It seemed to be a warning shot by Narasimha Rao. Reliance had been falling behind in the campaign funding it had promised the Congress Party, apparently seeing no point in pouring further money into a lost cause. The company was also suspected within Congress of stirring up the telephone licence scandal in order to distract attention from its own problems.
In 1995 a young police officer with the Central Bureau of Investigation in Mumbai, Y.P. Singh, had begun digging into the private placement with the Unit Trust of India and the two government insurance giants in 1994. His request to see the papers on the placement caused panic at UTI. The highly unfavourable placement had been forced on the institutions by senior figures in the Narasimha Rao government, he concluded. He listed some twenty illegalities, including conspiracy and fraud, and recommended charges against a string of senior officials.
After picking up signs of discontent among Oil and Natural Gas Commission engineers during a visit to a Bombay High oil platform, Singh also began looking into the award of the Arabian Sea oil and gas fields to the Reliance–Enron–ONGC consortium in 1994. The bidding had been extremely bitter, with rival groups accusing Reliance of inside knowledge of tender evaluation criteria that were kept unclear for others. Singh found that the new owners had come into the fields with little compensation to ONGC for its past costs of exploration and preliminary development. The new operators had also been given a highly unusual bonus on the oil price guaranteed by the government.
Singh asked his superiors at the CBI for permission to start a preliminary inquiry. Instead, in March 1996, he was abruptly transferred back to the Maharashtra State Police, after being accused of mishandling another case. Singh lodged an appeal with an administrative tribunal. However, two other authorities – the Planning Commission member G.V. Ramakrishna (a former Petroleum Secretary and SEBI chairman) and the Comptroller and Auditor-General’s office – took up similar criticism of the oilfield contracts. In October 1996 the private secretary of Satish Sharma, the Petroleum minister at the time the contracts were awarded, told the CBI that Reliance had paid Sharma Rs 40 million between June 1993 and February 1994 (and that two other companies involved in bidding had also made payments). Reliance denied the allegation.2
If Dhirubhai had rubbed Narasimha Rao the wrong way, his relationships with the opposition parties were also ambivalent. Sections of the Janata Dal and Left continued to regard him as anathema, yet he had successfully cultivated many of their leaders at state level. In the Hindu nationalist camp, he paid court to senior BJP leaders, but some party MPs such as Jaswant Singh had been Ambani critics for more than a decade, and his old nemesis, S. Gurumurthy of the Indian Express campaigns, had become a close adviser to senior figure L.K. Advani. Their hostility was often neutralised in party forums by a claque of Ambani supporters, such as the BJP secretary-general Pramod Mahajan, who once defended Dhirubhai as ‘not someone who sleeps with you then refuses to recognise you in the morning’. The metaphor would not have been to the taste of the RSS-trained cadres of the party.
Within the BJP leadership, Dhirubhai became distrusted for the split he helped engineer in the party’s Gujarat branch soon after it took power in the March 1995 state elections. Dhirubhai backed a lower-caste BJP leader called Shankersinh Waghela in disputes with the newly elected Chief Minister, Keshubhai Patel. In September 1995 the two openly split, and Dhirubhai flew Waghela’s faction of state MPs to the central Indian village of Khajuraho, famed for its erotic temple carvings, to keep them together. Around this time, national BJP leader Atul Bihari Vajpayee was appalled to find Dhirubhai on the telephone, putting forward a ‘solution’ to the Gujarat crisis: Waghela should be made deputy Chief Minister. Highly embarrassed, Vajpayee refused. A year later, Waghela ousted Patel’s faction and formed a government with Congress backing. It is not clear whether Dhirubhai had any intention to destabilise the BJP nationally or just install a cooperative state government to help his industrial plans.
• • •
Having gathered damning material on the share-switching cases and little on the supposed ‘bear conspiracy’ against Reliance, the SEBI and the Department of Company Affairs shuffled responsibility for prosecution between them and eventually the decision fell into the limbo caused by the calling of elections for early May 1996. The elections produced a three-way hung verdict, with the BJP having narrowly the largest number of seats. It decided to form a government, knowing it was unlikely to pick up support. Vajpayee was sworn in as Prime Minister, with Jaswant Singh as Finance minister and Ram Jethmalani as Law minister – a combination unpromising for Dhirubhai.
