All in the family
IT8217;S an open secret that business and politics have always mixed well in India. For a simple reason: through thick and thin, both sides...
IT’S an open secret that business and politics have always mixed well in India. For a simple reason: through thick and thin, both sides have firmly stuck to a vow of silence, a desi version of the Omerta Code.
But now, as a fallout of the bitter battle between Mukesh and Anil Ambani for control at the Rs 99,000-crore Reliance group, the rules have been dramatically altered: the politics of association is hogging the spotlight.
Association, because there is no clear paper-trail link between BJP leader Pramod Mahajan and Mumbai-based businessman Ashish Deora, to whom Reliance Infocomm gifted, and from whom it then took away, a generous allotment of one crore shares at Re 1 apiece. Both Deora and Reliance Infocomm deny any links with Mahajan, who is equally firm in his denial.
Association, because the one between Deora and Rahul Mahajan Pramod Mahajan’s son germinated in a Mumbai college canteen and bloomed into a bouquet of business ventures over the past decade.
Association, because Deora does share one with Anand Rao Pramod Mahajan’s son-in-law. Both are directors on IOL Broadband, a company that hasn’t been doing too well after it was advanced a Rs 10 crore loan by IDBI.
And association, because that’s enough to kickstart a political slugfest.
AS the Budget session of Parliament gathers steam, political parties across the spectrum — from the Left to the Shiv Sena — are sharpening their claws for an attack on Mahajan’s alleged links with Reliance Infocomm.
‘‘The entire country wants to know why these shares were offered to Deora in the first place and why Reliance decided to take it back. Reliance is a listed company and its shareholders have a right to know why they have paid more and Deora had to pay just Re 1,’’ says the Shiv Sena’s fiery Sanjay Nirupam, who has listed a set of questions in Parliament next week.
Some of the issues Reliance critics plan to bring up in the House are:
8226; Why did Reliance Infocomm give cheap shares to Ashish Deora?
8226; Are there any other companies — related to politicians — which received cheap shares from Reliance Info. If yes, then why?
8226; What action have government agencies like the Department of Company Affairs taken?
8226; Is IDBI’s Rs 10 crore loan offered to IOL Broadband — a company floated by Deora and Anand Rao, son-in-law of Mahajan — a bad debt?
8226; What action has IDBI taken to recover its loans?
‘‘IF the shares were offered to any minister or MP for a quid pro quo, then the Central Bureau of Investigation must investigate,’’ says Nirupam. Expect the Left parties to vociferously back this demand. Harkishan Singh Surjeet has already penned a voluminous article, ‘‘Reliance-Mahajan unethical ties’’, in People’s Democracy, the CPIM paper.
Dissecting the deal
IN late 2002, Reliance Infocomm offered one crore shares to three companies — Prerna Auto, Fairever Traders and Softnet — at the rate of Re 1 a share. It is now known that these three companies are controlled by Deora. Says he: ‘‘I got allotment of Reliance Infocomm shares in my three companies. It’s unfair to bring politicians into this issue.’’
Interestingly, Reliance has washed its hands of the paper owners of the three firms — in one case, Prerna Auto, this includes Lalit Goyal, the brother-in-law of Sudhanshu Mittal.
Says Reliance: ‘‘As per the terms of arrangement between the Trust and Ashish Deora, the said number of shares was to be sold to him or his nominees. Ashish Deora had nominated the aforesaid companies for the said transactions. The Trust was, therefore, not required to enquire about the promoters of the said companies.’’
WHEN Deora’s other business links — IOL Broadband, in particular — surfaced in media reports, Reliance Infocomm explained why he was given shares, and why they were then taken away.
Reliance Infocomm said that since Deora — son of a cotton trader — had experience in getting ‘‘in-building permissions and associated right-of-way permissions’’, he was compensated by equity shares.
However, as he was unable to fulfill his commitments, they were returned to the trust. Reliance explains: ‘‘Ashish Deora could not provide permissions for the required number of buildings within the stipulated period of time.’’
On his part, all Deora says is the shares were annulled as he could not keep his part of the commitment.
ASHISH Deora does not deny he’s a close friend of Rahul Mahajan, but is quick to add, ‘‘He Rahul has nothing to do with my companies.’’ But in fact, this is not the first time the Rahul Mahajan-Ashish Deora duo have made it to newspaper columns.
When Pramod Mahajan was I038;B Minister, Rahul Mahajan was producer of a Doordarshan programme called Tak Dhina Dhin. According to a report in this paper three years ago, the junior Mahajan’s company, Integral Productions, defaulted Rs 8.93 crore in payments to Doordarshan. It is learnt it was Ashish Deora who shelled out Rs 5 crore to Doordarshan after a PIL in the Delhi High Court.
WHEN asked, Deora bristles, ‘‘The media should keep out of my business dealings. Whether I paid Doordarshan or not, it’s all part of business. I can’t discuss this with the media.’’
