Results of more research on Mr Suresh Prabhu's past continue to shock.
Suresh Prabhu's past not only includes his involvement in the Cobbler scam, the Dabhol power plant corruption & coverup, the Adarsh scam, but also includes a scam pre-dating all of these. He was also involved in the Ponzi schemes and investor frauds of Nandan Gadgil (the Gadgil Western Group) in the 1990s.
For a banker and chartered accountant like Suresh Prabhu to have been involved in these scams, is his biggest indictment. It shows that he is a crook through and through.
He has now been afforded the opportunity by Prime Minister Narendra Modi to display his corruption and cover-up skills in the General Electric Company and Indian Railway scam as well.
Seriously, please consider should a man with Suresh Prabhu's illustrious background in scams and corruption be a Cabinet Minister in the Indian Government in 2014-2015?
Business Today
INVESTIGATION
Trapped in the Forest Fire
Suddenly, Suresh Prabhu, the powerful Union Environment Minister, finds his clean-n-green reputation going up in a blaze of irate investors, court cases, and political vendetta. What's the verdict?
The Friends Of Suresh Prabhu Ltd
The campaign is by vested interests
By A BT Investigation
This jungle trail runs from business to politics, from bankruptcy to deceit, from ambition to jealousy. At every twist and turn, it appears to have turned cold, but there is no doubt that the track unerringly leads to a swamp of fraud which the investor has, unwittingly, stumbled into. Embroiled in this forest of controversy is the 46-year-old Union Minister For Environment And Forests, Suresh Prabhakar Prabhu, whose meteoric rise in the last 2 years has stunned both his rivals and his friends. After all, Prabhu, who was not even a primary member of any political party when the Shiv Sena first announced his candidature in the 1996 Lok Sabha elections, immediately became the Union Minister For Industry in the 13-day Atal Bihari Vajpayee Government.
Suresh PrabhuSince then, the cases against the flamboyant chartered accountant-turned-banker-turned-politician have been mounting. Totalling over 30--and filed in Panjim, Ernakulam, and Mumbai--they have uncorked his past: strong connections and cosy relationships. Did Prabhu prey on investor gullibility? Or is he the victim of a political plot? Prabhu swears by his innocence: "The campaign against me has been launched by some vested interests." The small investor, who has dragged him to court, disagrees. And, although all the cases are sub-judice, the needle of suspicion points to politics as much as it does to business.
It certainly appeared so when a criminal case was filed before the Judicial Magistrate (First Class ), Court No. 2, Ernakulam, on January 6, 1997. A Kochi-based investor, K. Joseph, complained that 2 cheques--which were issued by a Non-Banking Finance Company (NBFC), the Rs 7.83-crore Western India Financial Services, for Rs 2 lakh and Rs 9,896, respectively--had bounced. That was hardly surprising: since 1996, investors have lodged as many as 60,000 complaints against nbfcs with the Securities & Exchange Board of India (SEBI) and the courts.
What was unusual about Joseph's case--and the 30 others filed against Western India Financial Services--was the name of the co-accused: Suresh Prabhu. Nearly 15,000 investors had deposited Rs 20 crore with the NBFC promoted by the now-bankrupt industrialist, Nandan Gadgil, 42, whose Rs 300-crore empire--including the Rs 90.66-crore Western Paques, the Rs 68.97-crore Western India Industries, and the Rs 11.47-crore Western India Securities (later renamed Wisec Global)--crumbled in 1996-97.
Like other scams, a businessman's (Gadgil's) fraudulent offices led to a politician's (Prabhu's) home. Prabhu--who won the Parliamentary polls as a Shiv Sena candidate from the Rajapur (Maharashtra) constituency in May, 1996, and March, 1998--was the Chairman and Managing Director of Western India Financial Services besides being a director on the boards of 11 other companies, including the Rs 486.63-crore Global Tele-Systems and the Rs 387.38-crore Sai Service Station. Which is why criminal charges under the Negotiable Instruments Act were levelled against both Prabhu and Gadgil after investors discovered that the post-dated cheques issued by the company had bounced.
Even as Gadgil's Pune-based uncle, Avinash Wardekar, 61, is desperately trying to resurrect the Gadgil Western Group, Prabhu is fighting to prove his innocence. Legally, the bouncing of a cheque is an offence under Section 138 of the Negotiable Instruments Act, and the directors of an offending company can be prosecuted under Sections 141 and 142 of the same Act. While the Metropolitan Magistrate Court, Mumbai, has accepted Prabhu's plea that he should be discharged from the case, the Judicial Magistrate (First Class) Court, Panjim, has refused to follow suit. Instead, the latter has contended that Prabhu's innocence can only be proved after a full trial. BT explores the nexus by investigating the cases against Prabhu, and his proximity to Nandan Gadgil.
