Home Corruption FROM RAJ TO RAFALE 9 Predators on the Prowl

FROM RAJ TO RAFALE 9 Predators on the Prowl

A policy to woo NRIs heralded an ugly and aggressive phase of hostile takeovers and corporate wars. Finally, they led to complete dominance of India Inc over politics

(Left to Right) HP Nanda, Swraj Paul, Bharat Ram

IT started with a seemingly inconsequential policy to woo NRIs. In the 1982 Budget, Finance Minister Pranab Mukherjee allowed Indians settled abroad to buy shares in Indian companies. The idea was to replicate the Chinese investment model, which hoped to attract huge inflows from the non-resident Chinese. What Mukherjee never anticipated, or may be the decision was designed to achieve this objective, it led to hostile takeovers and corporate wars that dragged in the government, including the prime minister, financial sector, including the Reserve Bank of India, and most of the business community.

Immediately, a London-based NRI, Swraj Paul grandly announced that he wished to acquire two of the most prestigious companies—HP Nanda’s Escorts, and Bharat Ram’s DCM. So audacious, ambitious and bizarre was the move that a journalist noted that they were “unprecedented for its daring and for the shockwaves that it sent through the Indian business world”. The attempt was clearly hostile and aggressive, and this led to an extraordinary war that tumbled out of the boardrooms into the streets, stock markets, central ministries, and even inside the corridors of power, including the Prime Minister’s Office.

Paul, who became an English Lord later, had relocated to London in 1966, and made his riches in steel, personally knew Indira Gandhi, the prime minister, and several other leading politicians and businessmen. Nanda and Bharat Ram were no pushovers. Their empires were among the largest in the country, and they were well entrenched both in Indian business community, and financial and political circles. Hence, the rivalry divided the government, political parties, financial regulators, media, judiciary and, of course, India Inc. The knives were out, and they were openly used to stab, backstab, even murder, characters.

So, it wasn’t unusual to see that policies were changed, courts were used to score brownie points and stall the opponent’s actions, banks and the RBI were asked to take a stance that changed with the times, and media brazenly took sides and opted for biased reporting. When the dust settled and putrefied air cleared, and Paul packed his bags to return to London, it heralded the arrival of the new age of corporate wars in which the four pillars of Indian democracy willingly participated to draw blood. The existing power structures were dismantled, as new ones were built, power equations changed, and governance slowly but steadily moved from the politicians to the leading businessmen.

The corporate wars of the 1980s entailed that businessmen had to, by default, enhance their influences over these individuals and institutions to garner support to either succeed in their raids or to stall the predators at the corporate gate. The successes or the failures of the takeovers didn’t matter. What was important was the involvement of the various powers-that-be in the process. Hence, by the 1990s, India Inc dictated politics, and the former decided the contours of governments, names of ministers, and appointments of bureaucrats and regulators. The business community influenced the media and judiciary.

LET’S turn our attention back to Paul, Nanda, and Bharat Ram, before we discuss even more virulent corporate wars that took place later. From the beginning, Paul knew that he required Indira Gandhi’s blessings to succeed. The reason: the majority of the holdings in both Escorts and DCM was held by the state-owned banks, insurance companies, and financial institutions. In addition, clearances were required from the governments for the transfer of shares, nods for investments, not to be referred to anti-monopoly commissions, and adherence to rules and laws.

The corporate warsof the 1980s entailed that businessmenhad to, by default, enhance their influences over these individuals and institutions to garner support to either succeed in their raids or to stall the predators at the corporate gate. The successes orthe failures of the takeovers didn’t matter

The fact that the politicians at the highest level were involved was evident from a public interaction during the double raids. The son-in-law of an industrialist known for his links with Indira Gandhi, asked Paul about the latter’s “relations with 1, Safdarjung Road”, where the prime minister lived. The NRI retorted, “Better than your father-in-law’s.” In a later interview with a newspaper, Paul said, “I had a wonderful relationship with Indira Gandhi.” When asked whether the prime minister offered him an ambassadorship to the US, which he declined, he boasted that “she would have given me anything I wanted”.

Well, Indira Gandhi didn’t give Escorts and DCM to Paul. Her reasons were several. She had just returned to power after a few years, and the Emergency had taught her not to make too many enemies. Her support for the London-based friend could have distanced leading politicians, key bureaucrats, well-known businessmen, and powerful editors. Hence, she kept quiet when Nanda and Bharat Ram forced Finance Minister Mukherjee to state that the aim of the policy wasn’t to encourage takeovers by the NRIs. She didn’t intervene when the RBI blocked the transfer of a portion of the shares that were purchased by Paul.

