Investigation has revealed that till July 2009, the Mehta Group had held the investment of Rs 47.34 crore it had made up to 2006 in Purti group through 12 of its genuine companies. Had the media looked at the shareholding pattern of Purti Group in July 2009, it would have seen that the Mehta Group investment in Purti was in the hands of these 12 companies.
From July 2009, the Mehta’s restructured their holding in Purti to keep their name under veil through the shell companies. Why should Mehtas keep their name under wraps from July 2009? Read on for an interesting facts that has led to ridiculous consequences for Mehtas, Gadkari and even for the media.
Changes in July 2009
Working in a highly backward area, Purti had accumulated losses of Rs 64 crore by 2009. Its loans had become Non Performing Assets (NPA) in banking norms. Purti stagnated by the incident.
Desperate for finance to make one-time settlement with Indian Renewable Energy Development Agency (IREDA) and banks, Purti sought a loan of Rs 164 crore from a local group, Global Safety Vision Limited. Global demanded collateral securities and guarantees, in addition to Purti’s assets. Both being from Nagpur, Mehtas and Global perhaps did not share mutual comfort. Therefore, enabling Global to lend to Purti, Manish Mehta had decided to effect a theatrical separation of his group from Purti by parking the group’s investment in Purti in the shell companies and withdrawing the group’s nominee directors in them. Mehtas also shifted the offices of some of the shell companies from Nagpur to Mumbai. The group had also added three more such companies taking their total stock to 17.
Manish Mehta told me on November 5, 2012, that the make-believe restructuring of the 14 companies carried out on a war footing in 2009 was based on legal advice. The execution was partly personally handled and partly outsourced.
To expedite signing of loan and guarantee papers to get the loan from Global, Manish used his confidants in Purti to get some employees and associates of Nitin Gadkari also as directors in the shell companies. Among them was Manohar Panse who ran his own cab couple of decades ago and joined Gadkari as an all-purpose employee, not as just a driver as described by the media. This is how Gadkari’s name got linked to the shell companies with all their ridiculous features. After the restructure, the Purti shares held by the restructured shell companies were given as collateral security to Global along with the guarantees of some of new directors of the shell companies. The restructure process started in the last week of July 2009 and ended by March 2010 when the entire holding of Mehtas in Purti came to be vested in the shell companies. Subsequently, the first instalment of Global’s loan of `164 crore landed in Purti’s account on 18.12.2009. Purti began making profits after effecting the one-time settlement with IREDA and banks.
Manish Mehta told me that his intention was to assume the explicit ownership of the 14 companies soon after NPA issues were over. He must be telling the truth. Otherwise, why would Manish Mehta rejoin the Purti board in 2010 end, after Purti had got over its NPA issues? This indicated clearly that the Mehta separation from Purti was only to get over Purti’s NPA status.
Manish Mehta told me that he had decided openly to become director and shareholder of the shell companies and inform the Income Tax Department about this. He confirmed to me over phone on November 10, 2012, that he had met the I-T officials and told them that his group owns the shell companies. It does not need a seer to say that it was the stage-managed separation of Mehta Group from Purti involving questionable companies that led to explosive and false allegations of money laundering against Gadkari.
Mehta-Gadkari-Purti Link
Now about the Mehtas. They are Gujarati Jains settled in Nagpur. Originally huge steel traders in central India, the Mehta group branched into forgings and exports, winning best exporters award for successive years. They are in retail and power generation too. According to them, they have an asset base of Rs 2,000 crore.
The family, which manages Jain Charities reputedly worth Rs 15,000 crore, is respected in the community in central India. Manish Mehta’s sister is a jain sadvi. The family runs schools for mentally-challenged and differently-abled. It also runs goshalas. They are constructing 72 resting centres every 15 km along national highways for Jain sadhus who walk on the road.
Manish and Gadkari were friends for long. Gadkari was Pubic Works Department Minister in Maharashtra from 1995 to 1999. Thereafter, till 2004, he was Leader of the Opposition in the state. The Mehta Group never had any business with Maharashtra Government.
