October 09, 2017

Amith-Sha-son-Jay-amith-modi

The turnover of a company owned by Jay Amitbhai Shah, son of Bharatiya Janata Party leader Amit Shah, increased 16,000 times over in the year following the election of Narendra Modi as prime minister and the elevation of his father to the post of party president, filings with the Registrar of Companies (RoC) show.

Company balance sheets and annual reports obtained from the RoC reveal that in the financial years ending March 2013 and 2014, Shah’s Temple Enterprise Private Ltd. engaged in negligible activity and recorded losses of Rs 6,230 and Rs 1,724 respectively. In 2014-15, it showed a profit of Rs 18,728 on revenues of only Rs 50,000 before jumping to a turnover of Rs 80.5 crore in 2015-16.

The astonishing surge in Temple Enterprise’s revenues came at a time when the firm received an unsecured loan of Rs 15.78 crore from a financial services firm owned by Rajesh Khandwala, the samdhi (in-law) of Parimal Nathwani, a Rajya Sabha MP and top executive of Reliance Industries.

One year later, in October 2016, however, Jay Shah’s company suddenly stopped its business activities altogether, declaring, in its director’s report, that Temple’s net worth had “fully eroded” because of the loss it posted that year of Rs 1.4 crore and its losses over earlier years.

The Wire sent a questionnaire to Jay Shah on Thursday seeking details about the shifting fortunes of Temple Enterprise and his other business ventures, as obtained from RoC filings, which he said he could not immediately respond to as he was travelling. On Friday, however, Shah’s lawyer, Manik Dogra, sent in a response with a warning that criminal and civil defamation proceedings would be launched in the event of “any slant or imputation which alleges or suggests any impropriety on his part.”

As is obvious, the story the RoC documents themselves tell do not indicate anything more than the bare fact of various loans and revenues, which have not been denied by Shah’s lawyer. The world over, it is normal for the business affairs of politicians’ relatives in democracies to be subjected to public scrutiny, especially when there is a sudden change in fortunes that coincides with an uptick in the political cycle. During UPA-II, for example, the Congress party spent the better part of three years confronting questions about how party president Sonia Gandhi’s son-in-law, Robert Vadra, had managed to grow his real estate businesses on the basis of loans, including unsecured advances by real estate giant DLF. Indeed the sharpest attacks on Vadra’s affairs were from the BJP.

Though Shah’s lawyer has not disputed the information drawn from Shah’s submissions – filings that companies must mandatorily make with the RoC to enable public viewing and examination – The Wire will be happy to publish any response from Shah as and when it is received.

The shifting fortunes of Temple Enterprise :

Temple Enterprise was incorporated in 2004 with Jay Shah and Jitendra Shah listed as its directors. BJP president Amit Shah’s wife, Sonal Shah, also has a stake in the company.

In 2013-14, Temple Enterprise did not own any fixed assets and had no inventories or stock. It also got an income tax refund of Rs 5,796. In FY 2014-15, it earned Rs 50,000 as revenue. However, in 2015-16, the firm’s revenues jumped to over Rs 80.5 crore, a growth of 16 lakh percent. Reserves and surplus turned negative to Rs 80.2 lakh from Rs 19 lakh the previous year. Trade payables were Rs 2.65 crore, up from Rs 5,618 the previous year. The assets of the company were only Rs 2 lakh. The firm had no fixed assets the year before. Short-term loans and advances were Rs 4.14 crore, up from Rs 10,000 the year before. Inventories were Rs 9 crore, up from zero the previous year, according to the firm’s filings.

The massive increase in revenues is described in the filings as coming from the “sale of products”. This included Rs 51 crore of foreign earnings, up from zero the previous year.

The filings also reveal an unsecured loan of Rs 15.78 crore from a listed entity, KIFS Financial Services. The revenue of KIFS Financial Services for the same financial year when the loan was given was Rs 7 crore. The annual report of KIFS Financial Services also does not reflect the Rs 15.78 crore unsecured loan given to Temple Enterprise.

Rajesh Khandwala, the promoter of KIFS Financial Services, first agreed to respond to The Wire’s questionnaire sent on Thursday seeking clarification on his firm’s dealings with Shah’s companies but subsequently did not respond to calls and messages. KIFS, a non-banking financial company (NBFC), has had run-ins with SEBI in the past.

Khandwala’s daughter is married to Parimal Nathwani’s son. Ahmedabad-based Nathwani heads the Gujarat operations of Reliance Industries and has operated for years at the intersection of business and politics. He is an independent member of parliament from the upper house. His re-election to the Rajya Sabha in 2014 was supported by BJP legislators in Jharkhand.