India’s first BJP government lasted only two weeks – but long enough for Jaswant Singh to order a show-cause notice to be issued to Reliance for breaches of the Companies Act. Jethmalani excused himself on endorsement of Singh’s order, saying he had made too many appearances for and against Reliance, and it passed to the next government to implement. Jaswant Singh’s decision resulted in twenty-nine charges being laid against Dhirubhai, other executives and his companies in a Mumbai magistrate’s court, including a serious one mentioning ‘intent to defraud’.
But Dhirubhai had plenty of friends in the thirteen-party Janata Dal-based coalition that took over, including the new Prime Minister, H.D. Deve Gowda, who flew back to Bangalore to resign his job as Karnataka state Chief Minister in Dhirubhai’s executive jet. In October the entire duplicate share and switching issue was wrapped up by a government decision to allow Reliance to ‘compound’ the charges – a process whereby a company simply pays a set fine for technical breaches and avoids a prosecution in court. Reliance had argued that the offences had been inadvertent, due to pressure of work on the registry. No loss had been caused to shareholders, no gain to the company. The magistrate, A.M. Thipsay, agreed that intent to defraud had not been substantiated. The total penalty came to Rs 6.396 million, while RCS was suspended from operations for six months from April 1997.
The issue had ended with a whimper, commented the Business Standard. ‘The case called for a lifting of the corporate veil and judging whether the entire episode was more than a result of clerical error.’ Instead, it had ended with ‘a tap on the wrist’. It had been a close call, a crisis almost ranking with the 1980s Polyester Mahabharata. Once again Dhirubhai had scraped through.
17
Dhirubhai’s dream
The twentieth century drew to its close with many clouds hanging over Reliance and Dhirubhai – and over India itself. The company had escaped narrowly from the sharemarket scandals of the decade, and its political and financial environment looked less favourable. Because of its capital controls and better regulated, more mature financial sector, India escaped ‘contagion’ by the financial crisis that swept out of Thailand through South-East and East Asia from mid-1997. But it suffered from a general suspicion of emerging markets, and its economy went into a stagnant phase.
The collapse of Congress rule in New Delhi had been followed by two years of unstable coalition government headed by the populist, lower-caste-oriented Janata Dal, first under Deve Gowda, then under Inder Kumar Gujral. When this regime too fell apart, mid-term elections in February–March 1998 brought the Hindu nationalists of the Bharatiya Janata Party back into power under Atal Behari Vajpayee. One of the Vajpayee government’s first acts, in May that year, was to conduct a new round of nuclear weapons tests in the Rajasthan desert and declare India an overt nuclear weapons state, with Pakistan following suit two weeks later. One result was imposition of economic sanctions by the United States and several of its allies, including Japan. These did not directly hit trade or borrowings by private sector companies like Reliance, but threatened inflows of general economic development aid from both the foreign governments involved and the World Bank and placed advanced technology transfers under tighter scrutiny. The bomb tests created a wave of nationalist euphoria among Indians, but they added to the economic gloom.
More to the point for Dhirubhai, the BJP’s return reinstated in pos
itions of power many figures who had gone after Reliance with a vengeance while in opposition or private practice – notably Jaswant Singh, Swaminathan Gurumurthy, Arun Shourie, Ram Jethmalani and Arun Jaitley. As we have seen, Jaswant Singh had used his brief two weeks as Finance minister in Vajpayee’s first short-lived government in 1996 to launch company law prosecutions against Reliance over the share duplication scandal. Was nemesis about to descend on Dhirubhai?
The question was tested before the year ended, with one of those intermittent moments when India’s different worlds collide – in this case big business, government and organised crime, associating one of Dhirubhai’s key Reliance fixers with breaches of official secrecy and a mafia outfit implicated in the 1993 terrorist bombings in Mumbai. It made for delicious reading by India’s newspaper- and magazine-consuming public, but could hardly have been more embarrassing with Hindu nationalists in power and a border dispute with Pakistan six months later.
• • •
Enter one Romesh Sharma, a former peddler of coat hangers who by the late 1990s had found a profitable niche as a ‘land-grabber’ in New Delhi. His modus operandi was to rent a large property, refuse to pay any rent, then produce forged documents of completed sale when the owner sought to evict him. A demonstrated propensity to kidnap, beat and blackmail – along with links to the shadier side of the Congress Party in Delhi and to Dawood Ibrahim, the Dubai-based crime boss of Mumbai said by Indian police to have organised the 1993 bombings at the behest of Pakistan’s Inter-Services Intelligence – usually produced silence in Sharma’s victims.
