The Centaur stink

the guilty have to be punished, whoever they may be. Unfortunately, ideological justification is being sought for covering up wrongdoings.

Objective of the sale

Was this sale disinvestment, or was it mere sale of government property through some middlemen? Para 4.0 of the minutes of the 172nd Board meeting of the Hotel Corporation of India held on 19.11.2001, where the sale transaction of the hotel was approved, states the objective clearly: ‘‘Managing director informed the members about the various transaction documents for the sale of business of various units except Centaur Lakeview Hotel, Srinagar.’’ In other words, it is ‘‘sale of business’’, not ‘‘sale of property’’ which formed the basis for invitation of Expression of Interest (EOI) from different bidders for acquiring these hotels on a ‘‘going concern’’ basis. The footnote in the CAG Report (page 41) clarifies clearly that the ‘‘going concern envisages continuance of operation of business by infusing superior technical and managerial skills besides additional capital’’.

This was the objective when the sale of Juhu Centaur was concluded in March 2002, realising Rs 153 crore, and Airport Centaur was sold in April 2002 at Rs 83 crore as ‘‘going concerns’’. What happened in September-October 2002? Airport Centaur was re-sold at Rs 113 crore by the buyer i.e. M/s Batra Hospitality Pvt Ltd. (BHPL) to Sahara Hospitality not as a ‘‘going concern’’, but simply as a property.

Did this happen suddenly? At least the Parliamentary Standing Committee on Transport & Tourism did not think so. From its 65th report, dealing with sale and resale of Airport Centaur Hotel, laid in Parliament in March 2003, I quote para 14 of the recommendation for the benefit of those who are talking (knowingly or unknowingly) for probe by PAC or JPC:

‘‘The Committee notes that the financial strength in respect of AB Hotels Limited (Radisson) was only taken into consideration for shortlisting M/s A L Batra. However, in the subsequent process Batra Hospitality Private Limited (erstwhile Batra Nibgo India Private Ltd) has been used as SPV. The list of companies of A L Batra Group, as given in the details submitted, does not include the name of M/s Batra Nibgo India Private Ltd., the name of which has been changed to Batra Hospitality Private Ltd. (BHPL). While AB Hotels Ltd does have the relevant experience of running five-star hotels and the financial strength of AB Hotels Ltd has only been taken into consideration for shortlisting, use of BHPL as SPV raises serious questions regarding the intention of the buyer. BHPL has been brought into the picture as SPV for acquiring the Centaur Hotel Mumbai Airport (CHMA) which appears to be a pre-motivated objective to dispose of the same, flouting the provisions/ conditions of sale, since the transfer of 100 per cent holding in BHPL will automatically lead to the transfer of the property and not sale of the property. This would not have been possible if AB Hotels Ltd had acquired CHMA. The Committee is of the view that the above issue requires a detailed investigation.’’

The NDA government did not agree to an investigation by CVC as recommended by the committee for obvious reasons. This was a clear property deal where a speculator earned Rs 30 crores within six months without infusing any technical-managerial skills or additional capital. The refusal to investigate two years ago led to the apprehension that the sellers had implicit knowledge about the re-sale, which they did not want to reveal at that stage.

This becomes explicit in the second case when there is a similar attempt to re-sell Juhu Centaur. Confronted with the reported deal of Kerkar to re-sell Juhu Centaur with a premium of Rs 250 crore to some builders (a gain of nearly 150 per cent), Arun Shourie, former Disinvestment Minister, says in an interview: ‘‘I have been hearing this for four months. When we sold it, I assumed he would sell it. When someone buys a property, he has a right to sell it 100 per cent.’’ (Outlook May 23, 2005). Interestingly, Kerkar also followed the same modus operandi of forming a SPV before buying the hotel.

This means the former Minister knew it would be re-sold. Further, he admits that someone is buying a ‘‘property’’ — not a ‘‘going business’’. Can we still call this disinvestment of business, or is this a property deal by a speculator? If the objective of the deal is to facilitate one Batra to earn premium of Rs 30 crore in six months, and to facilitate one Kerkar to earn premium of Rs 200 crore, then surely this is not ‘‘disinvestment’’. This is a criminal case to be investigated.

Airport Centaur

SOME of the other observations/ recommendations in the 65th report of the standing committee of Parliament are more revealing. For instance:

Recommendation Para 27:

The Committee is not convinced with the reply furnished by the Ministry of Civil Aviation that ‘‘unless the shortlisting criteria were changed, it was unlikely that any new bidder would have shown interest.’’ It may be pointed out that initially there were 17 parties who were shortlisted out of 19 parties who submitted EOI and subsequently four parties participated in due diligence. Hence, there was a qualitative change in the offer by reducing the turnover levy from 6 per cent to 2 per cent. The contention of the Ministry of Civil Aviation that it was unlikely that any new bidder would have shown interest is, therefore, not tenable.

Recommendation Para 28:

The Committee is of the view that the idea of reduction in turnover levy was to go for re-bidding by exploring ways and means to secure better response for re-invited bid. But, by restricting the invitation of the second round bid among the four parties only, the very purpose of reduction in turnover levy was defeated as only one bidder, that too the same for the earlier bid, remained in picture. Also, no thought was given to the views expressed by Shri R C Aggarwal, then managing director of Hotel Corporation of India. The second round of bidding was, therefore, clearly a case of considering a ‘‘single bid’’.

