Archive for March 29th, 2014

मुखोटा Magic: BJP-Congress, FDI-FII.

29 March 2014
I have set a google news alert with keywords, India and Supreme Court. That threw up yesterday a news item, which instantly grabbed my attention. Before we come to the news itself, a little background of why it grabbed my eyeballs. Arvind Kejriwal had Congress in his crosshairs, since the days of India Against Corruption (IAC) movement, for the corruptions and scams that were stumbling out with no end in sight. He was then abused as the Hindutva and Sanghi stooge. Later he and some of his colleagues decided, though not Anna Hazare and Kiran Bedi –who stridently declared that IAC would remain *apolitical* but much later Hazare declared support to Mamata Banerjee only to do a volte-face, and Bedi revealed she is a closet-acolyte of Narendra Modi-; to form a political party to realize their goals. The nascent outfit, Aam Adami Party (AAP), fought Delhi elections some months ago and performed remarkably well to decimate the Sheila Dixit led Congress government with second highest seats tally. However, AAP also dashed the dreams of BJP to ascend the Delhi’s Nano-Throne as a prelude to the bigger prize. The 2014 general elections were looming large by then, and Congress looked set to lose these even before they were declared. Not so much because of the corruption scandals, but due to the persistently high food inflation of past years and stagnant economy. Corruption and shrinking opportunities though played a large role in the buildup of vast resentment and anger among urbanites, especially youth. BJP and Modi started systematically and somewhat successfully tapping into this anti-Congress reservoir for electoral gains. What may have looked to Modi and his strategists a cake walk to gain power on their own at the center, started looking less and less sure because of AAP’s success in mobilizing people and Kejriwal’s identification of BJP as the other side of the corruption coin. Didn’t BJP’s Karnataka CM, Yediyurappa, had to quit on corruption charges?, to rejoin his parent outfit with blessings of Modi. Doesn’t Modi have two ministers in his state cabinet with serious charges of corruption, one of them of also murder, while the other has even been convicted by trial court? Moreover, Kejriwal started emphasizing that even if BJP were to replace Congress, there would be little difference in economic policies and red carpet treatment of crony capitalists. Modi called Kejriwal and AAP Congress’s B team, or bluntly put Congress stooges. The abuses had turned 180 degrees. Since corporate media has projected Modi an overwhelming front-runner, AAP has turned its scathing scrutiny on Narendra Modi. Kejriwal says *Gujarat Development model* is only for Ambani and Adani, and not for Aam Adami. Modi would give India, he says, to Ambanis and Adanis on a platter just as he has given Gujarat in utter disregard to the interests of the people of Gujarat. Whatever मुखोटा (Mask) –Congress or BJP-, -Narendra Modi or Rahul Gandhi- comes to power doesn’t matter is his principal charge; the real power will remain in the hands of crony capitalists led by Ambani. Govindarchaya was kicked by Hindutva forces into wilderness after being their principal ideologue not so long ago for daring to speak the truth: He had called Vajpayee, when latter was the prime minister, the Secular- मुखोटा (secular mask) of the Hindutva forces.
It is the systemic truth of the capitalist, liberal, and representative, democracy that citizens may choose the candidates available in the election fray, but the policies are ultimately selected by the money bags. This may look like a peculiar aberration of an improperly functioning Indian democracy, but actually holds good across the board, even in UK, USA or France. Look at the hopes and aspirations that Obama’s rousing speech making and the colour of his skin rode to the presidency. He won the Nobel peace prize even before he had really got going as president. What an irony in hindsight? He has exacerbated the war-hungry US-state and turned it into Surveillance-State as well. This state of affairs is not hard to fathom. Money, pots of money are required to stand for and win elections. Second, in this age of information overload, Media plays a crucial role in deciding agendas, filtering news, and running campaigns. Since media has been completely corporatized, it is no more in the business of reporting facts objectively, fully and facilitating understanding of issues. It seeks to shape and control the perceptions and psyche of its audience by converting readers into consumers of readymade, pre-fabricated news designed to subtly market policies and programmers that its masters want. That is George Orwell’s dystopia 1984: <<Those who control the Present, control the Past and those who control the Past, control the Future>>. That insight is a telling comment on the penchant of rulers or wannabe rulers to rewrite history. That’s why Truth is the first casualty when a *leader* opens his mouth, and Modi has turned it into *sublime art*. Lies are the first step, and repeating them are the next steps, in the project of rewriting history.
This longish background was necessary to know my response when I saw the news item: <<Supreme Court asks government to probe $1.08B investment in Reliance Industries>> or <<Supreme Court directs government to probe Rs. 6,500 crore investment in Reliance Industries>>. NDTV Profit has been very careful and circumspect in its report, whereas VC Circle has been more *daring*. Ambani and Narendra Modi, in future. Ambani and Man Mohan Singh, in the immediate past. (Remember the petroleum ministers who had to quit: Mani Shankar Iyyer, Jaipal Reddy; and those who replaced them: Murali Deora, Veerappa Moily; and why? and with what results?).
