It’s a story that has all the classic and inherent ingredients of a mega scandal—a realtor operating in India, where most real estate deals are murky; a foreign promoter based in the Middle-East, where no distinction can generally be made between money and power; Indian promoters, who are well-connected in Delhi, and have residential addresses in Amrita Shergil Marg and Golf Links; friends of the promoters, who had access to a former Prime Minister of the country, and who were allegedly involved in an earlier scam; and, of course, two mega media organisations, which were shareholders.
More importantly, all the right persons and agencies knew almost everything about the various swindles. The Central Bureau of Investigation (CBI) collected 50,000 pages of documentation. The income tax authority nailed the perpetrators. The Enforcement Directorate (ED) was in the loop. In addition, the culprits announced it openly; the entire information was in the public domain. Yet, ironically, though it is commonplace in India, the individuals involved in the rip-offs were roaming around freely in the country, and abroad. Clearly, there was a deep nexus between Big Government and Big Business.
Our narrative can start from any year over the past 15 years. So, in order to make it simpler, we will start wherever we feel like, and shift to any year, which seems relevant at that point of the story. A good place to begin can be either in Delhi, Dubai or Hyderabad. It can begin with the former PM, Narasimha Rao, or the erstwhile Delhi Chief Minister, Sheila Dikshit. However, it doesn’t matter where one begins or ends. In the beginning, middle and end, you will invariably and consistently brush your shoulders with the protagonist, Shravan Gupta.
BEFORE the 2010 Common-wealth Games in Delhi, the contract to build the village, which would house the thousands of athletes, was bagged by Emaar MGF, a joint venture between the Dubai-based Emaar, and the Delhi-based MGF. The brain behind Emaar was Mohamed Alabbar, who is close to the ruling family in Dubai. His company constructed some of the iconic buildings in Dubai, which included Burj Khalifa, the world’s tallest building, and Dubai Mall, globally the largest mall. Promoted by the Dubai government, it operates in 14 nations.
He is one of the new hot shots in Delhi and country’s real estate sector. In less than 15 years, his companies have grabbed lucrative projects across India. Along with brother, Siddharth, and other family members, including his wife, sister, sister-in-law, and daughters, he owns the MGF Group, which also has a presence in motor finance and other automobile-related segments.
The Gupta family is close to the Sareen family, and they are related through marriage. Sharavan’s wife is the sister of Siddharth Sareen, who along with his father, are politically connected. They were once close to several Congress leaders, including former Prime Minister Narasimha Rao. The Sareens also had links with the current Congress supremo, Sonia Gandhi. In fact, the former worked closely with the Italian giant, Snamprogetti, which allegedly got mega projects in India because of its proximity to the Gandhi family.
Given several controversies that dogged Emaar MGF over the past decade or so, Shravan was forced to resign as the executive vice chairman and managing director of the company. In the interim, he split with his brother; while the former retained his stake in Emaar MGF and the MGF’s real estate business, Siddharth took charge of the automobile division. According to media reports, “There had been differences between Shravan Gupta and his youngest brother Siddharth Gupta for some time, but ‘there has been a family settlement where the differences have been amicably sorted out, and the legal document has been signed’, said one of the two persons with direct knowledge of the development….”
The face of MGF Developments is Shravan Gupta who, along with his brother, Siddharth and other family members, emerged as one of “leading shopping mall developers in Northern India”. The Guptas are well-connected in the Capital’s power circles. For example, they know the Delhi-based Sareens, who were named in the Rs. 133-crore urea scam during Rao’s reign. Their names have also cropped in other fertilizer projects-related controversies. According to reports, the Sareens acted on behalf of the scam-tainted Italian firm, Snamprogetti. With their base in Dubai, it was the Sareens the family members were directors in MGF, and owned shares in Emaar MGF—who introduced Shravan to Emaar.
