Crony capitalism has been alive and kicking in India for a very long time.
One of the original crony capitalists in this country was Sanjay Gandhi, son of the then Prime Minister Indira Gandhi. Sanjay was a Doon school drop-out and had apprenticed as a motor mechanic at Rolls Royce in Great Britain in the 1960s.
He wanted to build a low priced people’s car called Maruti. His mother was the Prime Minister of the country and her colleagues in the government and the Congress party went out of their way to fulfil Sanjay’s dream.
In November 1970, a letter of intent was handed over to Sanjay Gandhi by Dinesh Singh, the then minister for industries. As Vinod Mehta writes in The Sanjay Story “The letter of intent was granted ‘on the basis of a paper proposal with no tenders called for and no impartial study’ for the mass production of 50,000 ‘low-priced’ cars per year made entirely of indigenous materials. In short, Maruti was licensed to match the total output of the other three domestic car manufacturers.”
But just a letter of intent wasn’t enough to get the project going. Land was needed to build the factory where cars would be manufactured and before that money was needed to buy that land. In stepped Bansi Lal, the chief minister of Haryana. “To his credit it must be said that Bansi Lal was the first to spot Sanjay Gandhi as a man of the future, as a man to hitch your bandwagon to,” writes Mehta.
Bansi Lal offered land to Sanjay Gandhi for the Maruti factory and at the same time gave him a loan to buy that land. As Kuldip Nayar writes in Emergency Retold about Bansi Lal “He was unscrupulous; means never mattered to him, only ends did. From being a briefless lawyer he had risen to be chief minister in less than a decade, and he wanted to go still higher. It was he who gave Sanjay, a 290 acre plot for the Maruti factory at a throwaway price along with a government loan to cover the amount.”
Despite all the help from Bansi Lal and the union government, Sanjay Gandhi’s people’s car never got going till he was alive. Production started only when Japanese car manufacturer Suzuki was roped in after Sanjay’s death in 1980.
Something similar has played out in Haryana where the current chief minister Bhupinder Singh Hooda seems to have gone out of his way to help Robert Vadra, the son-in-law of Sonia Gandhi, the chairperson of the United Progressive Alliance (UPA).
The IAS officer Ashok Khema brings out this nexus in a 105 page reply to the report of the committee constituted by the Haryana state government (dated October 19, 2012) to inquire into the issues raised by Khemka when he was the director general of land records.
This is how the story goes. Sky Light Hospitality Private Ltd bought 3.531 acres (or 5 bighas 12 biswas) of land from Onkareshwar Properties Private Ltd for a consideration of Rs 7.5 crore. This sale was registered on February 12, 2008.
Publicly available data on the MCA 21 portal of Ministry of Corporate Affairs, shows that Sky Light Hospitality is a company that was incorporated on November 1, 2007. As on March 31, 2008, the company had a paid up share capital of Rs 1 lakh. Upto September 30, 2011, its total paid up share capital was Rs 5 lakh. Robert Vadra owned 99.8% of the company and the remaining 0.2% was owned by his mother Maureen.
The company selling the land i.e. Onkareshwar Properties was incorporated as a company on September, 28, 2004. Its paid up capital as on September 30, 2011, stood at Rs 25 lakh. Of this 98% was owned by one Satyanand Yajee and the balance 2% by Godavari Yajee.
Paid up capital is the total amount of the company’s capital that is funded by its shareholders.
Various media reports have clearly established the link between Yajee and Hooda. A report published in The Economic Times today points out that “Satyanand Yajee, director of Onkareshwar Properties, which sold 3.5 acre in Shikohpur village to Vadra’s Skylight Properties, is general secretary of the All India Freedom Fighters Organisation(AIFFO) and is in charge of constructing and maintaining a memorial in the name of Hooda’s father Chaudhary Ranbir Singh in Rohtak.”
