President & Group Managing Director: Dr.Shelly Ahmed | Editor in Chief & Group CEO: M H Ahssan

Tuesday, August 13, 2013

Was Haryana CM Hooda, Robert Vadra’s Political Stooge?

By Vivek Kaul / Delhi

Crony capitalism needs a businessman and a helpful politician to pull it off. In the case of Robert Vadra, son-in-law of Sonia Gandhi, the friendly politician could well be Bhupinder Singh Hooda, Haryana Chief Minister.

The Hooda government’s role in helping Vadra make big money from real estate deals is not without precedent. One of the original crony capitalists in this country was Sanjay Gandhi, son of then Prime Minister Indira Gandhi. His business dream of making a low-priced car also depended on a friendly Haryana Chief Minister, Bansi Lal.
Some history is on order. 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 Industries Minister. 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 then 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 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 much-transferred IAS officer Ashok Khemka brings out this nexus in a 105-page reply to the report of the committee constituted by the Haryana state government (dated 19 October 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 12 February 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 1 November 2007. As on 31 March 2008, the company had a paid-up share capital of Rs 1 lakh. Up to 30 September 2011, its total paid-up share capital was Rs 5 lakh. Robert Vadra owned 99.8 percent of the company and the remaining 0.2 percent was owned by his mother Maureen.

The company selling the land, i.e. Onkareshwar Properties, was incorporated as a company on 28 September 2004. Its paid-up capital as on 30 September 2011, stood at Rs 25 lakh. Of this 98 percent was owned by one Satyanand Yajee and the balance by Godavari Yajee.

Paid-up capital is the total amount of a 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 acres 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 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 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 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 9 February 2008, to pay Yajee.  The question is how did Vadra’s Sky Light Hospitality, with a paid-up capital of just Rs 1 lakh (as on 31 March 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 31 March 2008, shows a book overdraft of Rs 7.944 crore. This is almost equal to the amount of Rs 7.5 crore that was needed to be paid for the land, plus the Rs 45 lakh that was 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, the latter never got around to encashing it. As a report in Business Standard dated 16 October 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 the 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 Business Standard dated 27 Ocotber 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.

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 28 March 2008, the 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 licence 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 coloniser 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 27 October 2007, the main objects to be pursued by the company on incorporation were as follows: “To carry on the business as hoteliers, hotel proprietors, hotel managers and operators, to establish and run restaurants, motels, inns, lodges, rest rooms, work as refreshment contractors and caterers, restaurant keepers, refreshment room proprietors, café and tavern proprietors, lodging house properties, ice-cream merchants, sweetmeat merchants, milk manufacturers and merchants, bakers, confectioners, professionals merchants, licensed victuallers, wine and spirit merchants, blender and bottlers.”

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 on 31 March 2008, the paid-up capital of the company was Rs 1 lakh. The company did not earn any income upto that date. 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 the 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 the grant of a colony license in its possession. This made it possible for it to enter into a collaboration agreement with DLF Retail Developers on 5 August 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 31 March 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., Rs 7.5 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 licence within 18 days of application to Vadra’s Sky Light Hospitality, which had no previous experience of developing a colony. The licence was renewed on 18 January, 2011 for a further period of two years up to 14 December 2012, Khemka points out.

Vadra’s Sky Light sold off the 3.53 acres of land to DLF for Rs 58 crore on 18 August 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.