THE BUSINESS CONTROVERSY
It was meant to revive the sagging fortunes of the Gadgil Western Group, which had diverted Rs 139.15 crore from its cash-rich companies--Western India Industries (1996-97 net profits: Rs 11.31 crore) and Western Paques (Rs 22.22 crore)--to finance its unrelated diversification into financial services, sugar, and shipping. In Western India Financial Services' 3-month fixed deposit scheme--which had been launched at regular intervals since 1995--investors were allowed to participate in the bill-refinancing business. After discounting a Bill of Exchange, Western India Financial Services would re-discount it in favour of the depositors based on the latter's quantum of investment. They were promised attractive returns: an annualised yield of 20 per cent on deposits of less that Rs 5 lakh, 22 per cent on deposits between Rs 5 lakh and Rs 10 lakh, and a "negotiable" yield on deposits of over Rs 10 lakh.
To reduce the depositors' risks, WIFS issued post-dated cheques for both the principal and the interest. It also forced the parties involved in the bill discounting deal--the issuer and the acceptor of the bill--to sign the bills of exchange. This was, obviously, done to protect the interests of the depositors in case the money was not paid up by the creditor company. But, at the time of encashing their profits, all that the depositors got was a stream of bouncing cheques. On November 14, 1996, when Joseph deposited 2 cheques in his account at the Central Bank of India, he was told that they could not be honoured due to "insufficiency of funds." On December 23, 1996, Joseph received a letter (dated November 14, 1996) from Western India Financial Services, which explained: "Due to the prevailing market conditions... our cash inflows are disturbed... Therefore, we request you not to present the aforesaid post-dated cheques as we are not certain of funding the account on the due date."
Little wonder, then, that the investor is crestfallen. Laments Joseph: "All my life, I had invested in schemes of the Unit Trust of India and the Post-Office. But, I guess, a mistake had to be made some day." By then, other creditors like H.G. Parekh, a Mumbai-based businessman, started realising what was happening. A cheque for Rs 1 lakh, which was issued to him by the company, bounced in September, 1997. But it was too late; Gadgil's empire was on the verge of bankruptcy, and investors had no option but to approach the courts to recover their money.
Expansion had contracted the Gadgil Western Group's fortunes. Between 1991 and 1997, Gadgil set up several greenfield ventures across the globe: in India, Dubai, and the US. He also raised large amounts of money by floating public issues at premiums. Not surprisingly, the share premium reserves of the group were Rs 329 crore on March 31, 1997, but it owed Rs 350 crore to the financial institutions, banks, corporates, and investors. Worse, the group's diversifications backfired: while the Rs 23.15-crore Western India Shipyards incurred a loss of Rs 30.35 crore in 1996-97, the Rs 5.68-crore Western Orissa Sugars made a loss of Rs 3.28 crore.
Gadgil was on the run. Law-enforcers finally caught up with him in April, 1997, when he was arrested in Dubai for another bounced cheque, which had been issued to a Dubai-based financier, Sunil Mansukhani. But he managed to get bail by putting some of his assets--including the Dubai-based Western India Oil Refinery, which planned to use a new technology to extract kerosene and diesel from refinery-wastes--on the block, and obtaining an advance from his bankers to repay his creditors. While Western India Financial Services has since been sold to Yogesh Kumar Tiwari, a Mumbai-based businessman, Gadgil's uncle, Wardekar, has taken over Western India Securities.
THE BOARDROOM CONTROVERSY
The case for the defence, essentially, rests on a single date: the day Suresh Prabhu resigned from the Western India Financial Services board. If it can be proved that his resignation was effective May 7, 1996--when the letter, dated May 6, 1996, was received by the company--it will prove his innocence. Since all the bounced cheques were issued after that date, that means that Prabhu was not involved in the scam. Points out Prabhu: "I resigned from the boards of (12) companies on May 6, 1996, to contest the Lok Sabha elections. I was not on the Western India Financial Services board when the cheques were dishonoured."
Did he? Agrees Manoj Tirodkar, 34, CEO, Global Tele-Systems: "We had asked Prabhu to be a non-executive director of our company. He resigned from our board on May 6, 1996." To buttress his claim, Prabhu shows copies of Form 32, which were filed by 11 companies--including Sai Service Station, Global Tele-Systems, and Global Wireless--with the Registrar of Companies (ROC) to indicate board-level changes. Indeed, all of them show Prabhu's resignation date as May 6, 1996.
Unfortunately, that is not the case with the form filed by Western India Financial Services, which uncapped the controversy. That document, filed by the NBFC on December 13, 1996, states that Prabhu, along with Gadgil and another director, Brij Bhushan Nagpal, resigned on November 14, 1996--the day Gadgil signed an memorandum of understanding to sell the company (which has since been renamed Amnet India) to Tiwari. In fact, the 4 new directors appointed on that date were Tiwari and 3 of his aides. However, another Form 32, dated March 26, 1997, lists Prabhu's resignation-date as March 15, 1997. If either of these dates (November 14, 1996, or March 15, 1997) is right, Prabhu will become an accused in at least some of the cases filed against Western India Financial Services.
To set the record straight, Prabhu even appears to have got the roc, Mumbai, to issue a clarification. In response to his letter, dated June 9, 1998, the roc wrote to Amnet India on July 24, 1998: "It appears that Suresh Prabhu had resigned on 7/5/96, and not on 15/3/97, as per Form 32 dated 26/3/97. You are, therefore, advised to rectify Form 32 immediately on receipt of this letter." Indeed, Prabhu's lawyers used this letter as evidence in their legal battles in Panjim and Mumbai to indicate that he had resigned from the boards of companies on May 7, 1996.
