People's Democracy

Eloquent Silence Of Mr Shourie, The Crusader

Dipankar Mukherjee

“Is that sufficient cause to sell off a public asset and effect the sale in a manner that is nothing sort of downright scandalous? And what of Arun Shourie, a man who built his reputation as a public crusader? …………………. The ball in your court, Mr Shourie.” This challenge was thrown to Shourie; the crusader in Outlook dated July 19, 2004 on the issue of fraudulent sale of Centaur Hotel, Juhu Beach (CHJB), Mumbai. The issue came up in parliament but the crusader chose to remain silent till date. Why this silence from the habitual tale-twister?

EVENTS LEADING TO THE SALE OF CHJB

A look at the chronological events leading to the sale of 6 acre 371 room CHJB, a 5 star hotel owned by Hotel Corporation of India, a subsidiary of Air India, explains the silence.

• Ajit B Kerkar was a member of Air India Board and also a member of Board of Sub Committee on Disinvestment of the Hotel Corporation of India Ltd (HCI), which took the decision to sell Centaur Hotel.

• In the minutes of the meeting of Air India Board held on December 10, 1998, it was mentioned that the main objective of disinvestments in HCI was to meet Air India’s requirement of funds though CHJB was earning profit till that time. Table 1 shows the year wise profit of CHJB:

 Table 1

It was only in the year 2000-2001, when the disinvestments process was initiated the hotel started incurring losses.

•  Kerkar changed his role from a seller to a buyer when he as the Chairman of one Tulip Hospitality Services Pvt Ltd made the bid for buying CHJB in October 2000 and more interestingly this seller-cum-buyer became the only bidder in the final sale bid.

• Air India vide its letter dated 21.11.2001 informed Kerkar and his Tulip Hospitality Services Pvt Ltd (THSPL) that its financial bid for Rs153 crore has been accepted. THSPL was to make arrangement for payment of this amount within a maximum stipulated period of 30 days as per the terms of the Bank guarantee submitted by THSPL as a part of the financial bid.

• Thus the last date for payment of Rs 153 crore was 20.12.2001 failing which the bank guarantee was to be encashed and the deal was to be treated as cancelled. However, when the payment was not made, instead of terminating the deal and forfeiting the bank guarantee, extension was unduly granted to THSPL on one pretext or other. In a letter dated 28.12.2001, Shourie wrote to the minister of civil aviation stating that the validity period of Bank guarantee is up to 31.03.2002 and he hoped to resolve the issue before this. This was an usual Shourian way of confusing and covering up the violation of the transaction which mandated the purchase deal to be finalised by 20.12.2001 failing which the transaction was to be cancelled.

• As a matter of fact, on 22.02.2002 a group of officials of Air India and Hotel Corporation of India had proceeded to Delhi and visited Bank of Rajasthan Ltd with the specific objective of encashing the bank guarantee, but they were asked by the ministry of disinvestment not to pursue the same.

• The very next day, i.e on 23.02.02, disinvestment ministry intervened to help THSPL to arrange the requisite fund. THSPL having an authorised share capital of hardly Rs 5.05 crore could not manage Rs. 153 crore and hence it was the much maligned public sector banks who had to dole out this public money to finance sale of public assets. Shourie arranged the meeting in his office on 23.2.2002 between the bankers and Kerkar so that the sale agreement and the loan given by the bankers are finalised on the same day, ostensibly to ensure that the agreement to sell could precede the payment of purchase price of Rs 153 crore. How simple! Accordingly in the meeting it was decided that funding of the loans would be in the following pattern and the transaction would be finalised on 09.03.2002:

Table 2

                                                                                        129.00 Crore

Subsequently the funding pattern was changed with Vijaya Bank replacing Lord Krishna Bank, LIC & UTI Bank.

• So Rs 129 crore, out of 153 crore was funded by public sector banks to sell a public sector outfit. Privatisation had become a sophisticated art to cover up big fraud on public money.

THE RESULT OF PRIVATISATION?

• The first thing the new management did was to close down facility restaurant like Shakahari, Pakhtoon and Haipan.

• Brought down the classification of the hotel from Five Star deluxe to Three Star.

• The foreign liquor registration was suspended from 17.03.2002 for nonpayment of sales tax worth Rs 53.37 lakh and also transfer fee and registration fee.

• Employees family medical reimbursement outstanding amount reached as high as Rs 40 lakh

• Provident Fund, Life Insurance, Bank Loans and Tax deductions worth Rs 1.71 Crore deducted from staff salaries but not deposited to concerned authorities.

• Suppliers outstanding bills has reached Rs 4 crore.

• Taxes worth Rs 2.25 crore collected from guests have also not been deposited to the government exchequer.

• Continuous non payment of bank interest on loan which is going to burden the concerned banks with NPA.

• Notice to 510 employees on 25.06.2004 to proceed on leave prior to their release on VRS without making any payment.

THSPL is now reportedly taking steps to resell the hotel for Rs 350 crore, which means a neat profit of Rs 200 crore by Kerker and his company within 2 years without hardly any investment. Earlier the Airport Centaur Hotel in Mumbai was resold by Batra Hospitality Group for Rs 113 crore within 6 months of its purchase at a cost of Rs 83 crore. Look at the similarity! Hospitality Group, single bidder, funding by public sector banks and finally Shourie and his cronies in media applauding such fraudulent act of looting public money as great acts of economic reform! His silence on these scams is understandable. It is only an irony that members of such scam-tainted NDA government are now charging others of taint. But why is UPA government still shy of ordering a CBI probe into the sale of these two Centaur Hotels, ie Airport and Juhu Beach, in spite of the repeated demands of the Left parties based on solid documentary evidence?  This is actually a tip of the iceberg. All disinvestment deals starting from Modern Foods, BALCO, VSNL, ITDC Hotel, Jessop, etc, if inquired, would reveal the biggest scam perpetrated by the NDA government. UPA government should immediately start the process with these two HCI Hotels in line with the CMP declaration of transparency in governance. The government should probe all such deals, and cancel the fraudulent sale agreements transacted by the earlier government, after the probe.