How the ghosts of Jain hawala diaries and Coalgate returned to haunt cases relating to Sahara-Birla papers

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Court Cases That Could Have Shaken India
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7. Mining Birla

The blame can no longer be laid elsewhere. It is too much of a coincidence that in sensitive matters, the outcome of the CBI’s investigation invariably depends on the political equation of the accused with the ruling power, and it changes without compunction with the change in that equation.151

—Justice Jagdish Sharan Verma, 27th Chief Justice of India

The CBI has become a caged parrot speaking in its master’s voice. It’s a sordid saga that there are many masters and one parrot.152

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—Justice Rajendra Mal Lodha, 41st Chief Justice of India

Justices JS Verma and RM Lodha, during their tenures as Chief Justice, presided over two of the most sensitive, even iconic, cases to have been argued in the Supreme Court in the last three decades. Both generated considerable media attention, and dealt with the nexus between business and politics. During the proceedings, what was laid bare was the rot at the core of Indian society, the deep-rooted corruption in the working of the country’s political economy.

In 1996, Justice Verma took over the trial of the Vineet Narain v. Union of India case from his predecessor, Chief Justice MN Venkatachaliah. The case had shaken the national political discourse. When, for instance, the alleged involvement of LK Advani of the BJP was aired, he resigned from the Lok Sabha. Advani protested his innocence and promised he would return to active politics only after his name was cleared by the Supreme Court.

That came the following year, in 1997. The judgment of Delhi High Court Judge Mohammad Shamim stated that the evidence presented by the prosecution—the CBI—as notes in a diary did not conclusively establish criminality and bribe-taking.153 Advani and prominent politicians such as VC Shukla, P Shiv Shankar, Balram Jakhar and Sharad Yadav among others, were all let off one more year later because the Supreme Court did not consider the evidence in the form of the diaries sufficient to conclusively establish the liability of the accused—the Jain brothers.154

Nevertheless, a separate verdict of the top court in 1997 had ordered that several reforms be implemented in the functioning of the CBI. The agency’s role in probing the Jain hawala diaries and its failure to bring those found liable to book had come up before a three-member bench of the Supreme Court headed by Chief Justice Verma.155 The important fallout of this judgment was that the CVC was made responsible to oversee matters related to governmental corruption handled not only by the CBI but also the ED, then responsible for enforcing the Foreign Exchange Regulation Act (FERA). Directives were also issued regarding the modus operandi for the appointment of the director of CBI (that involved consultation with the leader of the Opposition in the Lok Sabha), the director of the ED and the Central Vigilance Commissioner. Batching together several petitions (only the first of which had to do with the Jain papers), the court noted, ‘A general impression appears to have gained ground that the concerned central investigating agencies [the CBI and ed] are subject to extraneous pressures and have been indulging in dilatory tactics in not bringing the guilty to book.’156 The court’s directives sought to change this perception, one that posed a serious threat even to the ‘unity and integrity of the nation’, until a law was enacted by the Parliament to this effect.

Justice Verma acknowledged that the directives were modelled on recommendations of an independent review committee set up by the Union government in 1993 that consisted of top bureaucrats and was chaired by home secretary NN Vohra. The committee’s objective was to take stock of what was already an open secret—the ‘nexus of criminals with businessmen, politicians or bureaucrats’ running, what it termed, a ‘parallel government’ in the country.157 (Perhaps the most prominent ‘mafia organisation’ under the committee’s scanner was the Mumbai-based criminal syndicate run by Dawood Ibrahim.) It recommended the setting up of a ‘nodal agency’ to monitor the functioning of the Union government’s domestic and external intelligence agencies. The Supreme Court picked up this report four years after it was written, and it was another six years later that one of the Vohra Committee’s important recommendations became reality—the office of the CVC was granted statutory powers by an Act of Parliament with the Central Vigilance Commission Act, 2003. What had begun as an effort to break up criminal syndicates ended up producing a legislation aimed at reforming the working of the executive.