Last month, the roc also initiated legal proceedings against Western India Financial Services for violations under Section 303 (2) of the Companies Act. In a case filed in the Metropolitan Magistrate Court, Mumbai, the roc alleged that the company failed to file Form 32, notifying Prabhu's resignation in May, 1996, within the mandatory 30 days.
If true, why did Western India Financial Services decide to deliberately delay Prabhu's resignation? The reason, as disclosed by Prabhu's lawyers to the Judicial Magistrate (First Class) Court, Panjim: the company's board of directors would have lost legal sanction if Prabhu's resignation had been accepted in May, 1996. That's because Section 252 of the Companies Act states that a public company's board should have a minimum of 3 directors. And, after Prabhu's resignation in May, 1996, Western India Financial Services would have had only 2: Gadgil and Nagpal.
Those fears should not have influenced the resignation submitted by a director who wanted out. Points out S.S. Rana, 57, Advocate, Delhi High Court: "Nobody can stop a director from resigning. If it contravenes the law, the other 2 directors can co-opt a third director till the next general body meeting ratifies the decision, or inducts a new director." Maintains Prabhu: "My effective date of resignation from all companies, including Western India Financial Services, is the date on which I submitted my resignation to the respective companies." That was May 6, 1996, or May 7, 1996, if one considers the date when the letter was received by the company. Although there is no provision in the Companies Act about the process through which a director can resign, such events are decided by the relevant provisions in the Articles of Association of a company and legal precedents.
Take the case of Western India Financial Services. Article 155 of its Articles of Association states: "A director may, at any time, give notice in writing of his intention to resign by addressing it to the board of directors of the company and delivering such notice to the secretary or leaving the same at the registered office of the company Thereupon, his office shall be vacated." Legal precedents also support Prabhu's defence. Agrees Tirodkar: "A director's resignation is effective immediately if there is no mention in the Articles of Association. Else, one has to go by specific clauses in the Articles."
THE POLITICAL CONTROVERSY
Are deliberate attempts being made to villify Prabhu? Yes, says Kirit Somaiyya, 44, the Maharashtra State President of the Bharatiya Janata Party (BJP), who has known Prabhu since 1975: "The number of cases filed against him reflects the extent of political jealousy. Notes Prabhu: "Most of the cases against me were initially filed 20 months ago. They were refiled after I became a minister once again in March, 1998."
In fact, the controversy has seeped into the Goan political arena. There, the legal campaign against Prabhu is being spearheaded by Gopal Mayekar, 64, a former Congress-I Member of Parliament, who himself had invested Rs 2 lakh in Western India Financial Services, and is actively involved in the 29 cases filed by Goan investors against Prabhu. All these cases have now been transferred to the Sessions & District Court, Panjim, and the next hearing is scheduled for January 6, 1999. But Mayekar denies that the charges are politically motivated: "There is no campaign against Prabhu since I am also a victim. In fact, he was the only director against whom we could initiate prosecution as all the others (including the promoter, Nandan Gadgil) are missing."
Of course, his political links have compounded Prabhu's problems. Points out Somaiyya: "When Madhu Dandavate represented Rajapur in Parliament between 1971 and 1989, Prabhu always supplied him with details on crucial business issues. He was also close to Congress (I) politicians like Sharad Pawar and Vittal N. Gadgil." But, in the same breath, Prabhu's friends contend that he has never been involved in any controversy before the Western India Financial Services scam. Agrees Mukesh Kalmadi, 46, Joint Managing Director, Sai Service Station, where Prabhu was a director: "He has a clean image in business and politics."
But, then, how did Prabhu get involved with Nandan Gadgil? Explains Prabhu: "I was invited by a number of promoters, including Nandan Gadgil, to join the boards of their companies because of their perceptions about my standing in public life." Moreover, Prabhu's political aides contend that neither did he have any executive powers in any of the companies--including Western India Financial Services--nor large equity stakes in them. For instance, his family's stake in Western India Financial Services, which had an equity base of 58.50 lakh shares, was a mere 300 shares.
Of course, Prabhu's business roots go deeper (see box). Both in his capacity as a chartered accountant and the chairman of the Saraswat Cooperative Bank (1997-98 income: Rs 254.83 crore), he was close to numerous businessmen. For instance, Tirodkar admits that Prabhu's chartered accountancy firm was the auditor of one of his companies. And Prabhu himself says that, as the chairman of the Saraswat Bank for 81 months (between 1989 and 1995), he regularly interacted with businessmen. Indeed, he is still a director on the bank's board and, in September, 1998, he and his supporters were again elected to it. In fact, among the 12 directors elected, Prabhu got the maximum number of votes.
THE LEGAL CONTROVERSY
Going by the number of cases against Prabhu, he may find it tough to emerge completely unscathed. Already the rulings of the Panjim and the Ernakulam Courts indicate that he is unlikely to wriggle out of his predicament easily despite the fact that he has received a favourable decision from the Mumbai High Court. For instance, after the Ernakulam Court issued 2 non-bailable warrants against Prabhu on January 14, 1998, and March 19, 1998, in the Joseph case, he managed to get a stay on the proceedings from the Kochi High Court on July 2, 1998. But, on October, 23, 1998, Joseph filed a counter-affidavit before the High Court, which has yet to deliver a final judgement.