He adds, ‘‘Anand Rao and I have promoted IOL Broadband, which is not connected with the Reliance Infocomm share allotment. Similarly, Global eSecure another company promoted by Deora is not associated with this transaction. Why bring my companies into the picture?’’
Sagging fortunes
WELL, because IOL Broa-dband is hardly in the pink of health. The company is also in the spotlight because of a Rs 10 crore loan it took from IDBI in 2001. Whether Deora likes it or not, this will become yet another target of the politics of association.
In its business proposal to IDBI, IOL Broadband earlier known as India Online Network Ltd had said it would launch a broadband ISP business and get 30-40,000 subscribers in the first year and about 1-2 lakh subscribers in the following two years. The company raised another Rs 10 crore from a rights issue in 2001.
The objective for the loan was to set up a broadband network and hire sales, marketing and technical persons. Within six months of getting the loan between June 2001 and December 2001, IOL Broadband, listed on the Bombay Stock Exchange, shut its broadband operations and sacked all employees.
By 2002, the finances of IOL Broadband further deteriorated. It then changed its business model, and was now rolling out fibre optic networks around the same time Reliance Infocomm was doing its national rollout. Creditors continued to line up.
AFTER IOL Broadband failed to pay back its dues, Paradyne Infotech Pvt Ltd, a Mumbai-based supplier of hardware and software supplier, filed a winding up petition against the company in the Bombay High Court.
According to court documents with this paper, Paradyne sought Rs 3.44 crore from IOL Broadband, but as Deora and Rao failed to pay up for two years, Paradyne moved court in August 2003, against the company.
In an order dated January 13, 2005, Justice S.U. Kamdar asked the company to deposit Rs 1 crore within 12 weeks.
Ashish Deora — who refused to get photographed for this article — says his company has paid IDBI all its dues in time. ‘‘As on December 30, 2004, we have paid Rs 35 lakh to IDBI,’’ says he. Deora goes on to add, ‘‘We will pay all our dues. The IOL Broadband account with IDBI is not an NPA. We will pay our dues to Paradyne as per the law.’’
THAT still raises some questions. If this was the track record of the man Reliance Infocomm was rewarding one crore cheap shares for his experience, then India’s largest business group has some explaining to do. And in what circumstances did IDBI sanction the loan?
As things stand, the paper trail around the Reliance Infocomm shares supports the former telecom minister. ‘‘This is a false allegation made by motivated section of the media to serve interests of certain vested parties. This deal has nothing to do with Pramod Mahajan,’’ says Reliance.
But as the political pressure builds up, there may be many more questions, probes, and, hopefully, some answers.
‘I am not afraid of anything or anybody because I have not done anything wrong’
Pramod Mahajan responded to Manini Chatterjee
Why do you think your name has cropped up in the Reliance Infocomm RIC shares controversy?
I really fail to understand why. I solemnly affirm that I, my wife Rekha, son Rahul and daughter Poonam neither held nor hold any shares of any company till date, leave aside RIC or RIL.
Have you directly or indirectly received any RIC shares?I have already answered this question. Just to repeat I have not received any shares of RIC, directly or indirectly.
How well do you know Ashish Deora?I know Ashish Deora as a friend of my son and my son-in-law. But let me add that Shri Mukesh Ambani knew Ashish Deora much before I knew him. Mukesh Ambani personally blessed Ashish Deora on his wedding way back in January, 1996, which is a rare gesture by the Ambanis. Nobody from my family was even invited, because we did not know him Deora at that time.
Did or does Ashish Deora have any business links with your son Rahul or son-in-law Anand Rao?Yes, Ashish Deora does run a company, Indian Online, which he had started with my son-in-law Anand Rao, when he Anand was not even engaged to my daughter Poonam.
How well do you know the Ambani brothers? Which of the two, Anil or Mukesh, are you closer to?Actually, I know Mukesh and Anil as Dhirubhai’s sons, not as my friends. I knew Dhirubhai since 1980 when Mukesh and Anil were in their 20s and I had respected him as a visionary businessman right from the beginning, unlike many harsh critics who have turned admirers today. So there was no need for me to be close to any one of them in particular.
As a well wisher of Dhirubhai, I wish they stay together. And God forbid, if they ever separate, they should become successful like their father, individually.
What policy decisions taken during your term as telecom minister may have directly or indirectly benefited RIC?No, I have not taken any decision directly or indirectly favouring any telecom company, leave aside RIC. I want the UPA government to probe all my decisions and let people know the truth.
Let me add that even a section of the media which is targeting me has not made any specific allegations of helping RIC except for inaugurating RIC, a gesture which I extended to many, including Tata and Bharati, during my tenure.
Are you afraid your party’s enemies will raise the charges against you to embarrass the BJP?I am not afraid of anything or anybody because I have not done anything wrong. I am ready to answer any questions related to me or my family. Don’t expect me to answer on behalf of others.
Are you confident the BJP and RSS will defend you against these charges?I need somebody to defend me if I have done something wrong. Moreover, these being personal allegations by a section of the media, I do not want to bring the BJP or RSS into it. I am competent enough to answer the allegations myself.
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