Nation
EAS Sarma seeks immediate action on foreign donations of political parties

Former Union Secretary EAS Sarma who along with others obtained a landmark order from Delhi HC on illegal foreign funding of political parties has called on the Election Commisison to initaite immediate against political parties and Vedanta group

Following a Delhi High Court order that donations to the BJP and Congress from the Vedanta Group prima facie voilated the law, former union secretary EAS Sarma has written to Chief Election Commissioner VS Sampath to initiate immediate action against the parties concerned and to revoke their tax exemptions. Mr Sarma and Association of Democratic Reforms (ADR) had filed a public interest litigation (PIL) in the Delhi High Court (Delhi HC) against foreign funding of political parties.
 

On 28 March, Delhi HC held that the BJP and Congress had, prima facie, violated the foreign funding law by receiving donations from UK-based Vedanta Resources' subsidiaries and directed the Centre and Election Commission (EC) to take appropriate action against them within six months. As per Foreign Contribution Regulation Act (FCRA) companies like Vedanta come within the purview of the definition of a “foreign company” hence, in pursuance of rules political parties are prohibited from accepting donations from such foreign companies.
 

EAS Sarma said, “Vedanta has made donations to Congress, BJP and several other political parties like Trinamool Congress. This needs to be investigated urgently and action initiated.”
 

EAS Sarma has asked Mr VS Sampath to investigate donations received by all political parties from foreign companies during the last several years and proceed against them under FCRA and Representation of the People Act.  He has asked for deterrent action,  in view of the implications of such donations to the security of the nation and the integrity of our democracy.
 

EAS Sarma has asked to investigate the bona fides of Vedanta's Public and Political Awareness Trust and the electoral trusts set up by the other foreign companies in terms of implicit/explicit violation of FCRA/Representation of the People Act and take urgent action to comply with the letter and spirit of those laws. Sarma further said, “If necessary, bring all electoral trusts set up by foreign companies within the ambit of FCRA by a suitable legislative amendment. The trusts should make a public disclosure of their financial dealings.”
 

He writes, “Vedanta has also evidently set up a trust known as Public and Political Awareness Trust, specifically for making political donations. This is clearly an indirect way to channel political donations. It is doubtful whether routing political donations through an electoral trust complies with the provisions of FCRA. I understand that several companies have followed this modus operandi. A thorough investigation will reveal the goings on in these trusts which function in a highly non-transparent manner".
 

EAS Sarma requested chief election commissioner to appreciate the rationale of FCRA/ Representation of the People Act and the legislative intent that underlies it and decide once for all not to appeal against the Delhi High Court judgement. Sarma said, “I believe that the concept of private companies giving donations to political parties is per se objectionable as such donations have vitiated the democratic processes and led to mis-governance on a large scale. In particular, such donations from foreign companies amount to a slap on the face of India's democracy and they compromise the national security.”
 

The London based Vedanta in its annual report of 2013 clearly mentions that, “in accordance with the normal accepted practice in India of making political donations, the group made political donations of USD2.01 million in 2012 and USD0.97 million in 2013 through a trust or directly in respect of the Indian general election. The board believes that supporting the political process in India will encourage and strengthen the democratic process.”
 

Vedanta's listed subsidiary firms; Sesa Goa paid Rs30 lakh to the Bharatiya Janata Party (BJP) in 2012-13, while Sterlite Industries gave Rs5 crore to the Public and Political Awareness Trust, set up by the group to make political donations. In August 2013, Vedanta merged both subsidiaries into Sesa Sterlite. Sesa Goa's annual report showed its political donations dropped significantly in 2012-13 to Rs30 lakh from Rs4.65 crore in 2011-12 as its operations were hit by a mining ban.
 

