The Polyester Prince (14 page)

Dhirubhai used his clout. The Gujarati columnist Kanti Bhatt remembers being called upon for help by a newspaper editor who had offended Reliance by printing a hostile paragraph, apparently fed by a rival Marwari-owned company. Reliance had immediately cancelled all advertisements.

When he met Dhirubhai, Bhatt remembers him being furious, even throwing a telephone at one point. ‘Mr Ambani called in his advertising manager and said: “Show me our advertising plans.” Then he said to him: “Take out this particular newspaper.” it meant a loss of Rs 600 000 a year for that newspaper.’ After this charade, Bhatt went back to the editor and told him the message was that nothing could be written against Reliance if he wanted the ads. ‘The next issue was damage control, and a very long and favourable article was written,’ Bhatt said. Advertising was restored.

Later Bhatt was called in by Dhirubhai himself to find out why a Gujarati publication in Britain had suddenly begun printing a series of articles critical of Reliance. After talking to the publisher, Bhatt reported back: 1Sir, it is a plea for advertising.’ The plea was answered, and the articles stopped. ‘You could multiply these examples by a million,’ Bhatt said.

Dhirubhai could not wield the same power over the big metropolitan newspapers. But he could and did cultivate their journalists and editors. The Indian press tends to be like most of the other key institutions in the country: free, but in many parts corrupt except at the very top.

Bombay’s underpaid financial journalists are used to receiving gifts from businessmen wanting publicity, and their proprietors are happy to have their salary bill subsidised in this way. Press conferences are followed by buffet meals and drinks, and envelopes containing cash or gift vouchers are handed out by public relations officers on the way out. The envelope system has flourished most intensely during bull runs on the stock exchange when new company floats and issues have come thick and fast, and even a paragraph in a big English-language newspaper means recognition for a new company promoter.

In Paris, waiters are known to pay the proprietors of certain fashionable restaurants for the privilege of being able to wait at the tables and collect tips. In Bombay, some would-be business correspondents are willing to eschew salary altogether and even offer a monthly fee to the newspaper in return for being accredited as its reporter.

Reliance was a pioneer of envelope journalism. A senior commercial journalist in Bombay recalls that journalists would get vouchers worth up to Rs 2000 for goods at a Vimal retail outlet called Laffans. Some in senior positions would get regular monthly payments, or issues of Reliance shares and debentures at par. Ambani’s moles in the press were known as the “Dirty Dozen”,’ the journalist said. ‘The point man was Rasikbhai Meswani. He was a thorough gentleman. His door was open 24 hours a day for journalists. People would go to collect on first of the month.’

Dhirubhai also realised that the reporter was not the final arbiter of what got published.

He also cultivated desk editors and even editors. One who accepted Reliance debentures for himself, and help in arranging bank finance to pay for them, was Girilal Jain, editor of The Times of India for much of the 1980s.

The close journalists in the ‘Dirty Dozen’ would not only be used to get favourable news about Reliance printed prominently They also became an extension of Dhirubhai’s intelligence network, asking rival businessmen for their frank views ‘off the record’

about Reliance and then reporting them back. On the theory that rumour and gossip are more keenly heeded because they carry an aura of exclusivity, the pressmen would be used to plant opinions about the merits of Reliance activities and the failings of other companies.

Occasionally the journalistic network would turn up details of illegal or embarrassing activities by rivals that could be used to obtain peace, or failing that, turned over to authorities for punitive action or harassing investigation.

Many of the journalists regarded by their colleagues as being in the Reliance pocket would indignantly deny being bought. Indeed, some would have simply fallen for the perennial trap of getting too close to a source that had given them many good stories-and then having too much friendship or ego involved to admit any negative news. And especially for the news magazines that were the liveliest and fastest-growing section of the Indian media in the 1980s-the last decade before privately owned television arrived with satellite broadcasts-Dhirubhai and Reliance were a colourful and fresh story It was a highly effective image-making operation. But, perhaps inevitably, some accidental slips allowed the public glimpses of Dhirubhai’s secret manoeuvres.

The opening developed in 1983 when Finance Minister Pranab Mukharjee began giving some details in parliament to the response by non-resident Indians to the new sharemarket investment rules he had announced in his first budget, in February 1982.