Under surveillance by Delhi police, Sharma overreached himself by applying his land-grabbing techniques to a helicopter. He had chartered the aircraft from Mumbai’s Pushpak Aviation to help his run for election in March 1996 in a Uttar Pradesh seat. Sharma lost his deposit but kept the helicopter, having persuaded its naïve owners to enter a dummy sale deal, allegedly to avoid exceeding the limit on electioneering expenditure. In October 1998, to help ensnare Sharma, police got a Pushpak executive to attempt to repossess the machine from Sharma’s sprawling ‘farmhouse’ residence on the outskirts of the capital. The executive was beaten up, bound and carted off to an office run by Sharma in the centre of Delhi before police sprung the trap and rescued him. Sharma was investigated for kidnapping, forgery, illegal firearms and tax evasion and held under a national security act that cut off the usual escape route for the well connected: the tolerant and much-abused Indian system of bail. In what was obviously going to be a prolonged detention, he began to brag of his connections.
One was V. Balasubramaniam, chief of the Reliance government relations and corporate affairs office in New Delhi. Known widely as ‘Balu’, the Reliance lobbyist was one of Dhirubhai’s oldest lieutenants, with a relationship said to go back to 1974 when Dhirubhai recruited the talkative, impish-faced Tamil former clerk at Burmah-Shell. Some said Balu, then 61, was the most trusted confidant of the Ambani family. The magazine India Today reported:
He was their eyes and ears in Delhi, the person who knew everyone who mattered and was reputed to have instant information of the passage of every important file. This mattered in the heyday of the licence-permit raj when success depended on what Dhirubhai described as ‘managing the environment’. In RIL’s phenomenal growth during the 80s, not least when Pranab Mukherjee was Finance minister, Balu’s role was seminal. He complemented the entrepreneurial genius of Dhirubhai … Indeed, so deep is Balu’s political influence that it is being said that ‘the draft budget papers were not leaked to Balu. Balu leaked the budget to the ministry’.1
Immediately after his arrest, Sharma told the police that the ownership transfer papers for the helicopter were held by Balu. Far from being intimidated, Delhi’s joint police commissioner Amod Kanth went to collect the papers, which Balu handed over with a demand for a receipt. Sharma then went on to reveal that he and Balu were partners in two unlisted real estate companies, both using the name Reliance. He also claimed that, back in the 1980s, Balu had asked him to help with threats being made against Dhirubhai’s son-in-law Raj Salgaonkar by the Dawood Ibrahim gang – which he had called off immediately with a phone call to Dawood’s lieutenant, in Balu’s presence. Reliance denied any dealings with Sharma and said that Balu’s contacts ‘if any, were in his personal capacity’. But the connection intrigued the police, who went on to raid Balu’s home and office.
There they found material that took the investigation in entirely new directions. In the office, the police alleged, they found a copy of a secret cabinet minute about the problems of the post–nuclear test economic sanctions against India, the record of a meeting between key departmental heads about plans to privatise public sector enterprises and an internal Petroleum Ministry recommendation to its minister for changes to customs and excise duties on oil and oil products. Some of the documents had been faxed to numbers in Mumbai, with the addressees including Dhirubhai, Mukesh and Anil Ambani and the Reliance director (and Ambani cousin) Nikhil Meswani.
Rather more lurid suggestions were made by the perennial scandal-mongering MP of the opposition Janata Dal, Subramanian Swamy, who alleged that the police had found in Balu’s residence forty-two computer disks containing a huge volume of secret and highly sensitive data emailed from the Finance Ministry. Swamy implied that this included the complete list of people who had made voluntary disclosures of previously unreported income, under a tax amnesty that had netted the government great amounts of revenue. This list had been forwarded via Sharma to Dawood Ibrahim’s gang ‘for use in extortion’. As India Today noted, it was a case of the footnote overshadowing the main text, even a story as lurid as that of Romesh Sharma.