Sesa Goa has made donations of Rs2 crore to the Congress, Rs1.75 crore to BJP, Rs50 lakh to Maharashtrawadi Gomantak Party, Rs15 Lakh to All India Trinamool Congress, and Rs25 lakh to Nationalist Congress Party (NCP) during 2011-12.Vedanta donated USD5.69 million to political parties in India between 2009-10 and 2011-12. This includes USD3.66 million during 2009-10, when the previous general elections were held. Since listing on the London Stock Exchange in 2003, the company has donated USD8.29 million to Indian political parties.
 

Also read our earlier stories on political funding by Vedanta group here,
 

Vedanta’s Millions: Which political party benefited from it?
 

Vedanta gave ‘illegal’ political donations in India?
 

Which companies are funding political parties and how legal is it
 

Vedanta PIL: Centre asked to respond to plea for probe into funding for parties from UK group
 

Election Commission for probe into Vedanta donations to Congress, BJP
 

Political parties earned a whopping Rs4,662 crore in seven years

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Public Interest Exclusive
The Real Story of how HSBC Was Made To Pay

How a proactive RBI forced HSBC to partly redress glaring mis-selling by HSBC to actor Suchitra Krishnamoorthi. Will this set a precedent? Don’t bet on it

On 14th March, the Hongkong & Shanghai Banking Corporation (HSBC) suddenly called actor Suchitra Krishnamoorthi to discuss a settlement to close her long-pending allegation about gross mis-selling that had caused her a loss of over Rs1.85 crore.

Despite letters to Naina Lal-Kidwai, the high-profile head of HSBC, and legal notices to the Bank, she had come to a dead end. All that the Bank had offered was to waive its charges and commissions and re-invest her money in the hope that they will earn some more revenue. Clearly, this was unacceptable. She had filed a complaint with the banking ombudsman, but without any effect.

In early April 2012, she approached Moneylife Foundation, a not-for-profit organisation, of which I am a founder-trustee. We studied her case and, on 13 April 2012, I emailed Dr KC Chakrabarty, deputy governor of the Reserve Bank of India (RBI), with copies to chairmen of the Securities & Exchange Board of India (SEBI) and the Insurance Regulatory Authority of India (IRDA), secretaries in the finance ministry, Naina Lal-Kidwai and others, about her issue.

Under the guise of ‘managing her wealth’, the Bank had systematically looted her of nearly Rs4 crore through multiple financial instruments. It sold her two toxic unit-linked insurance policies (Rs15 lakh and Rs20 lakh) with a fake assurance of high guaranteed returns on which she incurred huge losses.

In 2007, when she wanted to withdraw funds to buy a house, she was persuaded to take a home loan of Rs1.65 crore to get tax benefits on the claim that monthly instalments could be paid out of investment income. Instead, HSBC relentlessly churned her portfolio to extract income for itself as commissions and entry-/exit-loads. If that wasn’t bad enough, she ended up with a fat short-term capital gains tax because HSBC sold some investments in less than 12 months. Many investments were volatile or underperforming equity schemes rather than debt or liquid funds that were more suited to her profile. So, she paid home loan instalment of Rs2 lakh a month while the Bank relationship managers were busy juggling 38 schemes in her portfolio to keep adding to her losses. She, finally, sold a piece of land to pay off her home loan.

The IRDA chairman’s office was the first to respond to my letter on 16 April 2012 asking for details of her insurance policies. But it merely acted as a post-office, passing on HSBC’s and Tata AIG’s response that the policies were closed.

We calculated the loss due to the churning of her mutual fund portfolio at over Rs29 lakh and suggested that she should file a complaint with SEBI. Although RBI did not send a formal response, the case was examined at various levels. We were also convinced, at that time, that a complaint to the banking ombudsman would be of little use, since its scope is very limited. We requested Dr Chakrabarty to take up the issue of mis-selling of third-party financial products by banks. Meanwhile, Ms Krishnamoorthi  filed a complaint with SEBI which she relentlessly followed up with Mr RK Padmanabhan, executive director, SEBI.

In April 2013, Moneylife Foundation held an open house meeting with Dr Chakrabarty which was also attended by the entire top brass of RBI’s customer services division as well as the banking ombudsman (BO) and chairman of the Banking Codes & Standards Board of India. We gave Ms Krishnamoorthi a platform to make a public plea that day.