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Sixteen years after the Vineet Narain verdict, in 2013, another three-judge bench of the Supreme Court (headed by Chief Justice RM Lodha) revisited its directions.158 The autonomy of the CBI had once again been questioned over its role in probing and prosecuting those involved in the scandal over allocation of acreages or blocks bearing coal. On 25 August 2014, the bench declared the allotment of almost every coal block by the Government of India between 1993 and 2010 as ‘arbitrary and illegal.’ The court said the allotment process used by ‘screening committees’ was opaque and concurred with a report of the Comptroller and Auditor-General of India (CAG) which estimated that the public exchequer had incurred a ‘notional’ or a ‘presumptive’ loss of a stupendous `1,86,000 crore (or, over US$33 billion) which could have been avoided if a competitive bidding process through open and transparent public auctions for coal blocks had been followed. All but four of the 218 coal blocks allocated during this period, under various coalition governments headed by both the Congress and the BJP as well as the Janata Dal-led United Front government, stood cancelled with effect from 24 September 2014.159 The judgment was a culmination to one of India’s most high-profile tales of political and corporate corruption.

The ghosts of the Jain hawala diaries and Coalgate returned to haunt the cases relating to the Sahara-Birla papers. These ghosts continue to hover over the polity although the court cases have fizzled out. The directives of the Supreme Court in 1997 and 2013 and the slew of changes launched thereafter was where yet another case of political corruption and corporate bribery had taken off. Since then, the Sahara-Birla diaries have trudged over desks of the executive and the judiciary, including multiple wings of the it department, CBI, CVC, ITSC as well as the Supreme Court. The institutions involved have taken body blows to their integrity and several of its key players resurfaced in the latest saga. For one, had it not been for the Supreme Court-monitored investigation into Coalgate, the Birla papers may have remained buried inside cupboards and lockers in an office building on Parliament Street in central Delhi.

This building housed an Aditya Birla Group company— Hindalco Industries Limited—that was raided by the CBI on 15 October 2013. Hindalco, a group company engaged in aluminium manufacturing, had come under the scanner over irregularities in the allocation of the Talabira II coal block in Jharsuguda district of Odisha that was meant for ‘captive’ use.160 Hindalco had entered into a joint venture with Mahanadi Coalfields, a subsidiary of Coal India Limited (CIL) and Neyveli Lignite Corporation (now NLC India Limited) to mine coal from Talabira II. CIL is the largest government-owned coal-mining company in the country (and the world), producing around 80 per cent of coal mined in India. Coal from Talabira II was meant for the Aditya Alumina and Aluminium Project, Hindalco’s smelter and power plant complex in Sambalpur, Odisha.

Hindalco was a flagship firm of the Birla group. Ghanshyam Das Birla, the founding patriarch of the undivided Birla empire, had managed the company himself. His demise in 1983 led to a splintering of the family’s cross-holding ownership of the group’s businesses three years later in favour of ‘individually’ owned enterprises. Hindalco was inherited by his grandson, Aditya.

When the business empire broke up in 1986, the largest chunk of the family silver landed up on Aditya Birla’s plate among the patriarch’s grandchildren due to the absence of male heirs in the other branches of the family.161 Beyond expanding its stake in media ownership—Shobhana Bhartia, daughter of former Congress Rajya Sabha mp Krishna Kant Birla, heads the Hindustan Times media group, while the Aditya Birla Group head Kumar Mangalam Birla has, through private investment firms, a stake in the Living Media/India Today/Aaj Tak media group—the Birla family has by and large maintained a low public profile.

The Birlas are Marwari banias or traditional businessmen and money lenders from Rajasthan in western India and belong to the Maheshwari jati or sub-caste of the Vaishya caste. Over four generations, the Birla family has been one of the biggest and most influential business groups in India, with interests in a wide variety of industries and sectors. The ‘father’ of the Indian nation, Mohandas Karamchand Gandhi, was assassinated on 30 January 1948 in the compound of Birla House, a spacious bungalow in New Delhi that was owned by GD Birla. The Birla dynasty, along with the Tata group, has been among the best-known names in the private sector. But, unlike the Tatas who remained aloof from politics, the Birlas were the chief financers of the Congress under colonial rule, ever since GD Birla’s personal association with Gandhi, a fellow bania himself, began in 1916.

