Goenka said little. But the next morning he arrived suddenly at Bombay Dyeing’s head office, Neville House, across town in Ballard Estate and walked unannounced into Wadia’s book-lined corner office. Goenka waved a file of press cuttings that were obviously planted information. The same morning his business newspaper, the Financial Express, had carried both an anti-Bombay Dyeing story and an editorial on the same subject. Goenka promised to crack down on the Reliance-sourced reports, both in the Express newspapers and in the national wire service run by the Press Trust of India (PTI), which he currently chaired.
But on 31 October the Press Trust put out a story based on a press statement by the Reliance public relations officer, Kirti Ambani, about the reports a few days earlier that Reliance was under CBI investigation over the PTA contracts in May. PTI quoted verbatim Kirti Ambani’s statement: ‘… our enquiries reveal that there is no such CBI probe into the matter and that the whole issue is being motivated by a large private, textile company which also happens to be manufacturers of DMT. Our enquiries further reveal that this party is not in a position to dispose of its DMT and carry large stocks of about 5000 tonnes of DMT. The basic problem seems to be the quality of the said DMT.’
Goenka was outraged, especially when finding that Reliance had directly asked a PTI desk editor to run the press release against Goenka’s explicit orders. Goenka ordered a retraction and apology. On 1 November the PTI issued it: ‘The Press Trust of India circulated yesterday a report based on a press release by Reliance Textile Industries Ltd, containing allegations against a reputable Bombay-based textile company. We did not verify the veracity of the allegations before issuing the report. We regret if the publication of the said report has caused any damage to the reputation of the party concerned.’
The old press baron took the issue up with Dhirubhai at their next meeting. According to two former confidants of Goenka, Dhirubhai admitted he used his influence to get a favourable press. ‘I have one gold chappal [slipper] and one silver chappal,’ he said, breezily. ‘Depending who it is, I strike him with the gold chappal, or with the silver chappal.’ (Another widely repeated version has Dhirubhai remarking: ‘Everyone has his price.’ He later denied saying this.)1
It was probably the most damaging blunder and misjudgement Dhirubhai made in his life. Goenka was outraged. He was already embarrassed enough by the ease with which Dhirubhai got his version of events into the Express. The inference he drew from the ‘gold chappal, silver chappal’ remark was that Dhirubhai saw no one, perhaps even Goenka himself, as being immune to his offers. It was just a matter of price. Goenka resolved to expose Dhirubhai, using all the resources and contacts at his disposal.
• • •
Alarmed at the unfavourable turn of government attitude and press coverage in November, Dhirubhai meanwhile made a desperate effort to restore himself to Goenka’s favour and to head off Wadia’s successful-looking campaign to have use of domestic DMT forced on the polyester manufacturers. One morning in December he telephoned Goenka and asked him to arrange an urgent meeting with Wadia in Goenka’s presence so they could settle their disputes in an amicable way. Goenka called Wadia, who was reluctant. The old man persisted and called back in the afternoon to tell Wadia a meeting had been fixed in the Express penthouse for that evening. Left with little choice without causing offence, Wadia swallowed his misgivings and agreed to attend.
The three sat around a low table. According to one account, Dhirubhai did almost all the talking during the forty-five-minute meeting, proposing that Reliance and Bombay Dyeing carve up the polyester feedstock market between them or, alternatively, that Reliance help its rival to place its DMT. Goenka presided, taking off his sandals and resting his feet on the table. For long stretches of his monologue, Dhirubhai caressed the old man’s feet.
At the close, Dhirubhai invited Wadia to the wedding of his second daughter Nina a few days later, then suddenly embraced the startled Bombay Dyeing chairman. ‘So now we are friends?’ he asked.
Wadia, highly embarrassed and still suspicious, mumbled a vague assent. Dhirubhai walked towards the elevator, then just as suddenly turned and prostrated himself on the floor facing Goenka. Then he left.
After the elevator door closed, Wadia turned to Goenka and said: ‘I’ll bet you that before the lift reaches the ground floor, he’ll already be plotting where next to stick the knife into me.’ Goenka reached over and gently slapped Wadia on the cheek: a tacit admonition not to be too cynical.