The RBI was sympathetic and Dr Chakrabarty was especially vocal about his personal view that banks should not sell third-party products. But it needed information to make HSBC pay. R Gopalakrishnan, counsellor of Disha Financial Counselling (a former deputy general manager of the RBI customer services department), stepped in, examined her case and marshalled all the legal and technical points in a two-page note for RBI.

While HSBC held a standard sweeping power of attorney (POA) executed by her, it had omitted to “prepare a financial plan based on the risk profile, resources available and mapping of financial goals as specified by the customer” or do an annual review which was part of the deal. Also, while Ms Krishnamoorthi had blindly signed some letters authorising investments, debits and credits to her account, it had failed to do it in every case under the terms of the agreement. Clearly, the bankers who were recklessly churning her funds were careless.

The end result after five years was a direct loss of Rs83 lakh from investment, Rs28 lakh in HSBC commissions to HSBC, Rs18 lakh from decline in value of two insurance policies, Rs4.5 lakh tax paid on redemption of short-term mutual funds (including Rs1.85 lakh penalty to the income-tax department due to non-disclosure of gain by HSBC to the client) and Rs58 lakh interest on home loan earned by the Bank.

Helpful RBI officials went out of their way to have several interactions with SEBI’s extremely proactive executive director RK Padmanabhan. Both regulators were convinced that Ms Krishnamoorthi had been cheated. SEBI issued a hard-hitting show-cause notice on 1 November 2013, quantifying the loss at over Rs27 lakh and investments that were completely out of line with the risk profile of the customer.

It classified this behaviour as an unfair trade practice and a violation of the code of conduct of mutual fund intermediaries. SEBI’s order threatened not only disgorgement of ill-gotten earnings but also to debar HSBC from the capital market and from buying and selling securities. Yet, HSBC managed to drag the case until March 2014 by seeking more time.  

Meanwhile, RBI suggested that she file another case with the BO, which she did, in January 2014, but was rejected instantly on the grounds that it was out of the purview of the BO scheme. Things were beginning to look rather bleak then, but again, following requests from Moneylife Foundation, Dr Chakrabarty granted Ms Krishnamoorti another personal hearing and RBI’s customer services department held several meetings with HSBC officials and Ms Krishnamoorti.

By then, pressure on the Bank from both regulators had mounted to the point that it began to talk about a possible settlement. It was also running out of time and options with SEBI which seemed disinclined to accept its explanations.

So, suddenly, on 14th March, Ms Krishnamoorti received a call from the Bank offering a settlement. We suggested that she insist it should be wound up in a single meeting and that she goes with someone whose presence would give her a psychological advantage. Fortunately, Shekhar Kapur, the well-known director and her former husband, accompanied her. We learn that HSBC began by offering half the ultimate settlement, but when it was rejected, it doubled the amount, subject to various terms and conditions (a gag-order, that she would not bad-mouth the Bank, all existing cases will be withdrawn and the Bank would not admit to wrongdoing, but make the payment as a gesture).

For Moneylife Foundation, this two-year battle was won because of strong pressure from Dr Chakrabarty and support from senior executives at RBI and SEBI, who closed HSBC’s exit routes. Ms Krishnamoorthi too was willing to keep fighting and not give up, despite the many setbacks. But Ms Krishnamoorthi is certainly not the only victim of banks. In fact, there are many in India and abroad. But, as this timeline shows, it is a tough and uphill battle against large financial institutions. The battle can become easier, if other victims get together to consider class action. In our experience, not everybody has the stamina to fight their battles—if they cannot dump their problem on someone else, people get reconciled to their loss and simply turn more cynical.

Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]

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COMMENTS

AJAY SHARMA

3 years ago

great show ; i respect all those who fight for the truth and against unlawful and illegal acts which benefit one sidedly the banks or any money/share/debt market participants leading to the ultimate disadvantage of the unsuspecting customer / consumer; WE should thank and reward all those who fight for such causes; No doubt there are many many more such manipulations happening today;

AJAY SHARMA
[email protected]

SK Sharma

3 years ago

I salute Moneylife to fight for public interest.

SK Sharma

Davesh Manocha

3 years ago

Wow! Excellent work by moneylife foundation and Sucheta.

Ravindran Menon

3 years ago

Kudos to moneylife for the support and resilence in taking up the case of the famous singer. Most of the so called wealth managers exploit the financial illiteracy of the investors and extract huge commissions by selling toxic investment products. You have done an excellent job of fixing a mighty global bank! Keep on the good work.

Prof Ravindran menon
Pune
+91 9923431035

V PRASAD

3 years ago

Wow ! great to read that ML has helped Ms Krishnamoorthi fight this case & win. It's another example of mis-selling of financial products & negligence of HSBC. Just imagine the plight of a common person who should have faced the same situation ! Congrats to MLF & Ms Krishnamoorthi for fighting HSBC.
Question arises about the ethics in selling financial products, even though we are educated, we are illiterate when it comes to financial products.So, its here that MLF articles,workshops in educating customers is most welcome. Long live MLF & please continue such good work.

Santhana Krishnan

3 years ago

Moneylife & Suchitra, as well as the concerned RBI & SEBi officials deserve to be congratulated.It is high time HSBC is debarred from capital markets and portfolio and wealth management services. At least they should be debarred from adding new clients or additions to the existing funds managed by them. ALL should learn a lesson from the case and should avoid these cheating banks like plague. All may not be lucky of have the contacts and time to recover even partial loss. It is surprising, why the banking ombudsman is not supporting the victim and only the bank, which is the perpetrator of the fraud.

SUNIL KUMAR HEMNANI

3 years ago

Yes a big battle again won by MONEYLIFE , another customer who was lucky .But the problems will remain and customers will just have to get smarter at signing documents. Two standouts for retail investors is Wealth managers & stock market brokers who churn needlessly .They all have signed documents to protect themselves .I hope we can get RBI &SEBI to be more pro investor , too many crooks in the system

JOSEPH KORAH

3 years ago

Most people would have given up, considering the obstacles created during the whole process of filing a complainant and subsequent hassles. But it is only because of Suchitra's and Moneylife's persistent follow-up and continuous pressure that the matter got resolved. Congratulations to both Suchitra and Moneylife for their efforts and helping Suchitra get justice for all the wrong done to her. God Bless.

Suiketu Shah

3 years ago

I would request Suchitra Krishnamoorthy to reveal the names of the RM's of HDBC who fooled her 5 yrs ago so people are cautious about dealing with such hard core crooks and cheats whether they are still with HSBC or gone to another wealth management company.

REPLY

Suiketu Shah

In Reply to Suiketu Shah 3 years ago

I would also request Suchitra K to put up the name of the fraud and cheat RM's of HSBC on http://www.watchoutinvestors.com so that the public at large can be beware of them

jaideep shirali

3 years ago

Moneylife & Suchitra, as well as the concerned RBI & SEBi officials deserve to be congratulated. In our country, most agreements signed by customers are so one sided that they defy all norms of justice. Investors should firstly not sign forms and cheques blindly, because legal recourse is slow and loaded against the investor. Secondly, investors should not invest in a product they cannot understand. It is far better to get back your money and less returns than lose it altogether. Thirdly, the product must be suitable for you, e.g. senior citizens do not need to invest in pension products. Ultimately, prevention is better than cure.

Rajendra M Ganatra

3 years ago

Compliments for aantastic achievement by Moneylife. The intermediaries routinely identify gullible folks and cheat them.

Best wishes for continued success.

Rajendra M. Ganatra
MD&CEO, ISARC
http://www.isarc.in

NAGARAJ Tirumani Vemula

3 years ago

TO: Smt.Sucheta Dalal
01-04-2014

Madam,

I have certain pending issues with
State Bank of India - a gigantic
commercial (banking) institution
which has done injustice to me.
Please respond if you can take up the issues which help people as stated below:-
1) Myself 2)To several people in the society.
I will send the list of issues if you respond.