The family made windfall profits from trade and speculation in raw jute and gunny during World War I, and by the early–1940s, had risen to the second highest position in the hierarchy of nationalist industrial titans, diversifying into textiles, sugar, paper and insurance. In the fading years of colonial rule, GD Birla was among eight industrialists in 1944 that drew up a Brief Memorandum Outlining a Plan of Economic Development for India, commonly known as the Bombay Plan. This document proposed that government or state intervention across the length and breadth of the land through a federal structure would be in the incipient national interest, moving its economy away from agriculture and towards industry.162 Several key ideas such as sector-based planning, phased development and state intervention in determining the composition of the industrial sector were adopted by the Planning Commission while drafting the First Five Year Plan.163

The Birla group has dominated private industry in India for close to a century. Though most individual members of the Birla family have maintained a relatively low public profile, certain activities of group companies have been controversial. One of the earliest, if not the first ever, books based on investigative business journalism produced in post-colonial times—The Mystery of Birla House—dealt with alleged tax evasion by the business house in 1950 emerging out of the close proximity of the Birlas with the ruling Congress government.164 It is this aspect of its history that came back into the limelight after the coal block allocation scam was revealed.

On the day Hindalco’s offices were raided in 2013, the CBI lodged an fir naming the chairperson of the Aditya Birla Group (and son of Aditya Birla), Kumar Mangalam Birla, for influencing public functionaries in favour of Hindalco in 2005; among such officials was former Union coal secretary PC Parakh.165 This was the fourteenth fir registered by the CBI during its Supreme Court-monitored investigation into the coal block allocation scam. Hindalco’s head office in Mumbai and its offices in New Delhi, Kolkata and Bhubaneswar were raided simultaneously. This investigation led to a former prime minister being questioned by the CBI, a first in the agency’s history. When the CBI dropped by the former coal secretary’s residence in Secunderabad, Parakh named Manmohan Singh as his co-conspirator. Singh, an Oxford-educated liberal economist, was Prime Minister at the time and had held additional charge over the ministry of coal when the Talabira II block was allocated to Hindalco under an expedited process.166

Observing that ‘a concerted effort was being made to manipulate the entire government machinery so as to protect the interest of M/s Hindalco,’ special judge Bharat Parashar on 17 December 2014 asked the CBI to record Singh’s statement.167 This led to the former prime minister being questioned by the bureau on 20 January 2015. On 11 March, the Special CBI court of Judge Parashar summoned Singh (he had demitted office in May 2014), Parakh, Birla and others (including an employee of the Aditya Birla Group named Shubhendu Amitabh) under the Prevention of Corruption Act, 1988. On 28 September, the CBI opposed an appeal by former Jharkhand chief minister Madhu Koda to summon Singh. On appeal, the Supreme Court stayed Singh’s personal appearance before the judge. In less than a month, the Supreme Court also stayed the summons issued by the Special CBI Court.168

During the search operation at Hindalco’s offices in New Delhi, the CBI retrieved cash from two steel cupboards amounting to `25 crore for which no records or accounts could be produced. The premises belonged to a firm called Aditya Birla Management Corporation Private Limited (ABMCPL), a group company registered in Mumbai that serves as the ‘apex corporate body’ providing ‘strategic direction and vision’ to other group companies.169 It shares its premises on Parliament Street with other group entities such as Hindalco, Century Textiles Limited, Grasim Industries Limited, and Essel Mining and Industries Limited.

According to a 167-page appraisal report of the investigation by the income tax department apparently prepared by Ankita Pandey, the deputy director of it (investigation),170 it was at this point that the it department was brought into the picture. This report later found its way into the hands of journalists, lawyers and activists, and chunks of it made it to the Supreme Court as part of the interlocutory application filed by Common Cause in its writ petition challenging the appointment of Chowdary.

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When one of the authors of this book spoke to Pandey over the phone on 3 November 2016, after the second set of papers related to the Sahara India Pariwar were discovered, the tax official said that she was on a long leave and was, in any case, not authorised to speak to journalists.

The details contained in the report indicated interesting aspects about the working of one of India’s most trusted business houses–the international market research and polling organisation Nielsen had ranked the Aditya Birla Group first on its annual Corporate Image Monitor the very year these investigations were taking place171–and provided insights, hitherto unknown, regarding major developments taking place across the country in which companies associated to the Aditya Birla Group were involved.

