Investments in Purti Power & Sugar legitimate indeed..!!

 

I was baffled by the media reports that alleged 14 shell companies with fake addresses and directors having invested crores of rupees in Purti Power & Sugar ltd in which Nitin Gadkari used to be the chairman besides holding a minority stake (he resigned as the chairman after becoming BJP president).  He was accused of channelizing black money through ‘shell’ companies which amounts to money laundering.  Being a keen observer of politics and corporate scams, I decided to spend some time to understand the money laundering allegation against Nitin Gadkari and investments in the Purti group.  Ultimately I found that media has been misquoting facts and blowing issues out of proportion.  The allegations were NOT based on researched facts or investigation.  The media seems more interested in sensationalizing which only demonstrates their desperation to stay relevant in today’s 24*7 media.  Read on..

The first and the foremost allegation against Nitin Gadkari is the controversial investment of 47.34 cr in the Purti group by 14 ‘shell’ companies that have fake addresses, directors and are ownerless.  A closer look at the Balance Sheet of Purti Power and Sugar Ltd will reveal that the investment of 47.34 cr was made in 2002 and not recently as claimed by the media.  The 47.34 cr which is a little over 85% of the total share capital in Purti which is 55 cr, was made between 2002 and 2006 by a well known Nagpur based business group (The Mehta Group that manages an asset base of over 2000 cr) through 12 of its legitimate companies with real operations and NOT ‘shell’ companies as claimed.  It is worth mentioning that the IT department had conducted a probe in Purti way back in 2006 and has accepted that the 47.34 cr investment made by the Mehtas to be legitimate.            

If the 55 cr investment in Purti is lawful at the time the investment between 2002 and 2006, how come it is claimed to be illegitimate after 2010? 

A comprehensive look into the issue reveals that Mehta group, the genuine investors of Purti have transferred their shares from the 12 companies that made the original investment to 14 of its own ‘shell companies’ in the year 2010.  Please note that the Mehta group has taken ownership of these 14 shell companies and these are NOT ownerless companies as claimed.  Had only the media gone back in time to track the original source of the 47.34 cr in Purti, it would have realized that the investment is indeed genuine and not bogus.  This very fact demolishes the media’s pitch that investment in Gadkari associated Purti are made by ownerless and fake entities.  If the Mehta group decides to transfer 85% of shares in Purti to 14 of its own shell companies, the original investment of 47.34 cr made until 2006 DOES NOT become illicit overnight..!! 

Coming to the 14 shell companies, it is to be noted that these 14 shell companies were not created overnight to transfer the shares, as a matter of fact these 14 companies were owned by the Mehtas ever since 2003-04 and have even been pledged as collateral with nationalized banks as a substitute to Mr. Manish Mehta of the Mehta group.  That being the case, I do not understand on what grounds the media claims that these 14 companies are bogus and ownerless. 

Next question, why did the Mehtas transfer their shareholding in Purti to shell companies?  Read on.. 

Purti has been primarily operating in the backward areas an, as a result it had accumulated losses to the tune of 64 cr by the end of 2009.  Following which the loans sanctioned to Purti were categorized as NPA as per banking norms.  The RBI guidelines stipulate that if one loan becomes bad, all the loans given to the promoter group companies have to be categorized as NPA.  The Mehtas who manage business worth 2000 cr did not want their reputation to go for a toss just because Purti has become “sick”, therefore Manish Mehta effected a pretentious separation of his group from Purti by transferring his share holding to the ‘shell’ companies and pledged the shell companies with the banks as security for further loan.  Now this is a secretarial issue and cannot be considered as illegal or even immoral.  Though the above said restructuring in Purti might bind the Mehtas “morally”, Nitin Gadkari has absolutely nothing to be blamed of, neither moral nor legal.

Three facts are incontestable.  One, the investment of 47.34 crore by the Mehtas through 12 of their functioning companies have been accepted by the IT department as legitimate after thorough investigation.  Two, only the legitimate investment was transferred from 12 functioning companies to 14 shell companies (it is as simple as transfer of money from one pocket to another).  Three, the Mehtas are the true owners of the 14 shell companies which have been accepted by the Banks as collateral on behalf of Manish Mehta, which disproves the allegation that the shell companies are fake and ownerless.

Based on facts, any right minded individual will arrive to the logical conclusion that Nitin Gadkari is neither criminally nor morally culpable for investments in Purti.  Had only our media been a little more diligent and investigated the matter with patience, truth would not have been fabricated as it has been; nonetheless enough damage has already been done to malign the BJP and its national president which will ultimately help the Congress to counterattack the BJP when the issue of corruption is raised.  It is worth to point out that the total shareholding of Nitin Gadkari in Purti is less than a ‘lakh of rupees’.       

Let me confess, I am not a fan of Nitin Gadkari or his style of functioning, in my opinion he has a long way to go to even come close to tall leaders like Atal ji / Advani ji who have dedicated their lives in growing the party from day one and has been successful in making the BJP a viable alternative for the Congress.  However Gadkari‘s hands are clean with respect to investments in the Purti group, therefore there is no need for him to resign as the national president of the BJP just because certain sections of the media have made mindless contentions.  

Note: All the facts mentioned above are based on findings by Shri. Gurumurthy that is available in the public domain.  

Jai Hind