The Supreme Court has sought a report by the government on the steps the latter has taken after the High Commission of India in Singapore requested an investigation around three years ago pertaining to the alleged Rs 6,530 crore investment by Singapore-based Biometrix Marketing Pte Ltd and Strasbourg Holdingsin four Reliance Industries Ltd (RIL) companies.
Prashant Bhushan, an advocate and AAP leader, said recently that High Commission of India had said that major portion of this investment had come into Reliance Gas Transportation Infrastructure Ltd, which is 100 per cent owned by Mukesh Ambani personally.  Also, he stated that Biometrix is a company with no equity, no assets and a small company, which did not even file income tax returns in Singapore, still the investment made by it was single largest FDI into India from Singapore.
RIL refuted all the allegations made by AAP. “The investments by Biometrix were open, transparent and perfectly legitimate transactions in full compliance with the extant regulations. These investments in the Indian companies were made by Biometrix out of loans raised from ICICI Bank, Singapore branch.
The above quotes are from VC Circle report. The comments *ADVERSE* to Ambani have been attributed to Prashant Bhushan, and *REBUTTALS* to Reliance Industries Limited (RIL). Its coverage doesn’t even point out that RIL is not the entity that has received any foreign investment from Biometrix Marketing, Singapore, and as such had no locus-standi to issue a rebuttal. It doesn’t even ask a simple question that why should ICICI bank loan such huge amounts to a small entity for investments in Ambani entities when RIL can raise as much money as it wants in India? Moreover, neither of the two websites have cared to probe if there is any material evidence in the public domain to shed light on this *FDI*. Knowing a bit about Singapore’s thirst for leveraging information technology in governance, I decided to try my luck to do some *internet research*.
The first document I stumbled upon is the report put up by Department of Industrial Policy and Promotion (GOI) regarding the Foreign Direct Investment inflows from Singapore during the period January 2000 to December 2008. This period saw the governance by both National Democratic Alliance (NDA) led by BJP and United Progressive Alliance (UPA-I) led by Congress roughly in 50:50 ratio. The last page of the document tabulates the TOP contributors to FDI inflows. Biometrix Marketing Pvt. Ltd. made six investments in Relogistics Infrastructure Pvt. Ltd., Reliance Gas Transportation Infrastructure (3 times), Reliance Ports and Terminals Ltd.and Reliance Utilities Ltd. At least two of these companies are closely held (private limited), and probably by promoters of RIL alone. The total investment made by Biometrix Marketing is US$ 1.6404 billion. This figure is far higher than the US$ 1.08 Billion reported by VC Circle and it is not in Reliance Industries as wrongly reported in the headline. In terms of Indian Rupees the reported total investment is Rs. 6510.653 crores. NDTV Profit has got the figure right, but has again erred to term it investment in Reliance Industries.
Above document fully supports the charge of Prashant Bhushan that <<major portion of this investment had come into Reliance Gas Transportation Infrastructure Ltd, which is 100 per cent owned by…….>>
Then I decided to check the available status of Biometrix marketing Pvt. Ltd. and another firm, Strasbourg Holding Pvt. Ltd., mentioned in VC Circle report, on the website of Accounting and Corporate Regulatory Authority (ACRA) of the government of Singapore.
A perusal of above document shows that both Biometrix Marketing Pvt. Ltd (registration no. 200708453H), formerly known as ORNA Pte. Ltd. and Strasbourg Holding Pvt. Ltd. (registration no. 200708450R), formerly known as ODED Pte. Ltd. stand <<DISSOLVED – MEMBERS’ VOLUNTARY WINDING UP>>. Both the companies share identical address: <<190, MIDDLE ROAD, #12-10, Singapore (188979)>>. Singapore has been extensively mapped on Google and it even has street views of the island nation connected by a land route to Malaysia. Middle Road runs parallel to well-known Rochor Road and cuts across Victoria Street. Incidentally, it is also close to quarters known as *Little India*. The building at 190 Middle road is named Fortune Centre, and #12-10 refers to 12thlevel 10th apartment/office. What is interesting is that not only these two companies, but several others share the same address. Some more names I found were, AC Alliances, Megamark Systems (FE) Pte. Ltd. and Coragglo Asia. See the document below.
AC Alliances sounded like a promising name for a Law or Accounting practice. I struck gold when I located a business directory while searching for AC Alliances.
The above verifiable evidence seems to support the *charges levelled by the PIL petitioners’ lawyers* during the hearing on 27th August in Supreme Court.
During an investigation by Indian High Commission in Singapore, Biometrix was found a “one-room defunct company in Singapore” that does not do any business and was closed most of the time.
