The Polyester Prince (33 page)

After the initial appearance of 1Crti and Babaria in August 1989, the case disappeared from public view. Soon after the
CBI
took over, both the accused were allowed bail.

Babaria says Kirti Ambani arranged half of the Rs 50 000 he posted. The other characters like Sequeira also got bail, and sank back into the Bombay underworld.

Kirti Ambani was transferred to an obscure position in Reliance Industries and has not appeared in the press since. Babaria continued to live in the police barracks at Bhendi Bazar, but could no longer travel to big-time engagements in Dubai because authorities would not restore his passport. He continued to scrape together a living by organising evenings of ‘Bollywood’ musical hits, often to collect funds for a charity called the Young Social Group, of which Babaria himself was president.

A pamphlet produced for one such evening in 1996 said: ‘Prince Babaria, lately the most controversial international figure for his connection with big industrialists and others, has gained a lot of publicity in the press and TV, locally and internationally. Yet Prince is

“The Man of Music and Entertainment” and will always remain loyal to it.’

In 1992, Babaria tested his renown by ‘running as an independent candidate for the Kalbadev! constituency in the Maharashtra state assembly, but failed to garner a significant vote. Babaria says Dhirubbai donated Rs 200 000 to his campaign funds.

The conspiracy case has been neither withdrawn nor proceeded with, but remains in judicial limbo. The backlog of many thousands of cases in the Indian court system is a convenient place to bury politicised scandals. Whether the Kirti Ambani episode was a murder conspiracy or a frame-up was never put to judicial test.

In the second quarter of the year, India aches for the monsoon rains to arrive. The summer has built up into unbearable heat, driving all living things into shade from mid-morning to late afternoon, bleaching the landscape. The ancient rages (songs) liken the searing heaviness to the yearning of the cowherd maidens for the divine youth Krishna.

Eventually, the burning landmass of India sends up a giant thermal, pulling in cloud-laden winds from far out in the Indian Ocean. The monsoon works its way up the west coast and across into the Bay of Bengal, the rain front anxiously charted in the weather maps. But for Dhirubhai, the monsoon of 1989 was less a relief than a forerunner of the political deluges to come.

On 24 July, the monsoon brought cloudbursts to the Western Ghats and coastal hinterland of Bombay. The valleys around Patalganga became channels for the immense runoff; the new industrial zone built right by a river bank was soon under two metres of water. The Reliance factory had no protective flood walls, nor any flood insurance. Its much-inspected machinery was immersed in mud and water for days. It was ‘a disaster that threatened the very solvency of Dhirubhai’s company, which had just struggled back to real profitability after three years of financial jugglery It was a crisis that brought back some of the old Ambani magic, recalling the fast assembly of the original polyester yarn plant. Mukesh Arnbani once again assumed direct charge on the spot. Under the direction of its engineers, Reliance brought in an army of contract workers to disassemble the machinery, clean and oil each part, and then put the whole thing together again. The plant was back in operation after one month, a triumph of Indian labour intensity under expert direction. But even this brought its controversy. The Indian Express reported that Reliance was seeking Rs 2.25 billion in concessional loans from the government financial institutions, to finance yet another covert expansion under the guise of rehabilitation. By Septernber, the Syndicate Bank was organising an emergency consortium loan of a more modest Rs 850 million.

Another flood was undercutting the Congress government. V P Singh’s decision not to form a new party but to try to unify existing parties, was paying off. In October 1988, the splinters of the old Janata coalition began moving back together, with the merger of the Janata Party and the Lok Dal into the Janata Dal. A month later, the Janata Dal formed an alliance with regional parties from Assam, Andhra Pradesh and Tamil Nadu, called the National Front. As Rajiv neared the end of his five-year term, the National Front formed working relationships with the Left parties and, less trustingly, with the other main force opposing Congress, the Bharatiya Janata P” (
BJP
)-the Hindu nationalist party which had taken the old Jana Sangh elements back out of Janata. The elections on 22 and 24

November 1989 saw Rajiv’s Congress crash from its 415 seats of 1984 to only 192 seats in the 545-member Lok Sabha (lower house).

It was still the largest party, as the National Front had gained only 144 seats. But with support from the BJP’s 86 members and the Left’s 52, and with Rajiv relinquishing any claim to try to form a government, the National Front was invited to do so. After five days in which a leadership challenge from the veteran Janata leader Chandrashekhar was diffused, V P Singh was sworn in as prime minister.