In Goa, the lower courts have delivered a body blow to Prabhu's defence. States the judgement by the Judicial Magistrate in Panjim, C. Fernandes, delivered on August 29, 1998: " the alleged defence taken by the accused No. 2 (Suresh Prabhu) will be looked into only at the stage of trial where both the parties adduced their respective evidence and documents." And in another case in Goa--filed by the Panjim-based Gulf Goan Hotels Company--the Judicial Magistrate, Desmond D'Costa, ruled on September 1, 1998: "At this stage, there is a strong suspicion that the accused (Prabhu) had cheated the complainant by inducing the investment of money"
Prabhu's defence will be further demolished if fresh cases--relating to the period when he was the Chairman and Managing Director of Western India Financial Services--are filed. Indeed, many companies promoted by Nandan Gadgil have failed to repay their creditors, but they have decided against taking legal action against him or his companies. Points out Kalmadi, who refuses to disclose the exact amount his company lent to the Gadgil Western Group: "We are sure that we will not get the money back. And this is part of doing business in India."
But, then, as Suresh Prabhu has realised, there is yet another danger of being associated with businessmen like Nandan Gadgil: that of being embroiled in a long-drawn legal battle. And, even if it is just a case of dirty business discolouring ugly politics, Prabhu cannot easily disentangle himself from the knots he himself once tied between the two.
Reported by Alam Srinivas, Rajeev Dubey & R. Sridharan
The Friends Of Suresh Prabhu Ltd
It has been a political pole-vault for Suresh Prabhakar Prabhu. In the mid-70s, he was only the President of the Khar Residents' Association in Mumbai; by 1996, he had joined the ranks of the Union Cabinet.
Maharashtra politics was aflutter when Prabhu, a Saraswat Brahmin from Konkan's Malvan region, got a Shiv Sena ticket to contest the 1996 Lok Sabha elections. Explains a Mumbai-based Shiv Sena leader: "We though Prabhu was ideally placed to fight the elections under the Congress (I) or the Bharatiya Janata Party (BJP) banner. He was close to politicians from both the parties." Prabhu, however chose, the Shiv Sena which gave him a ticket because its supremo, Balasaheb Thackeray, apparently wanted the intelligentsia to represent the Shiv Sena in Parliament. And Prabhu had the right credentials: a gold medal in the chartered accountancy examinations in 1980; years of charitable work; and proximity to politicians like Madhu Dandavate of the Janata Dal and Sharad Pawar of the Congress (I).
What was even more important was Prabhu's influence in the co-operative movement, which wields considerable political power in Maharashtra. In fact, Prabhu's 15-year stint, from October, 1983, as the Director of the Saraswat Co-operative Bank, and his 81-month tenure as its Chairman-between January, 1989, and September, 1995-brought him close to both politicians and businessmen. During his chairmanship, the bank's net profits rose from Rs 1.96 crore in 1988-89 to Rs 7.43 crore in 1994-95 while its deposits zoomed from Rs 5,002.84 crore to Rs 8,453.41 crore. "His ambitions may have grown during this time," says Kirit Somaiyya, 44, the President of the BJP's Maharashtra unit.
What benefited Prabhu was also his proximity to Suresh Kalmadi, 54 an Independent Member of the Rajya Sabha, his brother Mukesh Kalmadi, and Nandan Gadgil, the Chairman of the now-bankrupt Gadgil Western Group. Admits Mukesh Kalmadi, 46, Joint Managing Director, Sai Service Station: "My interactions with Prabhu were due to the latter's participation in high-profile activities in Mumbai." Unfortunately, Prabhu got too close to Nandan Gadgil, whose among small investors. And now threatens to engulf Prabhu too in controversy.
'The campaign is by vested interests'
In an exclusive interview with BT, the Union Minister For Environment & Forests, Suresh Prabhu, defends himself:
Q. Mr Prabhu, when did you resign as the CEO of Western India Financial Services?
A. I resigned from all the (12) companies in May, 1996, to contest the Lok Sabha Elections.
Why is there a discrepancy in the dates mentioned in Form 32?
Form 32, which has be filed to the Registrar of Companies, has to be complied with by the companies. My resignations of the Articles of Association of the respective companies and the requirements of the Company Law as well as the prevalent practices in the corporate sector. My effective date of resignation from all the companies, including Western India Financial Services, is May 6, 1996. My resignations from these companies have been taken note of by the authorities concerned.
How many criminal cases have been filed against you? Are they related to only Western India Financial Services?
The cases are not filed against me personally, but against Western India Financial Services, in which I have been sought to be implicated in my capacity as a director. All the cases pertain to the cheques issued by Western India Financial Services, which were not signed by me. I was (also) not on the board when the cheques were dishonoured.
What explains your presence on the board of a dozen companies?