The next day, Dhirubhai telephoned Wadia at his Ballard Estate office and announced he was personally bringing an invitation to Nina’s wedding. Wadia told him there was no need and after much persuasion Dhirubhai had the card brought over by an executive soon afterwards. On the day of the wedding, a Reliance manager arrived several hours ahead to ‘escort’ the guest. Wadia sent him away and went by himself. The reception was in the Cooperage Football Ground, scene of the Reliance shareholders meetings. Mukesh Ambani was waiting to escort Wadia in and offered to take him to the head of the line of guests waiting to greet the newly married couple and their parents on a podium. Wadia refused, and the two waited in the queue for about twenty minutes making awkward conversation. When he reached the stage, Wadia found a crowd of press photographers waiting to capture the two warring textile magnates together – the point of the exercise clearly being to dispel the atmosphere of dispute surrounding Reliance. Anil Ambani was deputised by Dhirubhai to escort Wadia out to his car, but Wadia sent him back at the gate.
• • •
Within a few days, hostilities had broken out again, and Goenka decided to press on with his investigation. The person he chose to find out the secrets of the Ambanis was not one of his famous editors, nor one of his reporters, nor even someone from the business milieu of Bombay but a young South Indian accountant from Madras whose name had not previously appeared in print except at the bottom of audited accounts.
Swaminathan Gurumurthy, then 36, was the product of a Brahmin family in a village 160 kilometres south of Madras. Blocked from university by Tamil Nadu’s policies favouring lower-caste students, Gurumurthy turned to accountancy, and came to Goenka’s attention while auditing the books of his Madras-registered companies. Like Goenka, he had also been drawn to Hindu nationalism in politics, joining the Rashtriya Swayamsevak Sangh (RSS or National Volunteers Order), a mass movement aimed at ridding the Hindu majority of a perceived defeatist attitude to other civilisations. The RSS had won a reputation for discipline and lack of corruption, making the political party it eventually sponsored, the Bharatiya Janata Party (BJP), seem the natural successor by default to the failed Congress and communist alternatives – at least until new Hindu warriors themselves became tainted by power in the late 1990s.
In its economic ideas the RSS has been nationalist but suspicious of big capital, whatever its origins. The big company threatened the small shopkeeper and trader communities, a repository of traditional virtues. And, more recently, multinationals with their universal products and their marketing science seemed to be imposing a Western popular culture and lifestyle wherever they set up. ‘I regard communism and capitalism as two sides of the same coin,’ Gurumurthy told an interviewer some years afterwards. ‘Both regard human beings as economic creatures. The only difference between them is whether ownership of wealth should be public or private and whether there should be profit or not. While communism will have a Chernobyl at any cost, capitalism will have it only if it demands high profit.’2 In Dhirubhai’s case, Gurumurthy was opposed to the monopoly power Reliance had developed. ‘I would have rather had a hundred Ambanis than just one,’ he put it.3
Still, it is ironic that Dhirubhai and Gurumurthy ended up on opposite sides. In the mid-1990s Gurumurthy was the leading light of the Swadeshi Jagran Manch, a BJP-affiliate that actively opposed the entry of multinational consumer brands like Coca-Cola and McDonald’s. Dhirubhai was often projected as the new, fully Indian entrepreneur struggling against a business establishment
left by the British, such as the Parsi companies, and later as a home-grown businessman fully in command of the latest technology and financial techniques: at last the authentic Indian corporate warrior.
Dhirubhai was of course closely identified with Congress by 1985, although he tried to maintain ties to opposition parties, too. What set both Goenka and Gurumurthy against Reliance was their sense of excessive power, of business drive exceeding its proper limits and of personal arrogance on the part of Dhirubhai himself. ‘… while other businessmen had some sense of guilt and shame about their wrongdoings, Ambani saw himself as an achiever against the law, the system,’ Gurumurthy noted later.4 Gurumurthy’s background in the RSS also helped to immunise him against some of the ‘cultural’ defences of Dhirubhai’s business practices. The Hindu revivalists were happy enough to work through the modern political and economic institutions left by the British. They were a movement of rule-followers, not rule-breakers. They wanted order, not anarchy. India was weak because its politicians could not make sensible laws and stick to them in the face of temptations put up by private interests. The rise of manipulators like Dhirubhai was not a result of Indians breaking out of their mental bonds but a symptom of their weakness.