According to media reports, the Rs. 700-crore contract for the Commonwealth Games Village “was a goldmine of project as the Delhi government was offering 27.17 acres on the bank of the Yamuna near the Akshardham temple for free. The builder was to spend money to construct 1,168 flats in 34 towers. The covered area was 4 million sq ft, including 4,000 bedrooms. Under the arrangement with the Delhi government, the developer would sell the flats after CWG and profits would be shared.” DDA would help find the new buyers.
Mohamed Ali Rashed Alabbar
Mohamed Ali Rashed Alabbar, founder and chairman, Emaar Properties, owns one of the world’s largest real estate development companies. He now has got into areas such as e-commerce and hospitality. With presence in over two dozen nations, the company’s annual revenues are over $4 billion with a market cap of $20 billion. Last November, he teamed up with Saudi Arabia’s Public Investment Fund and other private investors to launch a $1 billion “Middle Eastern-focused e-commerce platform”. He tried to team with Amazon’s Jeff Bezos.
Given the realities in the Middle East nations, Alabbar is close to the Ruler of Dubai, and vice-president and prime minister of the unified UAE. According to media reports, he is an advisor to both these prominent individuals. Alabbar’s power and clout can be gauged by the guest list in his son’s wedding in April 2017. The list included Chechnya president, the ruler of Dubai and UAE’s prime minister, the crown prince of Abu Dhabi, ruler and crown prince of Ajman, and the son of the King of Bahrain. In the past, Alabbar was a business partner with Al-Saadi Gaddafi, the son of the late Libyan leader, Muammar Gaddafi. He was allowed to visit Pyongyang, the capital of North Korea, on a private jet.
In his address to his shareholders, Alabbar said, “Today, across the world, business development models are being reshaped and economic and innovation cycles are shrinking. Companies that do not respond to these changes risk being exposed to irrevocable risks that affect their long-term prospects. We see the transformation around us as promising opportunities to create a new Emaar. We are drawing on the potential offered by Dubai as one of the world’s leading business, leisure and fashion hubs, and the opportunities in rapidly-growing international markets. We are implementing our strategy to make our high-growth businesses independent profit centres and continue to build smart cities of the future.”
Surprisingly, the then city’s lieutenant governor, Tejinder Khanna, Chief Minister Dikshit, head of the group of central ministers, Jaipal Reddy, and DDA declared Emaar MGF as the sole bidder. Of the 14 developers, which requested for the bidding documents, 11 qualified, but only two, Emaar MGF and DLF, were shortlisted. In the end, the DLF bid was disqualified. Instead of re-bidding, it was decided to award the deal to the single bidder. Later, Emaar MGF successfully asked for additional funds to complete the project on schedule.
In media interviews, Reddy clarified that “we could have cancelled the contract. But it would have meant huge delay. When we gave the developer extra money, we had no option. But we revoked his bank guarantee of Rs. 183 crore. DDA will make profit.” However, the allegations continued that it was the political connections that helped Emaar MGF to bag the lucrative deal. Once the games began, there were several reports about the lack of facilities at the Village, and the quality of the construction. Even now, the Village is partially inhabited.
IN the early 2000s, Emaar Hills Township, a group entity, joined hands with the Andhra Pradesh Industrial Infrastructure Corporation (APIIC)—in those days, the State was undivided—to construct and develop an upmarket township in Hyderabad. Spread over 535 acres, it was planned to include a world-class convention centre, a grand hotel, an 18-hole golf course and hundreds of villas. In 2004, when YS Rajasekhara Reddy became the Chief Minister of the State, three joint ventures were formed to implement the project. So far, so good.
According to the CBI, several decisions were taken over the next few years to enrich some of the managers of the private group and officials in APPIIC and the State government, and cause huge losses to the APIIC. Like in most real estate and township deals in the country, huge amount of cash was generated in the form of black money. Politicians and bureaucrats were favoured in the sale of the villas and, according to income tax authorities, involved tax evasion. For those in the realty sector, it was a classic business done in the traditional manner.