As a chartered accountant with a flourishing practice, I had relations with several companies. I was (also) invited by a number of promoters, including Western India Financial Services' Nandan Gadgil, to join the boards of their companies in view of their perception about my standing in public life. I have been working in social, and educational areas for more than 2 decades through voluntary agencies. The campaign against me is by vested interests. I do not ascribe it to any particular political party.
India Today Group Online
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Prabhu's exit: End of a fairy tale
August 23, 2002
By all counts Suresh Prabhu was a good power minister. Although the benefits of his policies and actions are not yet quite visible, he has made a name for himself as an efficient and clean minister. Ironically, the latter has caused his downfall.
Bal Thackeray, supreme leader of the Shiv Sena and the man who put Prabhu in Parliament as also in the ministerial chair, has pulled the plug. Prabhu was ordered to resign as power minister and had no option but to comply.
Newspaper editorials have bemoaned the exit of a 'clean' minister and criticised the dictatorial Thackeray for putting his party before the country by sacking Prabhu.
But let us face it - that is the ground reality of Indian politics and we need to recognise it. I am not condoning Thackeray's actions or his priorities, but I am equally surprised at the naïve expectations that the media and the intelligentsia still seem have from its politicians.
In a hard-hitting interview to The Indian Express last week, Thackeray had signalled his displeasure over Prabhu's performance and called him 'Alice in Wonderland' who was trying to be clean like Rajiv Gandhi.
The description probably applies to all those of us who are surprised at Prabhu's ouster. And it certainly applies to Prabhu if he thought he could defy the party leader and get away with it.
Let us look at who is Suresh Prabhu. Less than five years ago, he was just the husband of a colleague and the head of Saraswat Co-operative Bank - a tiny, but successful and high profile, outfit.
He was occasionally mentioned in connection with his directorship and (probably) personal guarantee extended to the Western India Group of Pune whose promoter Nandan Gadgil was in serious financial trouble. There was also some skirmish over loans extended by Saraswat Bank to fictitious cobbler co-operatives in what was dubbed as the 'cobbler scam'. But none of it was any worse than anything other bankers have been in trouble for.
Prabhu's decision to throw his lot with the saffron Shiv Sena was a surprise, but hardly anyone gave a second thought to the aspiring politician's ambitions. It only showed how foolish we were. The decision was the beginning of a virtual miracle - a non-cash jackpot.
Less than a month after Prabhu moved from being a banker to a politician, he was a Member of the Lok Sabha and was swearing in as a full Cabinet minister. In fact, Prabhu's meteoric rise is more like Cinderella and Alice in Wonderland rolled into one.
Prabhu was hand picked by Bal Thackeray for a political career. In the past, he had catapulted a journalist-editor-entrepreneur into the Rajya Sabha, but that did nothing for the party's national profile. This time he wanted an educated, articulate and moderate face to be the Sena man in Delhi, and chose Prabhu.
He ensured that Prabhu won his election through a super-safe seat in a constituency that was the fief of former Maharashtra Chief Minister Narayan Rane. Prabhu's win was a cakewalk. When he became the Shiv Sena minister in the National Democratic Alliance's Cabinet it was again Thackeray's choice. It was never the prime minister's decision. And that was probably Prime Minister Atal Bihari Vajpayee's first mistake.
When the PM acquiesced to having Prabhu in his Cabinet, he could have had no notion that he would either be clean or even passably efficient. He took him on without question because he had no choice.
It was a bonus for the Bharatiya Janata Party that Prabhu turned out the way he was; an even bigger bonus was that he seemed keener to please the prime minister than his party boss.
Since Thackeray made no bones about the fact that he held the 'remote control' over his party men and women and dictated their actions, Prabhu was clearly asking for trouble. That he lasted for so long, or had his tenure extended at the prime minister's personal intervention was also part of the Prabhu fairy tail.
But the clock may have finally struck midnight and the horses have probably turned into mice.
Prabhu knew exactly what the score was when he made his pact with the Shiv Sena and became a minister. In fact, when Thackeray chose him, several senior party leaders had been furious at his instant stardom. They felt let down that the boss should choose a novice over them.
Prabhu knew that his selection came with specific expectations. His decision to incur the Thackeray wrath by being more useful to the BJP may have been a calculated move. He may have planned a successful switch in political affiliations and the fairy tale could get still have another chapter.
But let us face it; Prabhu is not a grassroots politician with a mass base. He has no track record of public service. He is just a nominee of the Shiv Sena leader. We can complain all about the destructive nature of coalition politics but we cannot change it in a hurry.
As for the prime minister wanting Prabhu to remain a minister because of his efficiency - that is pure hogwash. If Vajpayee wanted ministers who were clean and efficient, there is nothing to stop him from choosing any number of them with long and proven track records in their respective fields.
He could hand pick people with intelligence and dedication and make them ministers. They needn't even all be in the Rajya Sabha; the BJP surely has a few safe seats from which to get them elected to the Lok Sabha.
For instance, why not ask Infosys chief N R Narayana Murthy to be minister for information technology? He could win an election from Bangalore; or appoint Deepak Parekh as finance minister - after all they seem to consult him on so many issues. He would probably have as much of a chance of winning from South Mumbai as his friend Murli Deora.