A source close to Amit Shah told this reporter that neither Nathwani or Reliance had any role to play in the facilitation of the unsecured loan from Khandwala’s firm to Temple Enterprise. On his part, Jay Shah’s lawyer said in his written response to The Wire that Khandwala is an old friend of the family.

“Rajesh Khandwala, the promoter of KIFS is the sharebroker for the family of Jay Shah for the last several years. This NBFC has been providing loans to Jay Shah’s and Jitendra Shah’s other businesses regularly for the last several years. Jay Shah has had family relations with Rajesh Khandwala much prior to the marriage of Nathwani’s son to Khandwala’s daughter, about 4 years ago,” says the statement from Shah’s lawyer.

In response to the query about the loan, Jay Shah’s lawyer wrote:

“Jay Shah, Jitendra Shah and their associates invested share capital and unsecured loans in this company [Temple Enterprise]. Since working capital facilities were not available to a new business/company, interest bearing Inter Corporate Deposits (ICD) were taken from time to time from KIFS Financial Services Ltd., a registered NBFC, to run this business. Tax has been deducted on the interest paid (TDS) regularly and the principal and interest amount has been repaid in full.”

In 2015, the same year KIFS provided an unsecured loan to Shah’s firm, Khandwala and Shah also formed a limited liability partnership (LLP), Sattva Tradelink, though this was dissolved later. The Wire had asked Jay Shah to describe his dealings with Khandwala, incuding Sattva Tradelink. Replying on Shah’s behalf, his lawyer said: “Though this LLP was formed by Jay Shah with Khandwala, in view of adverse market conditions no business was carried out and the LLP was wound up and has already been struck off from the Registrar records.” (emphasis added).

It is not clear what Shah’s lawyer meant by ‘adverse market conditions’, for the year the LLP was formed was also the year Khandwala’s firm lent Rs 15.78 crore to Shah’s company and the latter went on to book revenues of Rs 80.5 crore.

Specific questions to Khandwala about why the annual report of KIFS Financial Services for the loan year does not mention the loan to Jay Shah’s company went unanswered.

After the boom, the bust :

According to Shah’s RoC filings, Temple Enterprise is described as being engaged in wholesale trade and more than 95% of revenues come from the sale of agricultural products. “Temple Enterprise is in the business of import and export of agri commodities like rapeseed DOC, castor DOC meal, desi chana, soyabean, coriander seeds, rice, wheat, maize etc,” notes the statement from Shah’s lawyer. The statement also credits the business acumen of Shah’s partner, Jitendra Jayantilal Shah, and the education Amit Shah’s son received for the performance of the company. “The business ownership and management was principally held by Jay Shah and Jitendra Shah (an old family friend) and their associates. Jay Shah is a qualified engineer having done his B.Tech from the renowned Nirma University and Jitendra Shah was already engaged in the business of commodities for the last several years and his companies had been recording an annual turnover of over Rs.100 crore,” says the statement.

Shah’s lawyer also said a turnover of Rs 80 crore in the commodity business is not “abnormally high.”

What does appear a little abnormal, however, is that the firm, whose revenues jumped from just Rs 50,000 to over Rs 80 crore in a single year (FY 2015-16) stopped its business activities last year. The explanation offered by Shah’s lawyer: “Unfortunately, the business activities of the Temple Enterprise Pvt. Ltd. resulted in losses due to which the business activities were stopped sometime in October, 2016.”

From stock trading to power generation :

Kusum Finserve is a limited liability partnership incorporated in July 2015 with Jay Shah owning a 60% stake in it. It was formerly a private limited company, Kusum Finserve Private Ltd, before being converted into an LLP. The private limited company also got inter-corporate deposits from KIFS Financial worth Rs 2.6 crore in FY 2014-15. The partnership generated Rs 24 crore as income as per its last filings.

The filings also reflect an unsecured loan of Rs 4.9 crore but do not specify from whom. Shah’s lawyer says the main business of Kusum Finserve is “trading in stocks and shares, import and export activities and distribution and marketing consultancy services.” He adds that KIFS Financial Services has regularly been giving it loans. “This entity has also been regularly raising ICDs/loans from KIFS Financial Services for the last several years and the amount of Rs. 4.9 crore was the outstanding closing balance from them. These amounts were used for regular working capital. Tax has been deducted on the interest paid (TDS) and principal and interest amount has been repaid in full,” the statement says.