A report published in the Business Standard in October 2012, goes into even greater detail about the relationship between Hooda and Yajee. It points out the strong ties that Hooda has with the All India Freedom Fighters Organisation i.e. AIFFO. “Haryana Chief Minister Bhupinder Singh Hooda, too, has strong ties to this organisation. Before his death in 2009, Ranbir Singh, Hooda’s father, was working president of AIFFO. And, Hooda is a founder-member and working president of AIFFO’s sister body, All India Freedom Fighters’ Successors’ Organisation(AIFFSO), according to his profile in the Haryana Vidhan Sabha website.”
The report also mentions that AIFFO had spent lakhs of rupees in full page advertisements which praised Ranbir Singh’s contribution to the freedom struggle. As mentioned earlier Ranbir Singh was Hooda’s father.
Of course, just because Hooda and Yajee share a relationship does not mean that Yajee could not have sold land to Vadra.
So let’s get back to the land deal between Yajee and Vadra. Yajee’s Onkareshwar Properties sold 3.531 acres of land to Vadra’s Sky Light Hospitality. The price of the land was worth Rs 7.5 crore and over above this there was a stamp duty cost of Rs 45 lakh, for registering the sale.
As per Khemka’s reply, Vadra’s Sky Light Hospitality issued cheque number 607251 of Corporation Bank on February 9, 2008, to pay Yajee.
The question is how did Vadra’s Sky Light Hospitaliy with a paid up capital of just Rs 1 lakh(as on March 31, 2008) manage to pay an amount of Rs 7.5 crore for the land and Rs 45 lakh as stamp duty?
The answer lies in the fact that Sky Light Hospitality’s balance sheet as on March 31, 2008, shows a book overdraft of Rs 7.944 crore. This is almost equal to the amount of Rs 7.5 crore that needed to paid for the land, plus the Rs 45 lakh that needed to be paid as stamp duty for registering the sale.
What this basically means is that even though Sky Light Hospitality issued a cheque to Onkareshwar Properties, but the latter never got around to encashing it. As a report in the Business Standard dated October 16, 2012 points out “A book overdraft is not an overdraft at a bank but an excess of outstanding cheques on a company’s books over its reported bank balance.”
The notes to the account of Sky Light Hospitality also mention the same. “The overdraft shown in Corporation Bank account is book overdraft due to cheque issued before balance sheet date but not presented up to balance date, which is cleared after balance sheet date,” it is stated in serial no. 6 of the Notes To Accounts.
This can be confirmed from the balance sheet of Onkareshwar Properties as well. “Onkareshwar’s balance sheet as on March 31, 2008, showed an entry of Rs 7.95 crore under ‘sundry debtors’. This corresponds to the entry of Rs 7.944 crore book overdraft entered in Sky Light’s books. The land price was Rs 7.5 crore, and the balance Rs 45 lakh could have been registration and stamp duty costs. It appears Onkareshwar happily footed even these costs,” a report in the Business Standard dated Ocotber 27, 2012 points out.
So not only did Yajee’s Onkareshwar Properties not encash the cheque (it would have bounced if it tried to do so), it also happily paid the Rs 45 lakh stamp duty that needed to be paid to register the transaction.
The question of course is that if money did not change hands can the sale of the land to Vadra’s Sky Light Hospitality by Onkareshwar Properties be considered as a sale at all? This is something that Khemka points out in his reply. “If there was no payment as alleged in the registered deed, can it be said that the registered deed No. 4928 dated 12.02.2008 conferred ownership title over the said land upon M/s Sky Light Hospitality by virtue of the sham sale? Section 54 of The Transfer of Property Act, 1882 defines “sale” as a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. There was no promise to pay in the future in the registered deed. No price was paid as claimed in the registered deed No. 4928 dated 12.2.2008. The “sale” registered in the said deed cannot, therefore, be called a “sale” in the true sense of the term, legal or moral, and it cannot be said that M/s Sky Light Hospitality became owner of the land in question by virtue of the “sale.””
On March 28, 2008, department of town and country planning of the Haryana government issued a letter of intent to Vadra’s Sky Light Hospitality for grant of commercial colony license for 2.701 acres out of the total area of 3.53 acres. This was done within a mere 18 days of application, writes Khemka.
He further points out that “Sub-section (2) of section 3 of the Act of 1975 mandates that an enquiry will be conducted by the Director of Town & Country Planning, particularly with respect to the title to the land and the capacity of the owner-applicant to develop a colony.”