Though he could not avert the storm, Dhirubhai had taken some steps to protect himself.

In July 1989, the Indian sharemarkets saw massive selling of Reliance shares by investment companies controlled by non-resident Indians. They were getting their funds back into foreign currency non-resident accounts, a necessary step towards repatriation and a protection against both a sharemarket fall and a currency collapse. If these were the Reliance-owned companies, it did not necessarily mean that Dhirubhai was selling out his own stock. Reports at the time said two sets of brokers appeared to be working on behalf of Reliance, one set to sell and the other to take delivery It was a sound precaution: over the two months to the election, the Reliance share price lost a third of its value, against a slight rise in the overall sharemarket. All other Ambani-related stocks (Reliance Petrochemicals, Larsen & Toubro, and various debentures) also fell. The institutions that had once rushed to help prop up his share prices now held back, anticipating a change of government. The investors who had converted their G Series debentures at Rs 72.5 now had a stock worth Rs 70. With some glee, the Indian Express reported that Reliance, ‘who straddled the industrial arena like a colossus during the Congress (1) regime, is now facing a winter of despair.”

The new goverrunent saw all of Dhirubhai’s old opponents back in power. Singh brought back the former Revenue Secretary, Vinod Pande, from rural affairs to be his new Cabinet Secretary The former Enforcement Director, Bhure Lal, was put on the prime minister’s staff as a special officer. The new finance minister was the proponent of public sector investment, Madhu Dandavate, who had also been a leading critic of the Ambani style.

Those seen as friends of Dhirubhai were now on the outer. The new government soon transferred the officials it saw as Dhirubhai’s protectors in the Finance Ministry, including the Finance Secretary, S. Venkitaramanan, the Revenue Secretary Nitish Sen Gupta, and the chairman of the Central Board of Direct Taxes, A. S. Thind. The
CBI
director, Mohan Katre, was retired and the agency set to work on tracking the Bofors and other scandals that had surfaced under the previous government. The Unit Trust of India’s chairman, Manohar Pherwani, and the Bank of Baroda’s chairman, Premiit Singh, were shifted early in 1990.

The various cases against Reliance were revived. On 12 December, the Central Board of Excise and Customs through its member K P Anand issued a fresh order accusing the Bombay Collector of Customs, IC Viswanathan, of ‘Inconsistent reasoning’ and ‘grave’ errors of judgement in his decision to drop the charge of smuggling in the extra polyester yarn plant. Reliance had illicitly imported four spinning lines, and deserved ‘severe penal action’. Viswanathan was transferred on 2 January 1990. The new Collector in Bombay, A. M. Sinha, took the case up again before the Customs, Excise and Gold Appellate Tribunal early in February. This time the former Additional Solicitor-General, G. Ramaswamy, who had tried to nail Wadia in the Thakkar – Natarajan inquiry, was back in private practice (while a lawyer who had appeared for the Indian Express, Arun Jaitley, was now in Ramaswamy’s old role). Ramaswamy now pleaded for Reliance, seeking a delay in the customs appeal because it was ‘personally inconvenient’ for him to appear before the summer vacation, and claimed that as one member of the tribunal had been his junior in court, the panel should be reconstituted. The lawyer for the Customs, Kapil Sibal, was having none of this. Ramaswamy said the pressure for an early hearing was part of a ‘political vendetta’ against Reliance.

Another minor customs scandal was later unearthed. Investigators in the Central Customs and Excise Board found that in November 1982, when Reliance was assessed as owing Rs 312.8 million in duty and a court action had failed, the then Collector of Customs in Bombay, B. V Kumar, had allowed the company to pay in 138 instalments over the next two years, resulting in an implicit interest cost to the government of Rs 30.3 million.2

Kumar was shifted in January 1990 from the Central Board of Customs and Excise.