All the above objections were found tenable and reaffirmed by the CAG report No 3 of 2004 (PSU) and the CAG report No 2 of 2005. CAG report of 2004 which was reiterated in CAG report 2005 specified the loss of Rs 145.69 crore to the exchequer for the reduction in turnover levy and undercharging of lease rent. However, the following observations in Para 33 of the Standing Committee report sums up the cavalier approach to the public assets by the NDA government and the Ministry of Disinvestment in particular.

Recommendation Para 33:

From the position furnished by the Ministry of Civil Aviation, it is quite clear that the petrol pump was owned by the IOC, another PSU under the Ministry of Petroleum and Natural Gas. The Committee is unable to understand how the Ministry of Civil Aviation could get the valuation done and also proceed to transfer the ownership of the petrol pump without the consent of the concerned PSU and the Ministry. The Committee is of the view that neither the Ministry of Disinvestment nor the Hotel Corporation of India had the right to transfer the petrol pump to M/s Batra Hospitalities Pvt. Ltd. since neither of them were the owners of the petrol pump. This clearly shows that no proper thought was given to the selling process by the Government before inviting the Expression of Interest for the properties of HCI.

The CAG report has been labeled ‘‘unworthy of the high constitutional authority’’, ‘‘elastic foot ruler’’, etc., by those who claim to be the upholders of parliamentary democracy in the country. One shudders to imagine what choice epithets they will hurl at the standing committee. Incidentally, when Joint Controller General of Accounts P P S Bar, a member of IMG and the evaluation committee, expressed concern over lack of transparency and conflict of interest in the valuation of PSUs in September 2001 and the same was sought to be clarified through a starred question No 189 dated 3.12.01 in Rajya Sabha, the then Disinvestment Minister replied that the procedure followed in the case of MFIL has already been scrutinised by CAG and other cases of disinvestments are also in the process of scrutiny by CAG. So when CAG okays MFIL, he is worthy of high constitutional authority. Today he is not. If Laloo Prasad Yadav talks about the Election Commission, everybody including the media takes exception. Yet, no one bats an eyelid when CAG is so ridiculed.

Areas of discomfort

Two areas of discomfort which the Finance Minister referred to in his reply in the RS on 18.8.2004 regarding Juhu Centaur are:

• Repeated extension given to Kerkar in spite of his inability to arrange money for the purchase, a concern shared by the then managing director of Hotel Corporation of India and the meeting with bankers and bidder;

• the meeting with bankers and bidder on Sunday (sic) Feb 23, 2002.

Regarding repeated extension and non-encashment of bank guarantee beyond the stipulated date of 22.12.2001 when the transaction was to be completed, Shourie says: ‘‘The fact is we were left with one bidder in the end. And he was having difficulty in raising the money… When I ordered twice that his bank guarantee be encashed, the purpose was not to cancel the deal but to pressure him.’’ (Outlook May 23, 2005). This means inter alia that:

• If a buyer has difficulty in raising money, it is the solemn duty of the government to remove the difficulty, and of course according to Shourie ‘‘in a country where you have nationalised banks where else will any one get money from?’’

• If there is a condition in transaction to cancel the deal and encash the bank guarantee, it is only on paper and it is a minister’s sweet will not to cancel the deal but to put pressure in his own way.

The question is who was being pressurised on February 23? The bankers (to be precise those present were not even chairmen of the banks, but officials of the rank of assistant general manager, deputy general manager, additional general manager, general manager only) or the bidder, i.e. Kerkar?

Incidentally, on 22.2.2002, a committee comprising Deputy Secretary, Air India, Regional Finance Manager, Air India and Managing Director, HCI visited Bank of Rajasthan Ltd, Janpath, New Delhi, for encashment of bank guarantee. Why were they at the last moment advised by DoD not to take any action on encashment but to wait till Monday, the 24th of February? Why was MD, HCL absent in the meeting of 23.2.2002? Whether it is not a fact that HCI had appointed HDFC Bank as escrow agent in its 172nd Board meeting on 19.11.2001. Kerkar’s Tulip Hospitality Service Ltd (THSPL) vide letter 4.12.2001 requested that Canara Bank, Mumbai be allowed to act as escrow agent as they are lead bankers to consortium funding of the acquisition. Then why in the meeting on 23rd February, without the presence of MD, HCI, escrow agent was again changed to Bank of India at the instance of THSPL? Who pressurised whom? Who will find out what happened in that meeting?

Why CBI inquiry?

There are more questions which call for an immediate response to find out the intention behind this case, causing loss to the exchequer, as quantified in both the CAG reports, read along with the Standing Committee report. Who were behind these front companies which were used to buy a business and then re-sell it as a property? Being government property, this has to be investigated by a government agency.

Prima facie, this is a case of selling national asset to forwarded person after under-valuation. This is the very definition of corruption. The criminal intent behind this has to be probed. The sooner the better. This was discussed in Parliament thrice, starting with a Rajya Sabha debate on 4.12.2002 when the demand for a CBI probe first came from Shiv Sena, a member of the then ruling coalition. Who other than the CBI would investigate and interrogate all concerned including those who, as per CAG, facilitated the financing of one of the bids? Delay in starting the investigation would only facilitate intimidation of the kind as is being seen today in the media blitz by the former NDA ministers. All they want is to deflect our attention from a case of clear fraudulent deal. No matter how hard they try, they will not succeed in projecting this as a political and ideological issue.

The writer is a CPI(M) member of the Rajya Sabha