The phrase to mark here is the capacity of the owner-applicant to develop a colony. In order to check this capacity the owner-applicant (in this case Vadra’s Sky Light Hospitality), under Rule 3 of The Haryana Development and Regulation of Urban Areas Rules, 1976, needs to furnish among other things, particulars of experience as colonizer and particulars about financial position as to determine the capacity to develop the colony, Khemka points out.
So what experience did Sky Light Hospitality have in developing colonies? If one looks at the memorandum of association of the company, stamped by the Delhi government as on October 27, 2007, the main objects to be pursued by the company on incorporation were as follows:
So this makes it very clear that building colonies was not among the main objects of Vadra’s Sky Light Hospitality, when it was incorporated. As the Memorandum of Association clearly shows the main object of the company was to be in hospitality business, as was suggested by its name.
Nevertheless that did not mean that the company could not build colonies. Just that it did not have any previous experience in doing so.
As far as the financials of the company go, as I have previously pointed out as on March 31, 2008, the paid-up capital of the company was Rs 1 lakh. The company did not earn any income upto March 31, 2008. It had an expenditure of Rs 43,380 which was met through borrowed money. Hence, the company really did not have any capacity to build a colony.
As Khemka puts it “The “capacity” of the applicant-Company was nothing else other than Mr. Robert Vadra. The man became the measure of everything and the entire statutory apparatus a castle of sand.”
Once Vadra’s Sky Light Hospitality got the letter of intent from the Haryana government for a commercial colony license on 2.701 acres out of total 3.53 acres of land, things got even more interesting. Vadra’s Sky Light Hospitality now had the land title as well as the letter of intent for grant of colony license in its possession. This made it possible for it, to enter into a collaboration agreement with with M/s DLF Retail Developers, on August 5, 2008.
After this Sky Light Hospitality received a huge amount of advance or interest free loan from DLF. The balance sheet of the company as on March 31, 2009, clearly points out entries of Rs 15 crore and Rs 10 crore as advances received from DLF.
And this money paid by DLF was finally used to clear the dues of Onkareshwar Properties. As Khemka points out “this funding from the DLF Group was used to clear the dues of Rs 7.95 crores, i.e., Rs7.5 crores towards cost of land plus Rs 45 lakhs towards stamp duty, to M/s Onkareshwar Properties, the vendor-company in registered deed No. 4928 dated 12.02.2008.”
This is how the transaction was completed. This could not have happened without the Haryana state government granting a commercial colony license within 18 days of application to Vadra’s Sky Light Hospitality, which had no previous experience of developing a colony. The license was renewed on 18th January, 2011 for a further period of two years up to December 14, 2012, Khemka points out.
Vadra’s Sky Light sold off the 3.53 acres of land to DLF for Rs 58 crore on August 18, 2012.
In doing this Bhupinder Singh Hooda turned out to be Robert Vadra’s Bansi Lal. The moral of the story is that behind every successful crony capitalist there is a successful politician.
The article originally appeared on www.firstpost.com on August 13, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)
If ever there ever was a paisa vasool western it was Butch Cassidy and the Sundance Kid which starred Paul Newman and Robert Redford. The film other than having great visuals, a fast paced story line, brilliant background music and excellent performances by its lead cast, also had what is my favourite one liner from an English movie.
In a rather non-descript scene as Butch and Sundance head into the sunset, Butch says “Boy, I got vision, and the rest of the world wears bifocals.”
Nowhere is the statement truer currently than in the case of Robert Vadra, who has earned hundreds of crore without putting much of his own money at risk. As a line from a song in the movie Gol Maal (the original one made by Hrishikesh Mukherjee and not the recent Rohit Shetty series) goes “ke paisa kamane ke liye bhi paisa chahiye”.
Vadra broke the age old wisdom inherent in the phrase. He had the vision of figuring out how to make profits of hundreds of crore by putting very little of his own money into the business. Of course this clarity of vision wouldn’t have been possible to execute if he was not married to Priyanka Gandhi (now Vadra) India’s perennial politician in waiting.