…. that Biometrix is a company with no equity, no assets and a small company, which did not even file income tax returns in Singapore, still the investment made by it was single largest FDI into India from Singapore.
The statement that Biometrix is a <> doesn’t make sense. That the company is wound up as per available information is a fact; and so is the status of its sister concern, Strasbourg Holding. That its registered office addresses were that of the Accounting and Auditing firm is proved, so it can’t be said to be closed most of the time. Second, the company couldn’t have been without any equity at the time it had Nameplate Existence. Also I doubt that when it continued to exist it had no obligation to file income tax returns with Singapore government. Those could have been nil returns are another matter. However, there is a way to verify the facts. All the above information including from ACRA site came free of cost, but behind a paywall there is still more information available for dissemination. A *Business Profile with Certificate of Production of Report by Computer [BPwithCert]* for S$ 16.50 and *Corporate Compliance and Financial Profile [CCFP]* for S$ 50.00 can be bought online provided one has Singapore phone number to enter on the site. That stymied my plan to lay my hands on the first of the two. Business profile and Financial Profile are similar, though not identical, but latter gives past 3 years Balance Sheets and Cash-flow statements. Procuring the latter should provide revealing information about the nature of operations of these two firms including shareholding pattern and would confirm (or deny) the charges levelled in the court room. Below document provides BPwithCert, first 5 pages, and CCFP, next 6 pages.
The foregoing also explains the mystery as to how so many companies have the same registered address. This is a very common practice that runs across many tax heavens like Cayman Island or BVI; investment funnels like Mauritius enjoying Double Taxation Avoidance Agreement (DTAA), such as with India; and even well regulated but low tax jurisdictions like Singapore (also has DTAA with India), who encourage easy registration of foreign or even local companies. Literally, tens of thousands of nameplate or shell companies are registered @^^C/o Accountant/Auditor/Lawyer’s office address^^ in these jurisdictions for the purposes of Tax Avoidance, Tax Evasion, Money Laundering, or Money Stashing. These act as playground and safe haven for world’s wealthy and powerful, because of the maze of structures and their opacity created by well-heeled Lawyers and Accountants. However, such jurisdictions are coming in for intense scrutiny and are more stridently frowned upon across the world, at least for public consumption, when Government Revenues are not growing commensurate with GDP growth because of transnational nature of mega corporations operating across several jurisdictions. The agreement on General Anti (tax-)Avoidance Rules [GAAR] by world community and their adoption by several countries are a step to plug these leakages in revenue. India had committed to its implementation in 2012-2013, but after intense lobbying by vested interests, government readily agreed through the mechanism of Shome Committee to its deferment till 2016. [for more on this read, Vodafone-1, Vodafone-2, Vodafone-3, GAAR, GAAR-2, Mauritius-1, Mauritius-2].
Now that one finds both Biomertix Marketing and Strasbourg Holding are wound up, it raises some very serious and troubling questions.
·        When the companies were dissolved, who did take over their assets and liabilities?
·        What happens to the over US$ 1.6 Billion invested by Biometrix Marketing in entities controlled by Mukesh Ambani?
·        Who repays the loan advanced by ICICI bank, Singapore Branch, (recall the claim by Reliance Industries!!) to Biometrix Marketing to funnel investment into Reliance entities in India?
·        Has the loan been squared off by transferring the equity held by Biometrix Marketing to ICICI bank? Does this have regulatory sanction in the absence of statutory liquidation of a company or the loan turning into non-performing asset? What collateral was offered when the loan was first made?
Though at the moment these would remain unanswered, this line of investigation is worth pursuing. Past few weeks the Indian stock exchanges are on steroids and recording new highs every other day. Dollar inflows have shot up, and rupee too is strengthening. Though, this seems heartening news for Indians, the euphoria is inexplicable. The real economy is still not showing any signs of recovery. One reason given is that the euphoria is on account of the expectations of change of government at the center. Not just any government, but one led by Narendra Modi –the Messiah and Savior of the corporate world. Or is it really the other way round? The euphoria has been orchestrated so that it helps Modi to win the mantle of Premiership. This phenomenon of jacking up markets is not new. It is called ROUND TRIPPING (RT). RT is a euphemism for Indian black money returning to India via DTAA heavens like Mauritius and Singapore in the मुखोटा of Foreign Institutional Investors’ (FII) Inflows. Participatory Notes (P-Notes) is the material from which this मुखोटा is fashioned. The flavor of this election season seems to be मुखोटा. If BJP and Congress, NDA and UPA, are equally corporate friendly; why is there a marked preference now for BJP over Congress in the corporate circles and mainstream media. The answer one astute commentator, I don’t remember the name, adduced was that Congress proved incompetent and impotent to stop or subvert various scam-investigations initiated by the High courts and Apex courts, whereas corporates are betting that a strong leader like Modi will succeed where Congress failed. Any takers?
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