Previously, NRIs had been allowed to make portfolio investments in Indian shares but were not allowed to repatriate their funds. The new system allowed
NRIS
, or companies and trusts owned at least 60 per cent by
NRIS
, to put money directly into Indian shares and to repatriate funds after selling their shares. It was implemented by the Reserve Bank of India in April that year-just as Dhirubhai was marshalling his response to the bear attack on his share price.

In a written answer, tabled on 10 May 1983, Mukharjee said that between April 1982 and April 1983, 11 overseas Indians had purchased shares and debentures worth a total Rs 225.2 million (then about US$22.5 million) in two Indian companies. It was widely believed that the two companies were Escorts and
DCM
, targets of the raider Swraj Paul.

On 16 May 1983, however, the Calcutta-based Business Standard reported that in fact all the investments had been made in one company, Reliance, by investment companies overseas. ‘It is believed that all these investment companies belong to Mr Dhirubhai Ambani himself, the promoter of Reliance Textiles.’

Answering questions from the leftwing opposition figure Prof. Madhu Dandavate on 26

July, Mukherjec listed the 11 companies allowed to invest in Reliance, all of which he said were companies registered in the United Kingdom. Among the conventional names, two of the 11 stuck out for their cheekiness: Crocodile Investments and Fiasco Investments. The investments in Reliance accounted for 98 per cent of all investments made by NRIs under the new scheme-suggesting to critics that here was yet another policy tailor-made for Dhirubhai.

The tantalising clues were taken up by The Telegraph, a stablemate of Business Standard in Calcutta’s Ananda Bazar Patrika group, a hometown press that had little time for Mukharjee even though he was a Bengali. On 16 September, the Telegraph’s reporters found that the companies named did not exist. Two months later, on 16 November, the Telegraph found that eight of the 11 named companies had appeared in the UK registry-but that the applications to register had not been lodged until 27 July 1983, the day after Mukherjee’s reply in the Indian Parliament. All were made through one channel, on the instructions of a single client.

On 22 Noven-vber, just as the parliament was about to rise for a week, Mukharjee tabled a correction to his 26 July reply. the companies were actually registered in the Isle of Man-the small island community in the Irish Sea. Mukharjee could have said he was technically right: the island is a British protectorate and part of the United Kingdom. But like the Channel Islands between Britain and France, it has its own tax laws and derives much of its income from providing tax shelters for foreigners. Mukharjee corrected some other minor mistakes in the company names also: it was Crocodile Ltd and Fiasco Overseas Ltd.

Editorials asked how closely the central bank had scrutinised the eligibility of the 11 companies under the
NRI
scheme, if the finance minister could not even get their domicile right. ‘Pranab Mukharjee: Minister of Finance or Reliance?’ went the headline in the Telegravh’s leader. Facing more questions in parliament and an attempted breach of privilege motion (rejected by the Congress majority) on 14 December, Mukharjee insisted the different place of incorporation ‘did not make any material difference’ about eligibility and appealed to MPs not to ‘kill the scheme’. The
RBI
had seen certified statements about the majority shareholders, but their identities could not be revealed on grounds of banker-client confidentiality. If ‘black money’ was being laundered through the
NRI
scheme, there were other laws to take care of it.

The press soon followed up the Isle of Man clue. In January 1984, India Today and other publications revealed that company searches showed the 11 companies had been registered between 1979 and July 1982, initially with various English names as directors.

In July 1982, the ownership and directors had changed: suddenly 60 per cent to 80 per cent of the share capital in each company belonged to people with Indian names, mostly with the surname Shah. In 10 of the 11 companies, common directors were two accountants domiciled in the Channel Island of Sark, Trevor Donnelly and his son John Donnelly, both well-known ‘facilitators’ believed to hold thousands of directorships in holding companies in various tax havens around the world.

In eight of the companies, the biggest shareholders were found to be one Krishna Shah, a resident of the English midlands city of Leicester, and his wife, three sons and a daughter-in-law. In five companies, a couple called Praful and Nalini Shah, living in Flushing, New York, were directors. Four companies had one or other of two residents of Djibouti, Chimanlal and Jyoti Dhamani, on their board. Only in one company, Tricot Investments, were Indian names not on the board.