Accusations and personal attacks flew openly between the two corporate sides. The marauder charged that the owners of DCM and Escorts, with their pitifully minority stakes of less than 10% each, treated their companies like personal fiefdoms, and family inheritance that passed on from generation to generation. The owners enriched themselves at the expense of the other institutional and retail shareholders. Paul maintained that these business families were “privileged classes of shareholders”, who treated “public companies like private estates”. He criticized the latter’s huge salaries and “disproportionate standards of living”, and dubbed them as “dacoits”.

THE owners counter-attacked. Escorts’ Nanda said Paul was a “bull on a Bharat yatra in a China shop”. Bharat Ram of DCM questioned the raider’s source of money. He hinted that it might be dubious, even illegal. The Ram-Nanda duo dug up corporate and financial records to point fingers at the black blemishes on Paul’s corporate report cards, and how the latter’s companies had gone down the drain. Notes and white papers on Paul’s corporate track record were distributed in ministries and media houses. They proved how the NRI’s group companies were saddled with losses, possibly because of financial mismanagement.

VP Singh
VP Singh

Although Paul was sent back home, and Nanda and Bharat Ram survived, the trio changed not just the rules of the corporate game, but the game itself. Thereafter, India Inc turned into a theatre of continuous and virulent corporate wars. Such hostilities became the preferred means to achieve different ends—inorganic growths, survivals, feuds, ego massages, and family splits—over the next three decades. More importantly, since the success and failure was dependent on influence in political circles, executive, judiciary, and media, the business community decided that it wasn’t enough to manage or game the system. It was better to appropriate it, and take it over.

Nothing epitomises this grandiose takeover of politics than the epic, almost Mahabharat-like, war between the late Dhirubhai Ambani and Nusli Wadia. Both were masters—both men—of the art and science of corporate warfare. Wadia was India Inc’s insider, a Parsi Prince, and the suave, educated and cultured maternal grandson of Mohammed Ali Jinnah, the Founder-Father of Pakistan. Dhirubhai aimed to become the Polyester Prince, and was brash, an upstart, seemingly uncouth, but ambitious, outsider. He was the son of a schoolteacher, and sought to take on the best and biggest in the Indian business community.

Pranab Mukherjee

By the time they went at each other’s throat in the early-1980s, they had their connections. Dhirubhai had helped Indira Gandhi to come back to power. He had friends in media, civil services, and India Inc. Wadia was close to Rajiv Gandhi, the prime minister’s surviving son and heir apparent, after the death of Sanjay Gandhi. He knew senior politicians, civil servants, media owners, and was established within the Parsi circles, especially the Tata Group. Hence, it was bound to be an even battle, a war until the end, i.e. until one of them was killed.

By the early 1980s, both of them were sworn enemies. The animosity only grew over the years. The genesis of the duel is lost in myths, and apocryphal stories. One of them is that Wadia, the Textile Tsar, kept Dhirubhai, the Fibre Fighter, waiting outside his office for several hours. At the same meeting, Dhirubhai tried to sell his polyester fibre to Wadia. The latter refused and claimed that the product was of an inferior quality. Dhirubhai immediately furnished a secret internal report, which was prepared by Wadia-owned Bombay Dyeing that concluded the opposite.

It doesn’t matter if this story is correct or concocted. For, there were several genuine areas of conflict between the two. Wadia was convinced that Dhirubhai had stalled his licence to manufacture DMT (dimethyl terephthalate), a raw material required to make polyester fibre. The proposal was cleared only in June 1981, 30 months after Wadia had applied, and due to the personal involvement of Rajiv Gandhi. In 1984, before Indira Gandhi was assassinated, Dhirubhai, who too made polyester, switched to an alternative raw material, PTA (pure terephthallic acid), so that he didn’t have to buy DMY from his archenemy.

Rajiv Gandhi
Indira Gandhi and Rajiv Gandhi

The stage was set for an open and public war in 1985, when Wadia’s DMT unit became operational. A host of media articles referred to Bombay Dyeing’s second-hand plant as “junk”, and its produce as “obsolete”, when compared to the substitute, PTA, and of “second-hand quality”. Personal attacks followed. An article issued by UNI, a state-financed news agency, alleged that Wadia and his wife, Maureen, were trustees in a Parsi Trust that illegally sold the organization’s land. Wadia was sure that his polyester rival was behind these media attacks.

Dhirubhai had helped Indira Gandhi to come back to power. He had friends in media, civil services, and India Inc. Wadia was close to Rajiv Gandhi, the prime minister’s surviving son and heir apparent, after the death of Sanjay Gandhi. He knew senior politicians, civil servants, media owners, and was established within the Parsi circles, especially the Tata Group

IN May 1985, the government imposed restrictions on the imports of PTA. Dhirubhai was among the worst hit—his proposed PTA plant was scheduled to go on-stream in end-1986 and, in the interim period, he would need to switch to DMT. Worse, he would have to buy the raw material from Wadia. However, the wily Dhirubhai had an ace up his sleeve, which he disclosed at the last minute. In fact, it was the civil servants, who showed him the way out.