Manish Mehta told me that he was supportive of Gadkari’s idea of taking the development to villages. When farmer suicides became a big socio-economic and political issue in Vidarbha, Gadkari thought sugar as an alternative and wanted to start a cooperative sugar factory to reach to rural voters.
In Maharashtra, sugar cooperatives are vehicles of the political class for rural thrust. But the Maharashtra apex co-operative financial body controlled by the Congress would not support Gadkari. But Manish Mehta offered to support Gadkari if he promoted a sugar company. That was how the Purti Sugars was conceived in 2000. Purti is driven by Gadkari’s political ambition and Mehta’s capital. Gadkari’s financial stake in Purti is marginal. But, over 10,000 farmers have invested Rs 7.42 crore in Purti -- almost 11 per cent of its present capital of `68.9 crore.
Significantly, Purti, an established company, has issued shares to the farmers at par, not at premium. This indicates the political agenda of Gadkari in Purti.
Gadkari seems to have penetrated rural areas through Purti. When allegations against Gadkari were at peak, Business Standard [7.11.2012] reported from Bela village, 50 km from Nagpur, that the “majority of the 10,501 Purti shareholders are farmers”. A farmer, Keshav Vasudeva, who holds shares worth Rs 10,000, says in the report: “Purti has brought us prosperity. Before the factory came up, there was nothing here.” Another farmer-shareholder, Prashant Barapat, says: “We used to grow soybean, wheat and other crops with yields of Rs 15,000 from an acre and today, we get up to Rs 70,000 from cane”. The report concluding that the factory has benefited the farmers, which would not have been possible without Purti. Farmers say that Purti has created direct employment for about 1,000 people, while 25,000 people across 20-25 villages benefit from the factory. They add “the factory has put cash in the hands of our people, some of whom have got into the dairy business, and milk and milk-based products are supplied to hotels such as Haldiram’s in Nagpur.”
The report adds that while the shareholding is yet to yield any benefit in the form of dividends (Purti is still writing off accumulated losses), it gives the farmers a sense of belonging. “It is a legacy of the cooperative movement,” says deputy general manager at the plant and incharge of agricultural development.
Gadkari has everything to gain politically by projecting Purti as his venture. It is the political clout of Purti that has strongly identified Gadkari to Purti. Result: Gadkari publicly ‘owned’ Purti.
Media Scare
Why did the Mehtas not tell the truth to the media? Simple. They were scared of media. Some businessmen are media savvy. Some, media shy. But, Mehtas are media scared. Could Gadkari not have mentioned Mehta’s name to media? Mehta told me that he had pleaded with Gadkari not to mention their name, saying that he was all for government investigation. And Gadkari repeated this in public. Gadkari was caught between the need to tell Mehta’s name to the public and Mehta’s request not to mention their name in public. The Result: The media lynched Gadkari, who, Mehta told me, knew nothing about how Mehtas had kept their investments. Had Mehta told the media forthwith that the shell companies belonged to them from before 2003, the media campaign would have crashed before take off. But, can Mehta be faulted for fearing the media? Does TV moderators not terrify normal humans?
Postscript: It is ridiculous to say that I have given a clean chit to BJP president Nitin Gadkari. I do not know enough about him to give him a clean chit. I did feel on my probe that the media charge of money laundering against Gadkari was ridiculous. It did call for some courage to tell this unpopular truth. But the courage to tell unpopular truth is what I learnt from Ramnath Goenka.When, through the columns of Indian Express, I exposed the corrupt practices of Ambanis, many in media said that I was doing it to benefit Nusli Wadia!
Q.E.D: If one wants to be only popular, one can’t tell unpopular truth.
(Correction: In the article published on November 12, instead of ‘December 30’ read ‘October 30’ in the fourth line of seventh paragraph.)
S. Gurumurthy is a well-known commentator on political and economic issues.
Email: comment@gurumurthy.net