A mystified India Today reported that Krishna Shah was a former Leicester city councillor, born in Kenya, who had come to Britain in 1959 and initially worked as a train guard with British Rail, before opening his own shop and then setting up a small knitwear factory which employed only five people. Shah told the magazine’s reporter he knew nothing about any companies in the Isle of Man.

Someone in the companies was remarkably well informed on investment conditions in India, however. On 20 August 1982, the
RBI
had lifted a Rs 1 00 000 ceiling on share investments in any one company by non-resident Indians. Three days later, three of the Isle of Man companies applied to the central bank to invest Rs 20 million each in Reliance. Four other companies applied together on 24 September. Six companies made their share purchases on the same day, 15 October, at the same share price, which was a significant discount to the then market price.

While each company had paid-up capital of only £200, three of them had managed to talk the European Asian Bank to lend identical sums of US$1.65 million to each, through the bank’s branch in Colombo, Sri Lanka, on 26 October 1982. M three bought Reliance shares at the same price, Rs 128.4 It was a sound piece of investigation, but no link with Dhirubhai had been found and many questions remained unanswered.

Had the reporters spread their questions wider in the Gujarati diaspora, they might have discovered a very old connection. The leading name in Crocodile, Fiasco et al. was the same Kirishna Kant Shah and fellow student activist whom Dhirubhai had helped spring from jail after the 1947 communal riot in Junagadh (see pp. 13-14). ,After finishing his education, Shah had gone back to join the family business in Kenya. In 1964 he moved to Britain on his own, working for an engineering company for two years and then as a railway guard for eight years. In 1970 he quit British Rail and set up his own shop in Leicester’s Hartingdon Road, selling hardware, saris, utensils and religious statues, and living in a flat upstairs.

His customer base was the fellow Gujaratis then congregating in Leicester after their expulsion from Uganda by Idi Amin at 48 hours notice in 1972, and the more gradual squeeze out of Kenya by Jomo Kenyatta’s Africanisation’ of commerce. By the mid-1990s, about one-quarter of the city’s 400 000 population were immigrants, about 80 000 of them South Asian. Almost all the 65 000 Hindus were Gujarati.

Shah was not very interested in making money from his fellow migrants. Instead he sought their votes. In 1973 he got himself elected to the Leicester City Council, becoming the first South Asian on a city council in Britain, and served for ten years. ‘He was not a great businessman,’ recalls S. B. Khandelwal, proprietor of the Sari Mandir emporium in the city. ‘He would often close up shop early to go on council business.’

Clearly, Shah did not have millions of dollars to put into Reliance shares, or the financial knowledge to set up elaborate ownership arrangements through the Isle of Man, where he had never been, or to take out loans from a foreign bank in Sri Lanka to finance the purchase of shares in India through an Isle of Man company.

He had however kept in touch with Dhirubhai, and his wife Induben had become a friend of Dhirubhai’s wife Kokilaben. On trips to buy textile machinery in Britain, Dhirubhai would take Shah along, while Shah introduced Reliance’s export manager Rathibhal Muchhala to many of the South Asian retailers in Leicester. In 1972, Dhirubhai brought his wife and children to Britain for a holiday and the two families spent some time together Later that year Shah’s oldest son Sailash, who had just completed a diploma in textile manufacturing, went off to a job at the Reliance factory in Naroda, where he stayed five years before returning to Leicester to help his father set up the new knitwear business. In 1977, Dhirubhai provided two cars for Sailash’s wedding.

Krishna Kant Shah died in 1986, in the midst of a fresh controversy about the mysterious Isle of Man companies. At a meeting in 1995, Sailash Shah maintained there had been no business connection between his father and Dhirubhai. Asked how it was that the Indian press and investigators had singled out his family as Dhirubhai’s fronts, he would say only. ‘I don’t know how.’

That Dhirubhai did have a connection with the Isle of Man was indicated by the appearance in India during the mid-1990s of one Peter Henwood. An accountant running a company in the Isle of Man capital, Douglas, called International Trust Corp (later
OCRA
Ltd), Henwood had been instrumental during the 1980s in arranging layers of ownership for Dhirubhai’s offshore holdings through several tax havens. Dhirubhai had become close to Henwood and his attractive wife, on whom he showered expensive gifts.