Personally Gurumurthy had few chinks in his armour. He had got to work with important clients because of his own ability. Back in Madras he lived in a traditional extended family household, with everyone sitting on the floor at meals and eating with their hands. He dressed simply, usually with an open-necked shirt, and stayed in the Express guesthouse when in New Delhi or in a simply furnished room in the penthouse in Bombay. Periodically Gurumurthy would make pilgrimages to Hindu temples and holy sites around India, reappearing with saffron or vermilion tilak daubs on his forehead. He had both a strong sense of probity and a detailed knowledge of corporate accounting and law. He was an inspired choice for Goenka.
• • •
The question, in November 1985, was where to start. By that stage, the published information on Reliance made up a substantial file – much of it adulatory profiles repeating the same anecdotes. Gurumurthy decided to work from the two cases in which Reliance’s secrets seemed to have come close to the surface: the High Court petition by Reliance to enforce the PTA import contacts financed just before 29 May that year, and the 1983 controversy over the purchase of Reliance shares by the Isle of Man companies.
In the Indian Express organisation, Gurumurthy had direct contact with the chairman and the newspaper’s considerable resources within India itself. He found also that some of Dhirubhai’s opponents in industrial and trade conflicts also kept information about Reliance. Notable among them was a Sindhi textile trader, Jamnadas Moorjani, who worked from a modest office in a back street of Bombay’s Kalbadevi district but whose knowledge of markets and judgement was respected all over town. As president of the All-India Crimpers’ Association from 1978 to 1982, Moorjani had led the campaign by the independent polyester texturisers against the duty hike on yarn in November 1982.
Although he found a pervading fearfulness about discussing Reliance, Gurumurthy also built up contacts with bureaucrats, bank officials and even Reliance employees who were uneasy about some of the company’s transactions.
When it came to pursuing inquiries overseas, the little-travelled Gurumurthy relied initially on names suggested by Wadia, drawing on business contacts kept by Bombay Dyeing and associated companies. The initial contact was a firm of solicitors, Lee Lane Smith, in London’s Lincoln’s Inn Fields, who undertook a legal search of the mysterious shelf companies with names like Crocodile and Fiasco in the Isle of Man. In mid-December the solicitors engaged a private detective agency, King’s Investigation Bureau, to help them trace the ultimate owners.
By then the atmosphere at Reliance was becoming one of a siege as the Finance Ministry’s tax enforcement agencies and the Central Bureau of Investigation pursued their inquiries into the PTA letters of credit and the excise evasion charge. In February 1986 the years of living on adrenalin took their toll on Dhirubhai. He suffered a sudden stroke that left him partly paralysed down his right side and required immediate attention in an American hospital. For some weeks, the running of the company was left to his two sons, then aged 29 and 27 respectively.
Dhirubhai’s critics were also shaken, by a sudden, still unexplained attack on Jamnadas Moorjani. Sensing a more sympathetic government in New Delhi, the crimpers had renewed their agitation for the anti-dumping duty of Rs 15 000 a tonne to be lifted. One evening in February, a gang of men attacked the unassuming Moorjani as he left his Kalbadevi office and walked to his car. He was slashed with long knives, one arm nearly being severed, but recovered quickly in hospital.5
In this vitiated atmosphere, the Indian Express launched its exposé of Reliance with a misleadingly theoretical-looking piece on the merits of allowing conversion of the unconvertible security carrying the modest byline ‘By S. Gurumurthy’: ‘If the main rule prohibits something, get a sub-rule added which permits it. The main rule will no doubt exist in the book but the book alone. Business thrives on such rules. Touts make their fortunes, politicians enhance their power and bureaucrats their importance. Rule of law at once becomes sub-rule of law and sub-rule eventually becomes subversive rule. Let us get down to specifics …’6 It was not the way a practised journalist would have opened, but Gurumurthy set out a powerful argument against the practice that had become a hallmark for Dhirubhai: raising debt by offering attractive interest rates, then converting it to cheap equity by the ‘innovative’ path of converting supposedly non-convertible debentures into shares.