Dhirubhai Ambani
Dhirubhai Ambani with his elder son Mukesh Ambani

To give a breather to the existing PTA users, the government had allowed them to continue to import the chemical for 90 days before they had to switch to DMT. Wadia was shocked when he found out that Reliance Industries, which was owned by Dhirubhai, had opened letters of credit to import a whopping 114,000 tonnes of PTA, enough to last it till end-1986. The political-corporate-media war was about to reach dizzying, and unimaginable heights. It was dubbed as the “Maha-polyester War” by a Mumbai-based tabloid.

HOWEVER, at this stage, Wadia appeared to still have an upper hand. Rajiv Gandhi had become became the new prime minister after his mother’s brutal death in the previous year. The finance minister was VP Singh, a princely thakur. The PM-FM duo had publicly stated their endeavour to weed out corruption and crony capitalism. In a speech in December 1985, Rajiv Gandhi said, “On the backs of the ordinary (Congress) party workers rode the brokers of power and influence, who dispense patronage to convert a mass movement into a feudal oligarchy.”

In 1986, two of (VP) Singh’s key lieutenants were Bhure Lal, the head of Enforcement Directorate, which could investigate economic offenses, and Vinod Pande, Revenue Secretary. It was inevitable that the two trios—Wadia, Goenka and Gurumurthy, and Singh, Pande and Lal— would join hands

As the battle escalated, a fierce debate ensued over PTA imports, and the policy makers aimed to curtail Dhirubhai’s bravado, a new player entered the scene. Ramnath Goenka, the owner of Indian Express, which then enjoyed a combined circulation of nearly 700,000, joined Nusli’s gang in end-1985. Goenka quickly emerged as the new-age ‘Krishna’, the one who strategised every move from his Mumbai penthouse, stretched on a chair with his legs on the table, even as the others acquiesced to his decisions.

Yet again, the relationships between the octogenarian Goenka, called Bappuji, Wadia and Dhirubhai, as well as the media baron’s links with Indian politics, are mired in apocryphal stories and unsubstantiated anecdotes. In the 1970s and the first half of the 1980s, both Nusli and Dhirubhai loved and respected Goenka. They met him regularly. Goenka was initially enamoured by Rajiv Gandhi. When the latter became the PM, the paper tiger roared, “If I die tomorrow, I’ll go as a happy man because the country is in good hands.” Such feelings turned into hate later.

Nusli Wadia
Nusli Wadia

Nusli and Maureen met Goenka on one of their regular visits to the Penthouse. The baron politely asked Wadia if the business was fine. The aristocrat demurred, but his wife commented about the smear campaign against them in the media, including the Indian Express. She claimed that Dhirubhai was the mastermind behind it. Goenka kept quiet. But he put his men on the job and, within 24 hours, he was convinced that many of the journalists he had hired were “suspect”, and that his newspaper had favoured Dhirubhai in the DMT-PTA confrontations.

Goenka’s anger reached skyscraper-like height a few days later. On October 31, 1985, the Press Trust of India (PTI), a state-funded news agency, released a reproduction of a Reliance Industries’ press release on the issue. The release obviously gave Dhirubhai’s side of the saga. Now, Goenka was the news agency’s chairperson, and he had issued instructions not to carry such biased pieces. PTI did retract the story, but the damage was done. Goenka immediately decided to train his journalistic missiles, and other weapons of mass media, at Dhirubhai.


Yet again, there are other apocryphal stories to add to the Goenka-Dhirubhai legend. There are claims that when Goenka directly asked the Gujarati businessman about his hold on the media and politics, the latter replied, “Everyone has a price, in cash or kind”. The implicit hint: even Goenka must have a price, and he just had to say it. Another one, as revealed in the Bollywood flick, Guru, which was loosely based on the life and times of Dhirubhai, is that the businessman’s reply was that he “walks around with two pairs of slippers, one made of gold and the other of silver. I just use the one that’s required to hit on the head of a person.”

Whatever may be truth, the fact is that led by the quiet, little-known chartered accountant from Madras (now Chennai), S Gurumurthy, the exposes in the Indian Express ruptured the ramparts of the House of Ambani. They accused that Reliance Industries had smuggled factories, enjoyed ‘loan melas’ from state-owned banks, received favours from the Controller of Capital Issues for its share issues to raise money from the public, and was aware of policy changes before they were announced.