While the main business of the firm is trading in stocks, its RoC filings reveal it is involved in diversifying into a completely unrelated field: it is setting up a 2.1 megawatt windmill plant worth Rs 15 crore in Ratlam, Madhya Pradesh.

Loans from a cooperative bank, and a PSU :

Shah’s filings with the RoC also reflect Rs 25 crore worth of finance from the Kalupur Commercial Cooperative Bank. The board of directors of the bank include individuals from the Nirma group and Nirma university. The chairman emeritus of the bank is Nirma’s Ambubhai Maganbhai Patel.

The properties mortgaged include one owned by BJP president Amit Shah, valued at Rs 5 crore, and another transferred by an associate of Amit Shah, Yashpal Chudasama, to Kusum Finserve Private Limited in 2014. Shah did not reveal what the value of the 2002 square foot property was but market estimates put it at Rs 1.2 crore. Chudasama, a former director of the Ahmedabad District Cooperative Bank, was chargesheeted by the CBI in 2010 for attempting to “convince, coerce, threaten, and influence witnesses on [Amit Shah’s] behalf to conceal the truth from the CBI” about the fake encounter of Sohrabuddin and his wife Kauser-bi. In 2015, a special CBI court discharged Chudasama from the case, just as it had discharged Amit Shah too in December 2014.

Asked how Kusum Finserve had managed to raise a loan of Rs 25 crore from a cooperative bank against collateral valued at under Rs 7 crore, and whether other properties had also been mortgaged, Jay Shah’s lawyer said the bank did not give the firm a “loan” but a “non fund based working capital facility in the form of a Letter of Credit up to Rs 25 crore.” This facility is availed “from time to time,” says the lawyer’s statement. “This facility has been secured on usual banking terms which include hypothecation of the goods purchased under the LC, cash margin of 10% and collateral security of a property belonging to Jay Shah’s father and another property of Kusum Finserve (purchased on April 5, 2014 through a duly executed purchase deed) which is duly reflected in the financial statement of April, 2014 to March, 2015,” says the statement.

“The bank receives payments before the retirement of LC on its due date resulting in this being a non-funded and no-risk facility for the bank,” Shah’s lawyer said.

Besides the cooperative bank, Jay Shah’s partnership has also availed of a Rs 10.35 crore loan from a public sector enterprise, Indian Renewable Energy Development Agency (IREDA), described as a ‘mini ratna’ on its website, in March 2016. It is controlled by the Ministry of New and Renewable Energy. Piyush Goyal was the minister at the time the loan was sanctioned.

“The loan taken from IREDA for setting up a 2.1 MW wind energy plant is based on the equipment prices prevailing at that point of time as per industry standards (approx Rs 14.3 crore) and duly appraised and sanctioned in the normal course of business. The outstanding loan as on 30-06-2017 is Rs 8.52 crore and interest and repayment of loan are regular,” says Shah’s lawyer.

What is not clear are the parameters by which a partnership whose primary business, according to Shah’s lawyer, is “trading in stocks and shares, import and export activities and distribution and marketing consultancy services” decided to apply for and get a loan sanctioned for a 2.1 MW wind energy plant despite lacking any experience in the infrastructure or electricity sector. The Wire has reached out to IREDA about its lending policies and will add its response later.

From Shah’s lawyer, a threat :

While replying to The Wire‘s questions on behalf of his client, Jay Shah’s lawyer warned that any story on Jay Shah’s business dealings could have adverse legal consequences:

“In view of the answers and explanations detailed above, the facts are absolutely clear and you are requested not to publish anything in this behalf, which would not only infringe my clients’ privacy rights but would also be libelous and/or defamatory.

“Jay Shah is a private citizen doing his legitimate business. His business transactions are honest, legal and bonafide. Your questionnaire indicates that your intention is to drag him into a false and a manufactured controversy. Any slant or imputation which alleges or suggests any impropriety on his part will not only be false but also malicious and defamatory. It will also be a breach of his fundamental right to privacy. He shall, in that event reserve the right to prosecute you for defamation and also sue you for the civil wrongs.

“Notwithstanding the above, if you or anyone in the print, electronic or digital media carries and/or broadcasts any defamatory and/or false imputations including those which breach his fundamental right of privacy and/or defame him, Jay Shah reserves the right to prosecute and sue such person/entity including anyone who carries or broadcasts a repetition of such libelous/defamatory statement.”

Rohini Singh is an investigative reporter who worked at the Economic Times till recently. In 2011, she broke the story of Robert Vadra’s business dealings with DLF.

(By Rohini Singh from thewire.in )