Vajpayee’s Home minister and the BJP’s most senior Hindu militant, Lal Krishna Advani, had declared the Sharma prosecution a ‘test case’ for national resolve, saying it showed how the ‘Indian state has become so porous, frail and soft’ – but now it was veering on to a very different target from criminal gangs and Pakistani agents. At his direction, the case was taken over by the Central Bureau of Investigation, the same agency that had pulled so many earlier punches with Reliance but which in this case appeared determined to press the attack. On 19 November teams from the CBI raided Balu’s house and office again in Delhi, and in Mumbai they stormed into both the headquarters of Reliance at Nariman Point and the Ambani family’s home, Sea Wind. Balu and two of his senior staff, along with Reliance as a corporation, were charged with offences under the Official Secrets Act and the Indian Penal Code for a conspiracy to receive and possess classified documents. All were vigorously denied by a Reliance spokesman.2
But, unusually for an official secrets case (and in contrast to the CBI’s handling of Gurumurthy in 1987), the CBI did not place Balu or the other Reliance accused under arrest, and the prosecution virtually disappeared from public view for more than three years. In April 2002 lawyers for the three accused obtained rulings that overturned warrants issued by a lower court in Delhi, which would have obliged them to attend hearings of the charges. During May–July 2003 lawyers for Mukesh and Anil Ambani also obtained a stay on summonses requiring them to appear as defendants representing Reliance. There the affair seems to have disappeared into the Indian judicial limbo of pending cases. (In 2003 Sharma received a two-year jail term for the helicopter theft, but walked free as he’d already spent more than that time on remand. He then faced a succession of other charges.)
While it lasted, though, the scandal was an uncomfortable reminder of a past that Dhirubhai and Reliance were trying to forget. And the attacks on the probity of Reliance and the Ambani family kept coming.
• • •
In December 2000 a member of the Indian parliament named Raashid Alvi, belonging to the Bahujan Samaj Party based on the former Hindu outcaste populations of India’s northern states, handed Vajpayee, the Prime Minister, a 1600-page dossier raking over many of the previous decade’s contentious share-dealings around Reliance. When Alvi gained no response from the P
rime Minister, he went public with his dossier in April 2001, forcing the Department of Company Affairs to take up his allegations.3
At the end of 2001 another old Ambani assailant re-emerged. Swaminathan Gurumurthy, the young chartered accountant who had produced the devastating series of exposés in the Indian Express in 1986, had become leader of a group called the Swadeshi Jagran Manch, which opposed the entry of foreign companies and brands into India. Although not occupying any government position or seat in parliament, Gurumurthy remained highly influential with sections of the ruling BJP, and his corporate expertise was much drawn upon to reconcile the periodic splits in the families and caste communities controlling some of India’s big companies, banks and other institutions. From his office in Chennai (formerly Madras), Gurumurthy became incensed again at what he saw as blatant and gigantic ‘fraud and breach of trust’ by the Ambani directors of Reliance.
In a thirty-eight-page formal letter of complaint to the Securities and Exchange Board of India (SEBI), he alleged that an annual general meeting of Reliance Industries in December 1992 had authorised the issue of non-convertible debentures with or without detachable warrants (which could be transferred separately and give a right to shares) worth Rs 3 billion. Reliance directors or any entities associated with them were barred from buying into such an issue. During 1993 the Reliance board had authorised a directors’ subcommittee comprised entirely of Ambani family members to apply the resolution. But instead of one issue, the Ambanis made two – under the same resolution by the shareholders’ meeting. One was an issue of debentures worth Rs 3 billion with non-detachable warrants to UTI, entitling them to 7.48 million equity shares, which worked out at a price of Rs 401 a share, a hefty premium on the then market price of around Rs 300 but offset by the interest that would be payable on the debentures. The other issue was also for Rs 3 billion, but this one was taken up by thirty-four private companies in the network of Ambani ownership entities exposed in the share-switching scandal. These debentures, with detachable warrants, entitled the thirty-four companies to no less than 60 million shares, at an effective price of Rs 60 a share. When the debentures were converted and the rights under the warrants were exercised in January 2000, the Ambanis through their investment companies gained an extra 11.38 per cent of Reliance. The issue to UTI had been overpriced, Gurumurthy said, and the second issue to the thirty-four Ambani-linked companies was ‘unauthorised and fraudulent’ and should be cancelled.
Mahabharata in Polyester Page 27