This risked destroying the whole principle behind the distinction between convertibles and non-convertibles, reflected in the lower premium and higher interest rate on non-convertibles, Gurumurthy pointed out. No one would bother with convertible issues if it were allowed as a general practice. ‘There is yet another mischief,’ Gurumurthy noted. ‘Those corporate managements which deal in their own securities can abuse this licence by buying these non-convertible debentures at a lower price and thereafter announcing conversion. There were allegations of this abuse in the only case of conversion of the non-convertible in recent stock market history.’
A week later, Gurumurthy returned to the attack. He began in the philosophical style that became his hallmark: ‘Truth reveals itself, though often belatedly. This admirably suits the politician in power. The interregnum between truth and its revelation is generally a period of manipulation. In this interregnum alibis and half-truths rule. Finally unless someone is alert, truth gets confined to the archives. Result: alibis masquerade as truth.’
Gurumurthy recalled the grilling of the former Finance minister Pranab Mukherjee in 1983 over the non-resident Indian investment in Reliance and his defence that, while black money could be involved, this was not reason enough to kill a scheme bringing in much-needed foreign exchange. The figures, Gurumurthy wrote, showed that the NRI share investment scheme had brought in less than one per cent of the Rs 139 billion invested by NRIs in various deposit and investment schemes since 1981. The Rs 225 million invested by the eleven Isle of Man companies in 1982, augmented by a further Rs 6 million for a rights issue of debentures, had grown into a share portfolio worth Rs 1 billion. With bonus issues and conversions, it could grow into a holding worth Rs 8.58 billion or $650 million, a repatriable amount equal to 15 per cent of India’s foreign exchange reserves at the time.
This form of investment was a dangerous game for India, Gurumurthy argued. With the sharemarket index doubling in the year past, it meant the country could have to return twice as much foreign exchange as it gained, when – if it had needed to – the government could have borrowed at a small margin over the London interbank rate. Nor was the scheme very honest: ‘It appears to be tailor-made for motivated investment not altogether in the national interest.’
The arguments in these two articles were well made and stirred up a subject that smelled from the start. But the scenario of capital flight
that Gurumurthy depicted was contradicted by one of the implicit assumptions made by the critics of Mukherjee. If Dhirubhai was the ultimate owner of the Isle of Man companies, how could he sell off their Reliance shares without depressing his own share price?
A week later, however, Gurumurthy moved into new allegations. ‘Smuggling in Projects’ was the headline on the first of a two-part story. In 1980–81 the Petroleum Ministry had been working on plans for a petrochemicals refinery at Mathura, which included a 150 000-tonne-a-year purified terephthalic acid plant. In March 1981 Reliance had submitted its licence application for a PTA plant the same size. To overcome the Petroleum Ministry’s resistance, its Secretary was transferred in July 1983. In October 1984 Reliance got its preliminary approval for a 75 000-tonne plant. The proposed PTA plant at Mathura was cut back, to an output of 75 000 tonnes, and had been stalled in any case by lack of government funds.
Thanks to the help of Finance Minister Mukherjee, Reliance looked like having 100 per cent of India’s PTA production and 34 per cent of the country’s combined DMT and PTA output. Its control of other feedstocks, by-products and end-products in the polyester chain ranged from 38.6 per cent up to 62.5 per cent, according to Gurumurthy. India’s anti-monopoly law defined a dominant undertaking as one with more than 24 per cent of national installed capacity, but none of Reliance’s applications had been referred to the Monopolies and Restrictive Trade Practices Commission.
Gurumurthy had been working until then from published knowledge. On 15 May 1986 he began reporting from the results of his own investigations, in a three-part series entitled ‘Reliance Loan Mela’ – mela meaning a fair or bazaar and ‘loan mela’ referring to the notorious practice of Congress politicians handing out loans from government banks to their constituents in carnival-like ceremonies. The Reliance loan mela was not a case of giving a few hundred rupees to a poor family to buy a buffalo or irrigation pump, said Gurumurthy. ‘It has to do with crores of rupees smuggled from banks in an ingenious and brazen scheme to divert public funds to private ends.’
Mahabharata in Polyester Page 13
