Raashid Alvi

Bahujan Samaj Party MP Raashid Alvi is determined to take on the Ambanis for "dishonest misappropriation of public funds" even if it means moving a PIL to prove his point, reports Manish Chand

New Delhi, April 18

Bahujan Samaj Party (BSP) Member of Parliament (MP) Raashid Alvi is not too sure if the government can be relied on to conduct an inquiry into the Ambanis' "financial manipulations." So far, there has only been an "acknowledgement" of his letters of complaint, "but nothing beyond," says an outraged Alvi, who is appalled that for a financial scandal of this magnitude the government has not even bothered to initiate an inquiry into his charges.

The level of illegal diversions of public funds are so large that Ambani family companies are liable to pay penalties of more than Rs 6,000 crores for contravening the Reserve Bank of India Act, a scandalised Alvi told tehelka com.

The reason for the government's eerie silence over the subject is not far to seek, says Alvi. He goes on to hint at insider trading, metaphorically speaking, "black sheep in the Prime Minister's Office (PMO) and the finance ministry" who would not like to see any serious probe into his charges against the Ambanis take off.

Alvi knows all too well that it is not easy to take on the Ambanis, who he says have powerful friends backing them in almost every political party. However, having gone public with his precise and pointed accusations, backed by extensive documentation, he is not the one to give up so easily. A combative Alvi told tehelka.com, "If there is no positive response from the government, I will be forced to file a PIL. I am very hopeful that the court will look into all aspects of the issue and pass a suitable judgment penalising the Ambanis for dishonest appropriation of public funds and criminal breach of trust."

"It's a big scam. And it's a very big fraud. They have committed criminal offences and violated several provisions under all the Companies Act and action can also be initiated against them under Indian Penal Code," he added, pointing out that if a proper inquiry is conducted, the truth will come out, and the Ambanis will find it hard to defend themselves.

Alvi had charged the Ambanis at a Press conference on Tuesday of "dishonest misappropriation" of over a thousand crore of rupees of shareholders' money, evasion of taxes and fraudulently altering Reliance Petrochemicals Ltd's balance sheet. Alvi alleged that the Ambanis had diverted Rs 789 crores from an RPL public issue of Rs 934 crore in 1994 and Rs 886 crores from an RPL public issue of Rs 1,006 crores in 1995, "For the benefit of promoters and privately owned Ambani family companies."

On the basis of his private investigation after hearing complaints from some Reliance Group companies shareholders, Alvi has tried to establish "how the affairs of the companies of the Reliance group were conducted in a manner prejudicial to the interests of its members, to defraud its members and for fraudulent purposes and with imprudent commercial practices and unsound business principles. It has been noticed that a majority of the transactions have taken place to illegally enrich the promoters and the privately owned family companies." Alvi says there is enough irrefutable evidence to prove his charges of "illegal creation of personal wealth" by the Ambanis.

Alvi started his investigation some six months ago when some shareholders contacted him. A top operator of Reliance Group, Alvi said, helped him out in this investigation and delivered all the incriminating documents he was looking for.

"In legal terms, what they have done amounts to criminal offence for which they could be arrested and prosecuted," adds Alvi, who was a practising Supreme Court lawyer before he took plunge into politics a year and a half ago.

The BSP Lok Sabha MP is also intrigued at the Ambanis' casual attitude in reacting to very serious charges. "The point is that the Ambanis know they are in the wrong. Otherwise, why would they pay Rs 25 crore to the Income-Tax department in 1997? Just to buy mental peace? Nowhere in the world does even the richest industrialist pay Rs 25 crores just to get mental peace. What it proves is anybody's guess. If you haven't done anything wrong, you should send your advocate to argue their case," he said.

Alvi was referring to a letter from the I-T department, dated December 12, 1997 which sated that: "the company (RPL) had artificially rotated the shares owned by it with its own fund and created a loss of Rs 26.36 crore in its own hand so that the same could be set off against the income it otherwise had from other transactions."

In a written reply to the I-T department, Reliance had denied the allegation but issued a clarification that said: "With a view to buy peace and avoid litigation we have offered an amount of Rs 25.12 crore and tax payable on the said income has been duly paid."

A spokesman for Reliance Industries vehemently denied Alvi's allegations calling them "a deliberate and continuous campaign of disinformation, falsehoods and untruths that are being conducted at the behest of failed and unsuccessful corporate rivals."

The release issued by the company added, "The reference to events of the early years of the last decade, nearly 10 years past, clearly demonstrates the desperation of these vested interests, and brings out their frustration at the failure of their continuous efforts to tarnish the reputation of the Reliance Group."

The vehement denial by the Reliance Group, coupled with the government's yet-to-be announced move to initiate an inquiry is an indicator of the tough battle ahead for Alvi. For him, "The fraud of this scale" requires an immediate investigation. That is why he is surprised that for all the big tehelka about corruption that has put the government on the defensive, there is no prompt response to "a scandal where the Ambani Family Companies will be forced to cough up Rs 6,000 cores for contravening Reserve Bank of India Act."