VP Singh’s finance ministry had already initiated investigations against Dhirubhai. Now, backed by the Indian Express reports, it went on an overdrive. In 1986, two of Singh’s key lieutenants were Bhure Lal, the head of Enforcement Directorate, which could investigate economic offenses, and Vinod Pande, Revenue Secretary. It was inevitable that the two trios—Wadia, Goenka and Gurumurthy, and Singh, Pande and Lal—would join hands. Henceforth, they exchanged information, helped each other, and talked about the paths to tread on to take on Reliance.

Lal criss-crossed the globe in search for the “smoking gun” evidences that could nail Dhirubhai. So did Gurumurthy. During one of his US trips, Gurumurthy met Michael Hershman, who headed a detective agency, Fairfax Group. The latter said that he would need the Indian government’s sanction to investigate the connections between Reliance Industries and a few American companies due to the US laws. Hershman and Gurumurthy met Lal in New Delhi. They agreed that Fairfax would work for ED. The former would be paid 20% of the money that was recovered from Reliance Industries, if illegalities like the smuggling of plants were proved.

A desperate Dhirubhai had to do something, anything. He got lucky. In his anti-corruption zeal, VP Singh ordered raids on top business houses, and his sleuths interrogated many, often old, patriarchs for hours. One of Singh’s targets was rumoured to be Ajitabh Bachchan, the younger brother of Amitabh Bachchan, the popular, larger-than-life movie star, who was close to the Gandhi family, and was persuaded by Rajiv Gandhi to enter politics in 1984. The two families had known each other for decades.

Now the narrative becomes murky, misty, and cloudy. Dhirubhai or his loyalists possibly sent Amitabh a message that the government was enquiring about his brother’s properties and bank accounts in Switzerland. Matters reached a point of an enormous crisis when, in December 1986, a mysterious man appeared in Berne, Switzerland, and asked pertinent questions about Ajitabh. His eder brother was duly informed that the enquirer was an employee of Fairfax, the detective agency hired by the Indian finance ministry. All hell, as was expected, broke loose.

When Rajiv Gandhi and Amitabh spent the New Year’s Eve together in the Andaman and Nicobar Islands, a petrified and worried movie star-politician told the PM about the Berne incident, and warned about Singh’s intentions. In the PM’s mind rang the bells of a political conspiracy. The FM was going after his friends to discredit, unseat, and replace him. Within a month, Singh’s portfolio was changed—from finance to defence. In his memoirs, Singh wrote, “We heard that Amitabh Bachchan landed there (Andaman and Nicobar) and poisoned Rajiv Gandhi’s ears. The decision to remove me from the finance ministry was taken there only.”

By this time, although the events are a bit fuzzy, Dhirubhai had kissed and made up with Rajiv Gandhi. The meeting was possibly arranged by a beholden Amitabh, who possibly received regular inputs about his younger brother. No one, except for the two persons, knows what happened at that encounter in 1986. The myth-building machine within Reliance portrays Dhirubhai’s behaviour as an act of bluster. In Guru, the businessman offers a huge bribe to the prime minister, which was couched as the money that was left by his late mother, Indira Gandhi, for safe-keeping.

coruption 2

BUT may be the charming Dhirubhai convinced Rajiv Gandhi of how his businesses meshed with the latter’s dream of a 21st-century India. He probably played on the PM’s political fears and insecurities. May be, there were conversations on palace intrigues, and how VP Singh wanted to cut Rajiv Gandhi to size. What one knows for sure, and which was proved by the subsequent events, was that a truce was called between the two, who smoked the peace pipe. The political tide turned against Singh, Wadia and Goenka.

Dhirubhai won the war in March 1987. Two letters, one dated November 20, 1986, and the other undated, both signed by CA Mckay of Fairfax Group and addressed to ED’s Bhure Lal, were shown to Rajiv. They convincingly proved that a political conspiracy had been hatched by Singh, his two lieutenants, Pande and Lal, aswell as Goenka and Wadia. The first letter referred to the “progress made on source of funds for purchase of Swiss properties of Mr Bachchan”, and the second one to the “documents relating to the non-resident status of Mr Ajitabh Bachchan”.

Both the letters turned out to be fakes; no one knows for sure who the writer(s) was. However, they served their purpose. Singh was forced to resign on April 12; 1987. Although he defeated Rajiv Gandhi in the 1989 election, and became the new PM, he quickly eclipsed from politics, as did Rajiv Gandhi when he was assassinated in 1991. Wadia and Goenka were hereafter under the government’s radar; Dhirubhai became the political kingmaker. From then on, the character of politics, governance and business changed. Select business houses emerged as extra-constitutional emperors.

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