Surely a Sunil Gavaskar or a Kapil Dev would make an excellent sports minister and even win an election with ease. You could also have efficiency, honesty and talent in the Rajya Sabha by getting someone like R A Mashelkar to head science and technology, or Arundhati Roy to head the ministry for social welfare or even education; a Keki Dadiseth would make a good industries minister and Dr R Chidambaram could be the defence minister.
But we don't expect that to happen, do we? While a Suresh Prabhu may have had his own little fairy tale, we can't expect a much bigger one to transform this nation and its politics.
So let us stop moaning over Prabhu's exit and accept the reality. The very fact that he himself hasn't said a word, shows that he knew the consequences of his actions and was possibly looking far ahead.
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Business MAGAZINE | JAN 08, 1997
FOOTWEAR INDUSTRY
Caught On The Wrong Foot
A Rs 1,000-crore scam, involving fake cobblers' cooperatives run by three barons, casts a shadow over the Mumbai market
CHARUBALA ANNUNCIO
DAWOOD is the Islamic equivalent for David, the mighty Biblical king of Israel who had just one fatal flaw: he coveted another man's wife and paid dearly for that. The same mistake has been committed by Sadruddin Daya, former sheriff of Mumbai, promoter of Dawood Shoes and prime accused in the fake cobbler co-operatives scam that has rocked Mumbai over the past month and more. But this time, it's hard government cash that rightfully belonged to cobblers and poor shoemakers, most of which has been diverted to Daya and two more—Rafique Tejani, Daya's former partner and promoter of Metro Shoes, and Kishore Signapurkar of Milano Shoes. And they are paying dearly. Of the 10 people initially arrested these three are still in jail. All their outlets and offices have been sealed.
Known in the tightly-knit, and extremely affluent Aga Khan sect of Muslims (which largely controls the Mumbai shoe trade) as a man with a golden heart and a generous purse, Daya heads the growing list of high-profile people who have coveted, and accessed, public funds for personal benefit. He owns several properties in and around Mumbai and maintain a fleet of 15 Indian and foreign cars. Starting with one shoe shop a few years ago, he built a chain of 25 retail outlets. Likewise, Tejani, son of a salesman, retails through 10 shops and owns four of them. Of the three, only Signapurkar was an uneducated cobbler but the police have reason to believe that his recent prosperity is not entirely a result of back-breaking work.
The Mumbai shoe market comprises about 300 retail outlets with a turnover of about Rs 200 crore annually. Metro, Dawood and Milano retail through 30 shops and account for nearly 40 per cent of the Mumbai business. They are the most powerful buyers. The other 270 are owned by almost as many people with their own workshops. Now, thousands of cobblers, workshop owners and even retail outlet owners (most of these outlets are franchises) are left without work and wage. Some of them are looking at moving back to their villages or setting up retail stalls around Mumbai.
It was a grand idea that eventually went bust for the shoe barons. Around 1987, the Maharashtra government floated the Modified Automated Refinance Scheme (MARS) which offered Rs 25,000 for individual cobblers at an interest rate of 14.5 per cent to set them up in business. About 50 cobblers' co-operatives, some listing up over 2,000 cobbler-members, helped themselves of the scheme. None of the actual beneficiaries were cobblers, but societies formed by influential people like Daya. Even leading politicians are involved in the Rs 1000-crore scam. BJP MLA Sadashiv Lokhande, Shiv Sena legislator from Dharavi Baburao Mane and Maharashtra Pradesh Congress Committee chief Sushil Kumar Shinde have been identified by the Economic Offence Wing, which feels there is enough evidence to initiate action, even arrest.
Police sources claim that the whole sordid affair dates back to the early seventies when city-based cobblers' cooperatives got approvals under the Khadi Village Industries Commission (KVIC)—the commission had to certify that the applicants were genuine artisans. Investigations suggest that such generous disbursement was done with the collusion of banks. A 2,000-member society can, by simple arithmetic, claim about Rs 5 crore (at Rs 25,000 loan per artisan). And the banks involved include the Mumbai District Co-operative Bank, Dena Bank, Bank of Baroda and foreign banks like Citibank and Oman International Bank.
Also involved is the Maharashtra State Finance Corporation, which sanctioned, among others, a Rs 50-lakh loan to Charmakar Yuba Kranti Co-operative Society, a brainchild of Shinde when he was state finance minister and set up by his personal assistant. The Congress state government had sanctioned another Rs 45 lakh to it. Mane is a director of the Mahacharmodyog Utpadak Sahakari Sangh of Dadar, while Lokhande has been a prime mover behind the launch of the Jai Bharat Cooperative Society.
That's how long the scam went on, unearthed and unchecked. Prompting cynics to accuse the government of floating the MARS to benefit those who mattered. "How many banks would entertain the neighbourhood cobbler?" asks a shoe-shop owner. "Nobody brought it out in the open because everyone benefitted".