Though the lawyer-tuned-politician is determined to take the charges to its logical conclusion, he confesses his isolation in his battle against the Ambanis as "there aren't too many people prepared to join me" in what he calls a crusade to cleanse the financial machinery which, according to him, has been so artfully (and criminally) manipulated by the charismatic industrialists who have a reputation of being powers behind the throne.

Besides, with the all-powerful Ambanis having powerful friends across the political spectrum, Alvi said it's going to be a battle of wits in the days to come as he is under tremendous pressure from top Reliance officials and politicians whose identity he refuses to disclose. Alvi says his chances of success in this case depends a lot on support from people who can make a difference, but as of now there is a mixture of enthusiasm and self- protective caution.

"In private, people are ready to support me but in front of camera not too many people are prepared to do so," a slightly rueful Alvi said. But lest his realism be construed as weakness, he reverts to his combative mood adding for emphasis that if the government won't, the court will establish the truth, and that the truth will indeed be damning for the Ambanis, who are reputed to juggle twin roles of king-maker and money-spinner with equal ease.

A question of Reliance’s financial reliability

While the allegations by BSP Lok Sabha member Raashid Alvi may or may not hold water, it is peculiar that the SEBI says that the complaints are not within its jurisdiction and the RBI insists that they are, reports Sharif D Rangnekar

New Delhi, April 18

Did the Ambani-promoted Reliance Group misappropriate public funds raised through a Rs 900-crore issue in 1994? Did the Ambanis allegedly float a number of group companies that violated Non-Banking Finance Companies (NBFC) guidelines?

It is more than seven years since the Reliance Petroleum public issue. Government agencies are not too sure about the way the funds were utilised and have no clear records to establish anything. They neither have sufficient documents at hand to ascertain or deny strongly any allegations against Reliance of having misappropriated funds raised from the public or that group companies of the Mumbai-based corporate house had violated NBFC guidelines while allegedly playing the market. Government agencies appear to be a bit numb in their response, possibly because they have little or no documentation to fall back on or are shocked at the documentation and allegations raised by Bahujan Samaj Party (BSP) Lok Sabha member Raashid Alvi.

What is worse is that some bit of buck passing has already started. While the Securities and Exchange Board of India (SEBI) has claimed that none of the complaints could be investigated by it since they are not within its jurisdiction, the Reserve Bank of India (RBI) claims otherwise. While more or less clearing the maze of Reliance group companies from contravention of NBFC norms, the RBI says that the market regulator is the “appropriate regulatory authority to look into the matter of funds mobilised through public issues”.

Why SEBI claims to have virtually no role to play, it certainly raises eyebrows, given that the Central Bureau of Investigation (CBI) says that the allegations, if proved correct, contravene the SEBI Act 1992 and the Company Act 1956.

Union Finance Minister Yashwant Sinha has initiated a similar inquiry and has indicated that the matter needed more examination than has been done and was not satisfied with the response Alvi had received. Even as the SEBI, the RBI, and the Industrial Development Bank of India (IDBI) washed its hands off the issue, Sinha, in a letter to Alvi, says, “We have written again to SEBI, Department of Company Affairs (DCA) and the IDBI to look not just into the monitoring but all the issues raised in your (Alvi) abovementioned letters and to send their comments to this ministry expeditiously.”

Alvi’s allegations are serious. He says that the Ambani family diverted, misused and misappropriated public funds to the tune of a minimum of Rs 789 crore. The varied alleged manipulations on and off the capital markets contravened the Companies Act 1956 and the SEBI Act 1992, says the BSP MP. Reliance is also guilty of tax evasion, Alvi said. He claims that the IDBI, which was monitoring the end-use of the funds raised, may have been “hand-in-glove with the Ambanis”. He further alleges that the Registrar of Companies (RoC) has colluded with the Reliance management, which has concealed information, including balance sheets that had to be filed with the RoC.

Till now, what has been established is that the RoC in Ahmedabad did not have records of the balance sheets for the year ended 1995. The RoC communicated to Alvi that the records were not traceable but that they were being set right. Whether this pure negligence on part of the RoC or something else altogether obviously requires examination.

As for income tax (I-T) evasion, Alvi’s documentation seems to have some substance. Mumbai’s I-T department had observed in 1997, “It is clear that the company had artificially rotated the shares owned by it with its own funds and created loss of Rs 2,636.65 lakh in its own hands so that the same could be set off against the income it otherwise had from other transactions.” The I-T department said that the funds then lying with Krishna Associates (allegedly a Reliance company) was received from Reliance Petroleum through Reliance Project Services. Krishna Associates apparently used the funds to purchase over 18 lakh shares of Reliance Industries from Reliance Petroleum.

Reliance denied the allegations but, strangely enough, said that it was ready to “buy peace” by paying an amount of over Rs 25 crore.

Alvi has been knocking on the doors of government agencies and departments since December 2000. According to him, it took SEBI 75 days to respond, and it was not until February this year that the CBI initiated some form of investigation. The CBI has asked a number of government departments, including the Department of Company Affairs (DCA), to respond. Responses from all these departments are awaited.

What is certain is that the market will watch this controversy very closely, not just to know what Reliance’s fate is but also how the government institutions function, considering that some of them appear to be a bit reluctant to respond.