According to this appraisal report, the CBI team undertaking the search-and-seize operations had informed Pandey’s directorate over the phone about the ‘unaccounted’ cash worth `25 crore found on the premises of ABMCPL. (Additionally, cash worth over `26.5 lakh was also found but those tallied with records in the ‘regular books of account.’) The CBI had stated that ‘further necessary action in the matter’ could be taken by the it department. While the CBI registered an fir against group chairperson Birla the same day as the raids, the contents of the documents retrieved from ABMCPL’s premises did not make it into the charge-sheet filed, or any charge-sheet filed so far. As discussed earlier, the Supreme Court pulled up the CBI for this ‘omission’ two years later, when the coal block allocation investigations were under way.

Why had the CBI desisted from proceeding further? Apart from the it department, had any other phone calls been made by the investigative agency that day? The truth, at present, remains nebulous and might never be proved beyond doubt in any courtroom of this country. What is available, however, are the documents themselves. In the chapters that follow, we look at what these documents disclosed about the nexus between business and politics in India.

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151. Verma, JS, ‘Incredible CBI,’ The Indian Express, 11 April 2009, bit. ly/2ObYxUm.

152. Anon. ‘CBI a Caged Parrot Speaking in Its Master’s Voice: SC,’ The Hindu, 9 May 2013, bit.ly/2Og5u76.

153. Delhi High Court, LK Advani v. Central Bureau of Investigation, 1997 IIIAD Delhi 53, 1 April 1997, bit.ly/2F0rbsv.

154. Supreme Court, Central Bureau of Investigation v. VC Shukla and Others, 2 March 1998, bit.ly/2qdEdZl.

155. Supreme Court, Vineet Narain and Others v. Union of India and Another, 18 December 1997, bit.ly/2EP0dUj.

156. Ibid.

157. Ibid.

158. Supreme Court, Manohar Lal Sharma v. Principal Secretary and Others, WP/ CRL/120 of 2012, 17 December 2013, bit.ly/2CMXTea.

159. Supreme Court, Manohar Lal Sharma v. Principal Secretary and Others, WP/ CRL/120 of 2012, 25 August 2014, bit.ly/2CI3mTn.

160. A term used in the mining industry that refers to the mining of a mineral for use only in the authorised production unit attached to the mine.

161. Ninan, TN, ‘Birla Group Divides Business, Aditya’s Branch of the Family Gets Lion’s Share,’ India Today, 30 September 1986, bit.ly/2SmtAjE.

162. Kudaisya, Medha, ‘‘The Promise of Partnership’: Indian Business, the State, and the Bombay Plan of 1944’ in Business History Review, Volume 88, Issue 1, 97-131, Cambridge University Press, 2004.

163. Sanyal, Amal, ‘The Curious Case of the Bombay Plan’ in Contemporary Issues and Ideas in Social Sciences, Volume 6, Issue 1, Society for Research in Social Sciences, 2010.

164. Burman, Debajyoti, The Mystery of Birla House, Jugabani Sahitya Chakra, Kolkata, 1950.

165. Anon. ‘Kumar Mangalam Birla Embroiled in Coalgate Case with CBI Filing 14th FIR,’ The Financial Express, 16 October 2013, bit.ly/2OUf2K0.

166. Mukul, Jyoti, ‘How Manmohan Singh Became ‘Conspirator Number 3’ in Coal Scam,’ Rediff.com, 12 March 2015.

167. Anon. ‘Coal Scam: Chronology of Events,’ Press Trust of India in The Hindu, 25 August 2014, bit.ly/2JiTfFL.

168. Rajagopal, Krishnadas, ‘Supreme Court Stays Trial Court Order Summoning Manmohan,’ The Hindu, 1 April 2015, bit.ly/2qf88jV.

169. Aditya Birla Management Corporation Pvt Ltd, Company profile, https:// careers.adityabirla.com/abmcpl

170. The appraisal report of an investigation is prepared by a tax official not involved in the search-and-seize raids. It recommends the future course of action to an assessing officer within the it department.

171. Nielsen, ‘Aditya Birla Group Leads Nielsen’s Corporate Image Monitor 2012-13,’ 25 March 2013, bit.ly/2EJ8OIa.