IT was, at first glance, a simple operation. Smaller shopowners, who don't own workshops, find it difficult to source their goods. If they make a billed purchase from unregistered dealers, like the neighbourhood cobbler, they have to pay a sales tax of 8 per cent on value of the goods. But under MARS, the promoters of societies had access not only to cheap funds but also sales tax exemption on the shoes they made. So the shopowners sourced the goods on cash from the unregistered dealers and bought bills from these societies paying a 'fee' of 3 to 4 per cent to the society. And the societies made some more money without manufacturing any goods. The shoes were actually made in a few thousand small workshops, employing 10 to 100 cobblers, who lent their names to these co-operatives. In return they had jobs where they could earn upto Rs 200 a day. A small workshop owner could earn Rs 10,000 to 15,000 a month by supplying only about 400 shoes. The banks got good clients who paid up on time. Few cobblers would have been able to do that. And everybody was happy.
But investigations are now revealing loopholes, thick and fast. Tejani and Daya claim that most of their outlets are franchised, not owned. But many employees are found on Daya's payroll. One of the first to be arrested, Anwar Merchant, Daya's brother-in-law, not only headed the administration of Dawood shoes, but also worked as accountant of the bogus Jeevan Vikas Cooperative Cottage Leather Industries Ltd. He admitted to maintaining the records of the cooperative society and preparing salary slips and maintaining attendance registers for members, who existed only in name. Franchisees include names with dubious reputations like Rizvi Builders and wife of underworld man, Iqbal Mirchi. Loan applications show forged signatures. The societies have been unable to produce a single genuine cobbler or a workshop to prove actual shoemaking. Yet, Dawood and Metro show turnovers of about Rs 5 crore each.
Even as the families of the prime accused are tight-lipped on the affair, their supporters accuse that Daya got on the wrong side of an income-tax official and a police official, who in turn started the investigations to avenge his insult. But the shoe community has not reacted till now. "We are scared and trying to save our own skin, especially as we hear of them (the accused) being tortured in jail," says a source close to some of the accused. P.R. Vakil, defence counsel for Tejani, accused the deputy commissioner of police, Sanjay Pandey, in court of assaulting his client. But some of them have started to speak after considerable coaxing.
For one, they point out, the cooperatives had been filing their returns for about eight years. Saying that these books are wrong is tantamount to stating that a government inquiry has no value. Exclaims Asif Merchant, director, Catwalk Fashions Pvt Ltd: "It's like currency notes being invalid." To police accusations that all levies from sales tax to excise to octroi have been dodged, the shoemakers answer that only the government departments concerned are capable of deciding the extent of evasion, not the police. And how could the banks give lump sums to the societies and conduct no checks on the whereabouts of the money, they ask. "We are solvent and therefore the perfect sitting ducks," says one owner.
Even as speculation is rife about the fate of the money—the police believe it's been circulated in hawala channels, and even used to fund bomb blasts and property deals—the local shoe industry comes out as the worst loser. Says Adarsh Gupta, executive director, Liberty Shoes: "This scam reflects badly on the industry". While industry circles try to put up a brave front by asserting that the three prime accused will be freed—which may well happen, considering past experience—they can barely hide their worry. Now that the keeping-everyone-happy cooperatives have been clamped down, Asif Merchant believes that shoe prices will go up by up to 25 per cent in Mumbai. And, irrespective of the powerful Daya and his ilk, this will hurt every ordinary foot in Mumbai city.
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Gadgil Western opens first plant in Dubai and announces proposal to expand use of Interline's technology to other parts of the world.
ALPINE, Utah--(BUSINESS WIRE)--June 5, 1995--After two years of planning, Interline Resources Corp. (AMEX:IRC.EC) and Gadgil Western Corp. officially inaugurated the first fuel oil refinery in the world to use Interline's technology in Dubai, United Arab Emirates, on May 27.
At the inauguration, Nandan Gadgil, chairman of Gadgil Western announced his intention to build additional refineries in Dubai, Bahrain, Singapore and India that will use Interline's technology to produce petroleum products such as gasoline, diesel and marine diesel.
According to Gadgil, Interline's technology will open a new chapter in petroleum refining. The additional plant in Dubai will be located adjacent to the existing plant, expanding the Dubai plant's refining capacity to 57 million gallons per year.
The re-refineries in Bahrain, Singapore and India will process 82 million, 165 million and 330 million gallons per year respectively. Gadgil Western intends to have these plants operational by the end of 1997.
Gadgil Western's plant in Dubai is in the production trial stage. Initial production results are expected in June. More details about the additional plants will be announced once the results are successfully completed. If all the plants are constructed, anticipated royalties to Interline from the refineries could be as high as $6 million per year.
Interline's breakthrough technology allows Gadgil Western to upgrade low-value, heavy hydrocarbons, costing between $10 and $14, to middle distillates, such as gasoline and diesel fuels, selling at prices of about $20 to $25.
Officials from Gadgil Western and Interline joined Sultan Ahmed bin Sulayem, chairman and managing director, Dubai Ports and Jebel Ali Free Zone Authorities and M.P.M. Menon, Indian Ambassador in the United Arab Emirates to officially inaugurate the plant.
Following speeches by those officials and official start-up of the plant, attendees were escorted on a tour of the estimated $6 million plant.
"Land has been acquired by Gadgil Western in Bahrain and on-site improvements have been made," said Gadgil. "Long-term contracts are being secured by Gadgil Western to ship the large amounts of fuel oil required to run the refineries."
