This follow up of Gadkari Probe I and II [New Indian Express 12/13, November 2012], confirms that lack of forensic depth in the investigation on Nitin Gadkari by sections of media has forced them into bias and errors of judgement. And therefore into wrong, even bizarre conclusions.
It also unravels the misconceptions on facts and logic in the probe by a well-known English daily [‘investigation’] titled “Gadkari family held shares in 3 Purti ‘shell’ cos”. [November 25, 2012] The ‘investigation’ claims that I might have been “hasty” in exonerating Gadkari and that “the source of money into Purti” has been buried under several layers of “fictitious” companies.
Minimum, the claims lack legitimacy. Because, instead of challenging, the ‘investigation’ intriguingly ducks, the Gadkari Probe I [NIE 12.11.2012] which points out that the sources of Purti equity are genuine Mehta companies and other known corporates.
Does it need a sage to say whether the Purti equity is from genuine investors or not is really at the heart of the Gadkari probe? If it is from identified investors, then money laundering charge becomes fake. The further probe here reaffirms that the Purti equity is from identified sources. The media expose, which sidesteps this main story, is just a juicy sideshow.
Purti’s Rs 68.91cr equity genuine
First, the arithmetic. Look at the history of Purti’s equity which now stands at Rs 68.91cr. From its inception till 2005, Purti had received Rs 55cr equity; on 30.3.2009, it received a further Rs 4.98cr; on 1.1.2010, it got Rs 1.51 cr more—aggregating to Rs 61.51cr from private investors. Several thousand farmers put in the balance Rs 7.40cr to complete the total of Rs 68.91cr.
The equity of Rs 55cr received by Purti up to 2005--80 percent of its present total--is really the core issue. It flowed in thus. First, Rs 47.34cr from 12 genuine Mehta companies: Parshwa Forging, Shreyans Machinery Handlers, Empire Forgings; Fargo Finvest, Godwana Eng, Creators Handicraft India,
Heritage Parks, Rushabha Forging, Coronation Shrines India, Aarya Infrastructure, Aarya Com and Parshwa Agrico. Next, Rs 3.62cr from IRB Nagpur [Rs 1.85cr], Nagpur group [Rs 0.25cr] and individuals [Rs 1.52cr]. Third, the balance [Rs 4.04cr] came from 9 of the 14 Mehta-controlled - now questioned - companies mentioned in Gadkari Probe I. Purti’s Rs 55 cr equity in 2005 [Mehta’s Rs 51.38cr plus Rs 3.62cr from others] was subject to tax probe on Mehtas and Purti in 2006, and accepted. The ‘investigation’ has ducked this crucial fact.
Purti, set up to benefit farmers in drought-prone area--so, economically unviable-- predictably turned sick by 2008. Its loans to cooperative banks had become Non Performing Assets in 2005-6; to State Bank of Indore [SBI Indore] and Bank of Maharashtra [BoM] in 2006-7; to IREDA in 2007-8. Purti needed more equity. And got it in two tranches. The first tranche [Rs 5cr] came on 30.3.2009--Rs 3.11cr again from 9 of the 14 companies; Rs 1.57 cr from Last Mile Infrastructure, belonging to Arun Lakhani [local businessman and an original Purti promoter]; Rs 0.30 cr from four other companies [Skylark, Viewpoint, Jasmine, and Aim Merchant] equally. The next tranche [Rs 1.51 cr] came on 1.1.2010, from the IRB group [which had earlier invested Rs 1.85 cr]. This took the total private equity in Purti to Rs 61.49 cr. The balance Rs 7.42 cr had come from thousands of farmers over a period. This completed the total Purti equity of Rs 68.91 cr. Now two facts stare. One, the entire equity of Rs 68.91cr into Purti is from identified investors. Two, Mehtas held Rs 54.79cr on 30.3.2009--79.5 per cent. Yet, the ‘investigation’ says that I have put “the blame” of Rs 47cr on Mehtas! on the ground that the 14 companies are “fictitious” companies. But, are they?
14 Cos genuine till 15.2.2011
While the ‘investigation’ pejoratively labels companies now holding the 4/5th Purti equity as “fictitious”, it does not say what “fictitious” means. Given its dictionary meaning as “imaginary” “unreal” “false” “pretended” or “deception”, and shocked by ‘fake’ offices and directors, the ‘investigation’ labels the 18 companies “fictitious”. First, take the case of 14 companies which had subscribed to Purti shares worth Rs 4.04cr till 2005 and Rs 3.11 cr in March 2009, and to which, the 12 Mehta companies transferred their Rs 47.34cr equity by October 2009. They had identifiable directors and valid registered offices when they subscribed to Purti shares from 2002 to 2009. They remained so as late as 15.2.2011. That Mehta’s had owned them in 2003 itself has been established in Gadkari Probe I by tracing how Mehtas had substituted 11 of the 14 companies as their alter ego to give guarantees on their behalf to IREDA and how the other three had substituted for Mehta to guarantee BoM and SBI Indore in 2004. [see NIE Gadkari Probe I dated 12.11.2012]. Undeniably, none of them was “fictitious”--then or later-- till 15.2.2011. Why only till, and what after, 15.2.2011, will unfold later.
See their history. In 2003, seven of the 14 had registered offices in Nagpur originally, four of them had offices in Mumbai, two in Amravati, and one in Bengal. In October-November 2003, Mehtas shifted their registered offices, except the one in WestBengal, to Nagpur. From then till 17.2.2011, 13 of them had valid registered offices in Nagpur; one, in West Bengal. And in each of them Mehta nominees--the combination of R K Powell, J Pahade, Anil Chandak, R Kela, Ketan Baheti, and J K Verma--were directors till Sept11 2009. Earlier, on 24.7.2009, persons associated with Gadkari were nominated as directors and they remained as directors till 15.2.2011. Why? That will be clear tomorrow.
It was when the Gadkari associates quit on 15.2.2011 that directors with doubtful identity entered their boards and two days later, on 17.2.2011, their offices shifted from genuine to doubtful addresses. But the ‘investigation’, which failed to ask why these changes took place, gives false impression that these companies were always “fictitious”, thus suppressing the vital fact that they were not at least till 15.2.2011.
Therefore, its conclusion that “the source of money into Purti” is buried under “fictitious” companies is hasty at best and false at worst. The ‘investigation’ also wrongly lists Arun Lakhani’s Last Mile Infrastructure among the “fictitious” 18. It doesn’t share the features of the rest. Its directors are different; its office was always in Nagpur. With the story of the 14 being known, the facts about the remaining three, which incidentally did not put any equity in Purti directly, will unveil tomorrow.
The ‘investigation’ which falsely insinuates that “fictitious” companies had put equity in Purti is therefore qualitatively uninspiring. The clue to where the ‘investigation’ probably lost its way is to be found in its remark that [only] “in the last couple of years directors, their addresses and those of the companies have flitted from Nagpur”. Any agile investigator would have asked himself “why did the 17 companies flit from genuine to fake offices and directors” years after they put equity in Purti. That would have made him realise that the changes of registered offices and directors that happened long after were just a juicy side-show and that would not question genuineness of their equity in Purti. But, because of competitive sensationalism, the media became obsessed with just half, not even the whole, of sideshow, perverted the truth and projected genuine equity in Purti as bogus.
The full sideshow will reveal why and how Gadkari’s associates became directors of the 17 companies and Gadkari family members held shares in three of them, briefly; how and why did the 17 companies which had genuine directors till February 2011 and offices come to have suspect directors and registered offices. Await tomorrow.