The story started with Sky Light Hospitality, a company in which Vadra owns 99.8% stake, zeroing on 3.5 acres of land in Shikohpur, ten kilometers from Gurgaon, in February 2008. This land was bought from Onkareshwar Properties, then majorly owned by Satyanand Yajee, a man known to be close to Haryana Chief Minister Bhupendra Singh Hooda.
Yajee sold the land to Vadra for Rs 7.5 crore. The balance sheet of Vadra’s Sky Light Hospitality as on March 31,2008, clearly reveals that the company had a capital base of only Rs 1 lakh. Also the company did not have any loans on its books. So how did a company with a capital of Rs 1 lakh buy a piece of land worth Rs 7.5 crore? Over and above this stamp duty also needed to be paid, where did that money come from?
Vadra’s Sky Light Hospitality issued a cheque without having the requisite money in its bank account. Yajee did not deposit the cheque and supposedly also paid up the stamp duty. Soon Vadra sold the piece of land to DLF which valued it at Rs 58 crore. DLF gave an advance of Rs 50 crore on this. The first Rs 5 crore of this advance was paid out in early June 2008.
This money was used by Vadra to pay off Yajee. He also used the money to go on a major property buying spree across Rajasthan and Haryana, two states ruled by the Congress party and made a killing on it.
But some recent revelations made by the Outlook magazine show that Vadra could not have sold the land to DLF in the first place. “Documents seen by Outlook reveal that, till recently, the land did not have the required permission to be sold, leased or used for any other purpose (than for which it was sold to the buyer). In short, Vadra’s company (Sky Light Hospitality) could not by law sell the land (as it claims to have done in 2008) to DLF,” the article points out.
The land that Vadra had bought in February 2008 was agricultural land and agriculture land can’t be used for commercial use. The change of land use (CLU) was approved by the Haryana government in late March 2008. As The Hindu had reported earlier “A little more than a month later, on March 28, 2008, the Town and Country Planning Department issued Mr. Vadra’s company a licence to develop 2.701 acres of the land into a housing colony.”
So Vadra got the permission to develop the land into a housing colony in March 2008. But did that permission allow him to sell the land along with the licence? The answer is no.
As Outlook points out “As per one set of official records of the state government for 2008, 2009 and 2010, the permission the Shikohpur plot had was a ‘CLU’, which makes farmland fit for commercial use. This ‘licence’, officials say, could not have been transferred. Nor could a plot with CLU have been sold, sub-let, sub-divided, broken into plots, or developed in any way other than the CLU was originally meant for. In Skylight’s case, the permission is understood to have been for developing residential properties, though it is not yet known whose name exactly it was taken in. Subsequently, Skylight may indeed have decided to tie up with a builder such as DLF to develop homes—but would the company be permitted an outright sale, along with the licence? That’s something officials say can’t be done.”
What this means is that if Vadra wanted to build homes on the piece of land and sell them, he could do that. He could have even tied up with a builder and built homes. But he couldn’t have sold the land along with the licence to DLF. And that is precisely what he did.
This is proved by the statement issued by DLF on October 6, 2012. “M/s Skylight Hospitality Pvt Ltd approached us in FY 2008-09 to sell a piece of land measuring approximately 3.5 acres just off NH 8 in Village Sikohpur, Dist Gurgaon. This was licensable to develop a Commercial Complex and the LOI from Govt of Haryana to develop it for a Commercial Complex had been received in March 2008 itself. DLF agreed to buy the said plot, given its licensing status and its attractiveness as a business proposition for a total consideration of Rs 58 crore.”
So what DLF was paying for was essentially the licence that Vadra had to develop the land for commercial use from the Haryana government. The company has clearly said this.
This admittance by DLF raises another interesting question. The company has practically built a new city Gurgaon, often referred to as the Millennium City, from scratch. Given that why were they so naïve as to not be aware what the law as it stands was? Or was it just an attempt on their part to be nice to the first son-in-law of this country?
Vadra used the Rs 50 crore advance that he got from DLF to build a mini land empire for himself between 2008 and 2011. But all this had only been possible because he had the ‘vision’ to marry Priyanka Gandhi. The rest of us in the meanwhile were caught wearing bifocals.
