wooden staves) and tear gas.5
Dhirubhai rode out this episode, but with regret. Not only had he lost the earlier affinity with his factory workforce but also arguments between Ramnikbhai Ambani and Anil had induced Dhirubhai’s elder brother to distance himself from the company’s operations.6
The blazing success as Dhirubhai proceeded to his triumphant general meeting in May 1985 carried some dark shadows. Many of those who opposed him had been crushed in ruthless displays of the state power he could manipulate: the police lathis and tear gas that fell on his own workers, the tariff changes and tax raids that hit his business rivals, or the ignominious transfers given to civil servants who held up his plans.
The opposition parties had been alerted to his connections with the ruling Congress Party and Indira Gandhi’s office. The very resistance met by any query about Reliance only encouraged opposition politicians, including Janata’s Madhu Dandavate and the Bharatiya Janata Party’s Jaswant Singh, to press harder. Dhirubhai had a growing list of critics and enemies to feed them questions. It required only a sudden removal of his high-level protection for his complex fast-growth operation to be dangerously exposed.
8
The great polyester war
On 23 November 1985 Bombay’s sensation-seeking weekly tabloid Blitz came out with a cover story that soon had more than the usual crowds browsing at the newsstands. ‘BIG 3 IN MAHAPOLYESTER WAR,’ shouted the front-page headline. ‘It’s a Mahabharata War or rather, Mahapolyester War – in Indian big business style,’ began a lengthy report that took up the whole of the front page and spilled into two full inside pages. ‘There are only Kauravas, no Pandavas and no Lord Krishna. The reason is that none is without blemish. The fight is neither for inheriting the earth nor the heaven, but for one of the most luc
rative industrial markets – that is, polyester filament yarn, where profits soar around Rs 80 to Rs 100 per kg.’ Not only that, Blitz told readers in a front-page subheading: ‘The Mahapolyester War goes beyond the industry to apocryphal stories involving serious political repercussions. According to New Delhi’s grapevine, the old Pranab–Dhawan–Ambani axis responsible for Reliance’s booming fortunes is currently reorganising its scattered forces with V.P. Singh, the Finance minister, as its principal target.’
Pictured as contestants in this dark war without heroes were Dhirubhai along with two competing textile magnates: Kapal Mehra of Orkay Silk Mills and Nusli Wadia of Bombay Dyeing. ‘Among these Kauravas fighting each other, Reliance (Dhirubhai Ambani) and Orkay (Kapal Mehra) are the principal combatants, with Bombay Dyeing (Nusli Wadia) on the sidelines. Thanks to Reliance and its vast patronage and money power, Orkay got the wrong end of the sword, with the result that the patriarch of the family spent Diwali in jail after five attempts to bail him out had failed.’
Mahabharata in Polyester Page 10