Gadgil Western has assets of $366 million and market capitalization of $433 million. Gadgil Western has operations or collaborations with other companies in India, Dubai, Holland, Portugal, Singapore, Vietnam and Bahrain.
Operations include environmental services, energy, finance, petroleum, shipping and sugar. The company has joint collaborations with Valvoline of the United States and Mitsubishi of Japan, as well as Interline.
Interline has developed worldwide interest in its proprietary process, and has signed agreements to build refineries for Quaker State's Q Lube division, for Whelan Environmental Services of England and for Dukeun Industrial Company of South Korea.
The Q Lube refinery, which will be located in Salt Lake City, is scheduled for completion in September 1995. Up to 30 more refineries could be ordered by Quaker State, depending on the success of the initial plant.
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Investors shocked as court drops Prabhu's name
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01 JULY 1999 23:21 IST
Union environment minister Suresh Prabhu is perhaps relieved a bit now since he has finally succeeded in getting his name dropped as the prime accused, though on technical grounds, from the infamous court case of a banking fraud of over Rs 1.20 crore in Goa.
It came as a shock for around 100 investors two years ago when they found their cheques being dishonoured, issued by the Western Indian Financial Services Ltd, then headed by Suresh Prabhu, a reputed banker-turned-politician.
As judicial magistrates in two different courts had refused to drop Prabhu's name from the case, the Shiv Sena leader had then appealed to the district and sessions court, on the grounds that he had resigned from the non-banking financial company much before the fraud came to light.
The magistrates had refused to recall the process against Prabhu, raising serious suspicion about the date on which the union minister claimed to have resigned. While the investors had produced certified copies from the Registrar of Companies that Prabhu had resigned in March 1997, Prabhu had produced documents from the same agency, claiming that he had resigned in May '96.
The lower courts had however noted that the form 32 produced by the union minister was neither dated, signed nor stamped by the RoC, unlike the certified copy of the RoC produced by the investors. On the contrary, one letter by the RoC, produced by Prabhu, stated that "Prabhu appears to have resigned on 7 May '96."
In fact, one of the JMFC had even agreed to apply section 420 of the IPC, on the grounds that Prabhu did not make any provision for honouring the cheques. Prabhu's sole contention to drop his name was based on the claim that he had resigned before the cheques got bounced in November 1996.
The district and sessions judge Nelson Britto, while dropping his name now, observed that it was unjustifiable on the part of the magistrates in issuing process against Prabhu when the complainant had not made a statement under section 141 of the Negotiable Instruments Act that he was the in charge of and was responsible for the conduct of the business of the WIFSL while it was also not substantiated on oath under section 200.
Dropping Prabhu's name comes as a big setback for the investors, some of whom had invested their life-time earnings into it, as all the other directors are still absconding. They include Nandan Gadgil, Brijbhushan Nagpal and Narendra Kumar. The police are still unable to trace them while one investor has also approached the high court, complaining against police investigations moving at snails pace.
The investors are obviously now planning to challenge the order in the high court. Adv Gurudas Tamba, one of their lawyers, however wonders why these technical points, on the basis of which Prabhu's name is being dropped, were not raised by Prabhu's counsel either in the appeal or during the arguments. "At least we could have countered it successfully", he adds.
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Union minister Prabhu appears in court in scam case
Sandesh Prabhudesai in Panaji
Everybody thought he had flown down from Delhi to felicitate Advocate Uday Bhembre, noted Konkani writer, thinker and journalist, until he was then seen entering the court building and appearing before the judge as an accused in a multi-millionrore financial scam.
Suresh Prabhu, Union Minister for Chemicals and Fertilisers, finally appeared before the JMFC in Margao, failing which the court could have issued a warrant to arrest him. He has been avoiding the summons for quite a few months now.
He is facing a serious charge of duping several Goans to the extent of Rs 120 million as the former chairman of Western India Financial Services Limited, which wound up its business within one year in 1997 while the depositors' cheques got bounced.
This is a recent case filed by some investors from Margao while several other cases are still pending in other courts, mainly in Panaji. In fact, a case is presently pending in the high court, challenging the order of the district and sessions court dropping Prabhu's name from the case on technical grounds.
Email this report to a friend The investors are irked with the court judgement since the grounds on which Prabhu's name was dropped were never placed before the court for arguments due to which their counsels could not even counter it.
The investors feel lost because Prabhu is the only director of the WIFSL who is available. The banker-turned-politician is the elected MP and holding Union minister's position in the central government. His other former colleagues, Nandan Gadgil, Brijbhushan Nagpal and Narendra Kumar are still told to be absconding.
Although Prabhu had requested the JMFC in earlier cases to recall the process against him as he had resigned in May 1996, the form 32 he produced was neither dated, signed nor stamped by the Registrar of Companies. The investors had, however, produced a certified copy of the RoC, stating that he had resigned in March 1997.
Yet another case has been filed in the Margao court now while the Panaji-based investors are waiting for their petition to come up in the high court. Prabhu, while appearing before the Margao JMFC, has asked for exemption from further hearings.
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