The article was originally published on www.firstpot.com on November 17,2012.
(Vivek Kaul is a writer. He can be reached at [email protected])
Robert Vadra is a lucky man. A very lucky man indeed.
People sell land to him and do not demand money in exchange immediately. This is not money running into a few thousands or a few lakhs, but it’s more than a few crore.
In today’s edition of Business Standard N Sundaresha Subramanian explains how it all started for Vadra. How the son-in-law of the first family of Indian politics got into buying and selling land.
Onkareshwar Properties sold 3.5 acres of land in Shikhopur near Manesar to Vadra’s Sky Light Hospitality sometime in February 2008(as an earlier report in The Hindu suggested). Sky Light Hospitality as on March 31, 2008 had an issued capital of Rs 1 lakh. This was the money Vadra and his mother Maureen (who owned 0.2% of the company) had put into the company for business. The company had not taken any loans.
So the question is how did a company with Rs 1 lakh capital buy 3.5 acres of land? The sale deed for this land showed that it was bought by Sky Light Hospitality for Rs 7.5 crore. So how did a company which had Rs 1 lakh capital buy a piece of land which cost Rs 7.5 crore without taking on any loan?
Sky Light Hospitality’s balance sheet as on March 31, 2008 shows a book overdraft of Rs 7.94 crore in Corporation Bank Friends Colony, New Delhi. This basically means that a cheque was issued without enough funds being available in Sky Light Hospitality’s accounts. The cost of the land was Rs 7.5 crore. With a 6% stamp duty, the total would have worked out to Rs 7.95 crore (Rs 7.5 crore + 6% of Rs 7.5crore). And that is more or less the entry that sits on Vadra’s Sky Light Hospitality.
The question is how can a company issue a cheque without there being enough money in its accounts? This can only happen if the individual/company in whose name the cheque is being issued agrees not to deposit the cheque immediately.
And that’s what precisely seems to have happened in this case. As the Business Standard points out “Onkareshwar’s balance sheet as on March 31, 2008, showed an entry of Rs 7.95 crore under ‘sundry debtors’. This corresponds to the entry of Rs 7.94 crore book overdraft entered in Sky Light’s books.” So what this means is that Onkarshwar sold the land, accepted the cheque, did not deposit it immediately and also paid for the stamp duty in the meanwhile.
Vadra took this land and sold it to DLF sometime in June 2008. DLF valued this land for Rs 58 crore and gave Vadra an advance of Rs 50 crore against it. Vadra basically used this Rs 50 crore to go on a property buying spree in Haryana and Rajasthan. What this also meant was that Vadra bought land for Rs 7.5 crore and sold it for Rs 58 crore. And in the process made a profit of Rs 50.5 crore. All along he had invested only Rs 1 lakh of his own money in the deal.
Vadra got the advance of Rs 50 crore in three installments an earlier story in The Financial Express pointed out. The first of these instalments was paid on June 3, 2008, The Hindu had pointed out. It was this money that Vadra would have used to pay off Onkareshwar Properties. So what this means that Onkareshwar sold the property to Vadra in February 2008 and waited till June 2008 to be paid. That was a very considerate transaction in this day and age where every real estate company wants the money in advance.
A clear link has also started to emerge that the Haryana Chief Minister Bhupinder Singh Hooda may also have had a role to play in facilitating the deal between Onkareshwar and Vadra’s Sky Light Properties.
Satyanand Yajee owns 98% of Onkareshwar Properties. He is the general secretary of the All India Freedom Fighters Organisation (AIFFO), the Business Standard points out. “Satyanand Yajee, who turned Onkareshwar Properties, a company with capital of Rs 1 lakh, into a Rs 136-crore capital base behemoth, isn’t an obscure figure. He is an office bearer of the Delhi-based All India Freedom Fighters Organisation (AIFFO)…Haryana Chief Minister Bhupinder Singh Hooda, too, has strong ties to this organisation. Before his death in 2009, Ranbir Singh, Hooda’s father, was working president of AIFFO. And, Hooda is a founder-member and working president of AIFFO’s sister body, All India Freedom Fighters’ Successors’ Organisation(AIFFSO), according to his profile in the Haryana Vidhan Sabha website,” the paper writes.