In May 1990, the Bombay Customs revisited the Reliance plant at Patalganga at less than a day’s notice, and took detailed notes on machinery in the new purified teraphthalic acid plant. On 11 May, it issued a new show-cause notice of some 170 pages, alleging that Reliance had imported a
PTA
plant with a capacity of 190 000 tonnes, against its licensed capacity of 75 000 tonnes a year. The captive paraxylene plant, declared to have a capacity of 5 1 000 tonnes, could actually turn out about 400 000 tonnes a year, according to the Customs evaluation. The under-deciaration at the time of import was put at Rs 1. 74 billion, and the duty evaded over Rs 2 billion. The response from Reliance spokesmen was that the charges were part of the same vendetta, promoted by Nusil Wadia. The machinery was all covered by licences, and the excess capacity was authorised under the government’s ‘re-endorsement’ Scheme.3

From January 1990, the new government had also been scrutinising the tariff protection given to Reliance. Officials from the Ministries of Finance, Textiles, and Petrochemicals had been studying the import duties on polyester fibres and their inputs, with a view to sharp cuts. According to the press reports, the government saw lower tariffs as the simplest way to cut Reliance down to size: it could be carried out almost instantly with few avenues of legal appeal, and would be politically saleable as a move to cut cloth prices.4 On 25 February, the government enforced a 25 per cent cut in the price of
FTA
.

But it was in the new corporate alliance with Larsen & Toubro that the Singh government managed to hit Dhirubhai the hardest. The financial institutions, which still had a combined 37 per cent holding as against the Ambanis’ 20 per cent, were instructed to remove Dhirubhai from the firm’s chairmanship. In early April 1990 the Life Insurance Corporation took the first steps towards calling an extraordinary general meeting of shareholders to have all the Reliance nominees removed from the board. On 19 April, Dhirubhai bowed to the pressure and resigned, on condition that the three other Reliance men stayed on the board. A career manager with various public-sector enterprises and banks, D. N. Ghosh, replaced him as chairman. Ghosh’s first action was to get Larsen & Toubro to sell off the Reliance shares on which the firm had spent Rs 760 million a year earlier. The sale, at an opportune moment later in the year, actually made the firm a Rs 170 million profit. The second action was to reduce the lin-iit on supplier’s credit to Reliance to Rs 2 billion-and that only to cover work being done by Larsen & Touhro itself The proceeds of the Rs 8.2 billion debenture issue, successfully floated in October 1989, were diverted to Larsen & Toubro’s own expansion in cement and machinery manufacturing.

The prize had been snatched away. Dhirubhai was left with a huge gap in his financing for his gas cracker at Hazira, for which costs had escalated from the original Rs 7.2 billion to about Rs 8.46 billion. The Indian financial institutions were talking about bridging finance, but insisting that Dhirubhai first tie up his technical agreements for the plant and get the land transferred from the Gujarat state government. They were also humming and hawing about the special funding for the flood clean-up and repairs at Patalganga. The Reliance share price sank even lower, to levels not seen since the company’s early days, hitting a low of Rs 50 in March.

Dhirubhai’s new newspaper, launched as the Observer of Business and Politics in December 1989, was not the influential voice that his son Anil and son-in-law Raj Salgaocar had expected. Dhirubhai had taken more direct control himself, as it became clear that the new government was going onto the attack against Reliance. He began to have suspicions about the paper’s editor, Prem Shankar Jha, who had been keeping company with Ram Jethmalani, daughter of Dhirubhai’s old legal and political foe Ram Jethmalani. Two trusted journalists, R. & Mishra and B. S. Unniyal, were appointed as deputies. Jha himself had been approached by V P Singh in February 1990 to become the prime minister’s media adviser, but had asked for six months to make a decision. He returned from a trip to Kashmir late in March to find that two senior writers had resigned over Unniyal’s policies. Jha warned Dhirubhai that some 50 of the original 58 journalists were also close to quitting. But within two weeks, Jha himself had decided to quit and told Dhirubhai he was joining Singh’s office. ‘It was the only time I have ever seen him silenced,’ Jha remembers.5 ‘

The mood at Reliance became ever more defensive. For the public record, Dhirubhai and other figures put a brave face on things. But the tone of the company’s anonymous briefings to journalists became one of hurt pride, of a wrongly persecuted victim.

Dhirubhai and his boys had recognised that the names Reliance and Ambani required some image work. Kirti Ambani had been hustled out of his public relations role after the murder conspiracy scandal the previous year. The ‘corporate affairs’ side of the company was greatly expanded, with the recruitment of skilled publicity managers in both Bombay and New Delhi.