First, as usual, there was an understatement of revenues. This was to save the usual registration charges and stamp duty, and also to generate tax-evaded cash incomes. Initially, about two dozen plots were sold for a declared price of Rs. 5,000 per sq yard to friends and loyalists of the directors and senior managers of the private partner. However, in the case of another 13 dozen plots, while the deal price on the agreement was shown as Rs. 5,000, an additional Rs. 40,000-45,000 was collected as cash from the privileged buyers.
IN fact, a price of Rs. 45,000-50,000 per sq yard reflected the market price during the 2000s. During their interrogations, the key managers of the Emaar MGF Group admitted that no accounts were maintained for the huge cash component (80-90 per cent of the price), and the money was brought in huge gunny bags. Many of these hugely under-priced plots went to State politicians, cine stars and their relatives. According to media reports, they included a former Congress president, a relative of the Chief Minister, wife of a Rajya Sabha MP, family member of a senior BJP national politician and movie actors.
Second, when the real estate sector boomed in the mid-2000s, the marketing rights of the plots were transferred to Emaar MGF. Instead of Emaar Hills Township, the plot would be sold, and of course the black money collected, by a new group entity. This was done without the approval of the APPIIC and related to 285 acres of land. It obviously caused a huge loss to the State entity, which was a minority shareholder in Emaar Hills Township and, hence, had a right on the revenues that would accrue to the joint venture.
In public documents, Emaar MGF said that Emaar Hills Township had allegedly, “in violation of the terms of the collaboration agreement and without the knowledge of the APIIC and the Government of Andhra Pradesh, entered into a development agreement” with Emaar MGF, and the right to receive a majority of the revenues from the sale of land “was illegally transferred”. It was also charged that the “nominees of the APIIC on the board of directors of Emaar Hills have received illegal gratification for the suppression of this fact from the APIIC.” It was a private, cozy and lucrative back-room agreement.
Controversial wheels within wheels
There were other things that were wrong with the Hyderabad township project. APIIC held only a 26 per cent share in the joint venture, Emaar Hills Township. Critics said that the percentage was deliberately reduced to hike the revenue share of the private partner at the expense of the State entity. Even the 26 per cent portion was illegally reduced by the transfer of the development rights to Emaar MGF. The loss of revenue for the APIIC was estimated at Rs. 4,000-5,000 crore. Gupta was actively involved in these scams.
FINALLY, in this case, it was alleged in court cases that a portion of the land allotted to the joint venture was “illegal and arbitrary”. A petitioner claimed that “this land has been notified as ‘wakf land’ under the Andhra Pradesh Wakf Act, 1955, and is reserved for specific religious purposes.” Thus, the entire project seemed murky and full of illegalities to merely benefit Emaar MGF.
Like in most real estate and township deals in the country, huge amount of cash was generated in the form of black money (in Emaar Hills Township project). Politicians and bureaucrats were favoured in the sale of the villas and, according to income tax authorities, involved tax evasion. For those in the realty sector, it was a classic business done in the traditional manner
In the 2000s, government investigation agencies, including the CBI, were aware of the nefarious activities of the group. For instance, in September 2007, Emaar MGF was “subject to search and seizure operations under Section 32 and surveys under Section 133A of the IT (income tax) Act. The search and seizure operations were conducted at various locations… and on the premises and/or residences of certain executive Directors and employees… and certain Promoters, Group Companies of Promoters, members of the Promoters Group, relatives of the Promoters, and employees of the Promoters Group,” revealed the group’s public documents.
On December 3, 2009, the group was “subjected to search and seizure operations conducted by the Enforcement Directorate…. The search and seizure operations were conducted at two of our offices and at the residence of our directors, Mr Shravan Gupta and Mr Siddharth Gupta, certain of our employees and one of our independent real estate broker,” said public documents of the group. There were cases related to how Gupta hadn’t disclosed his annual incomes.
Clearly, there is enough evidence with the various courts and investigation agencies on the illegal business activities of Emaar MGF, and especially the Gupta family. However, despite this, the government’s emphasis to root out corruption and book the guilty, however powerful they may be, the Guptas are free. If this regime needs to make a transparent statement, this is one of the cases it needs to pursue, and take to its logical end—the arrest of the two Gupta brothers.