And the link doesn’t end there. “Both Hooda and Yajee are sons of freedom fighters. While Satyanand’s father, the late Sheel Bhadra Yajee, hailed from Bihar and was said to be close to Subhash Chandra Bose, Ranbir Singh hailed from Rohtak and was irrigation minister of Punjab when the iconic Bhakra Nangal project was implemented. On a website in honour of Sheel Bhadra Yajee, the chief minister, with his father and son, Deepender Hooda, is quoted showering praises. Recently, AIFFO had spent lakhs of rupees in full-page advertisements praising Ranbir Singh’s contributions to the freedom struggle. ,” the Business Standard points out.
Given this it is not surprising that the Haryana government was in a hurry to give Vadra a clean chit on his property dealings in the state. Vadra’s real estate empire started with more than a little help from Hooda.
A part of the money that Vadra’s Sky Light Hospitality got from DLF was also used to buy plots of lands in Bikaner, as a DNA story reported a few days back. “In a flurry of deals between June 2009 and August 2011, Robert Vadra purchased at least 20 plots of land collectively measuring more than 770 hectares in Rajasthan’s Bikaner district, in a region that would see prices spiraling soon after. A clutch of investors, including Vadra, apparently privy to information on upcoming industrial projects (the Vavasi silicon chip project and the solar parks policy) in the vicinity, reaped huge profits with land values appreciating by up to 40 times since 2009,” the story pointed out.
In fact Vadra was willing to pay Rs 65,000 per hectare of land when the going rate was not more than Rs 30,000 a hectare. As the DNA wrote “Bikaner businessman and land investor Vineet Asopa, who sold among the largest plots to Vadra, was so surprised at the ease with which he demanded and received Rs65,000 a hectare when local prices were no more than Rs30,000 a hectare that he summoned contractors for an overnight survey of whether the land was rich in minerals.They dug 80 feet deep, found only rocky surface, and Asopa went ahead with the deal. He found out only two months later that the purchaser was Vadra, whose signature was on the cheques.”
This would not have happened unless Vadra was privy to information about the industrial projects coming up on the aird land he had been buying up. And this needed more than a little help from the government.
Ashutosh Varshney in a column in The Indian Express equates Vadra’s strategy of buying up land before anyone else does, to an honest graft. He quotes George W Plunkitt, a US state senator in the state of New York, in the late 1800s. “In a famous passage, George W. Plunkitt…said the following: “Everybody is talking these days about Tammany men growing rich on graft, but nobody thinks of drawing the distinction between honest graft and dishonest graft… Yes, many of our men have grown rich in politics. I have myself, but I’ve not gone in for dishonest graft — blackmailing gamblers, saloonkeepers, disorderly people, etc… There’s an honest graft… Let me explain by examples. My party’s in power in the city, and it’s going to undertake a lot of public improvements. Well, I’m tipped off, say, that they’re going to lay out a new park at a certain place. I see my opportunity and I take it. I go to that place and I buy up all the land I can in the neighbourhood. Then the board of this or that makes its plan public, and there is a rush to get my land, which nobody cared particularly for before… Or supposing it’s a new bridge they’re going to build. I get tipped off and I buy as much property as I can that has to be taken for approaches. I sell at my own price later on and drop some more money in the bank… Wouldn’t you?” (William L. Riordan, Plunkitt of Tammany Hall).”
That’s what Vadra is doing as well. His mother in law’s party is in power. He is tipped off about a new project coming up in states the Congress party rules. He just happens to be buy land before anyone else does being privy to information. And once the information is made public the price of the land goes up many times over in the months and years to come, and he sells out. Wouldn’t you, dear reader, be doing the same thing, assuming you were privy to information like Vadra is?
The article originally appeared on www.firstpost.com on October 27,2012. http://www.firstpost.com/economy/robert-vadras-midas-touch-is-based-on-inside-info-504707.html
(Vivek Kaul is a writer. He can be reached at [email protected])