REPLY

Moneylife Foundation

In Reply to NAGARAJ Tirumani Vemula 3 years ago

Dear Mr Vemula,

Greetings! Thank you for addressing your issue to Moneylife Foundation.
You may be aware that Moneylife Foundation runs 5 Helplines. Do check out http://foundation.moneylife.in/?page_id=..... We have a tie-up with Disha Financial Counselling (an NGO) for Banking and Credit related issues. This is FREE, confidential, it is product and company neutral, one-on-one counselling provided by senior bankers with decades of experience.

I would urge you to take up your matter with this Helpline. We have counselling sessions by Disha's experts at our office at Mumbai every Wednesday and Friday from 2:30pm - 5:30pm at Shivaji Park at Dadar, where members receive guidance on their financial matters. You can call or email and book an appointment at a time slot and date convenient to you.

If you are based out of Mumbai, we would urge you to send us an email with more details and supporting documents. We can then print your email and hand it over to Mr Gopalakrishnan, Disha's chief counsellor and former DGM of the RBI and we can take it forward through a telephonic or electronic counselling session, once we receive your email. Thanks.

Warm Regards,
Marlyn D’souza – Moneylife Foundation

Khaja Mohiuddin

3 years ago

This case is an eye opener to private banks and the credit goes to Dr Chakrabarty Dy,Governor of RBI. The selling of products should have clear terms.

Dr Chakrabarty should not be permitted to retire early on his superannuation. he should be retained as adviser to RBI and the Ministry of Finance-Banking Govt of India.

Anita Williamson

3 years ago

Very encouraging to hear of someone successfully taking the banks on and winning the recompense they deserve. In the UK I have been battling with HBOS over a fraudulently sold mortgage while charting my painful, and so far unsuccessful, journey via my blog, Life after Debt at blogspot. I wrote the following piece in exasperation.

Recipe for Disaster

Take three perfectly good financial products,

One non status mortgage requiring no proof of income, a cautious valuation and client equity stake of 35%

One 100% mortgage requiring no client equity stake, a cautious valuation but belt and braces proof of taxable income and affordability

One 80% mortgage, a cautious valuation, belt and braces proof of taxable income and affordabilty offering discounted interest payments for the first two years

Add a large helping of political gain with nauseating proportions of deregulated bankster spin and mix well.

Throwing caution to the wind, allow evidence of income, equity and conservative valuations to float to the top, carefully remove and discard.

Using what is left, re-package as an innovative low risk mortgage product which will take the market by storm

Present finished article to the board in terms of anticipated personal returns and obtain consent to market.

Use highly incentivised bank staff to roll out new product to as many brokers and introducers as possible, turn a blind eye to their methods and pay all concerned on results

Insist all new applications are submitted online by the broker with declaration pages to follow after offer

Provide regulated mortgages of up to a 125% LTV having told brokers that applicants homes will not be valued conservatively and applicants incomes will not be verified.

Have your cake and eat it while watching with detached indifference for the cookies to crumble,

Leave the victims of widespread mortgage fraud to cook in their own juice,

And then, just like HBOS have done with my own case,

Wash hands thoroughly.

chan

3 years ago

Congratulations, Moneylife!!! Beware, large banks and broker firms, customers are woken up now! kindly make an arrangement that this article is widely circulated among masses. Regards.

REPLY

Nilesh KAMERKAR

In Reply to chan 3 years ago

What Ms. Dalal / Team Moneylife has achieved here is a miracle.

And a 'Chamatkaar' must not be confused as a routine chore with predictable outcome.

Sucheta Dalal

In Reply to Nilesh KAMERKAR 3 years ago

Dear Mr Kamerkar

I agree with you. I hope other readers also realise that there are no predictable outcomes in such fights. In fact, many times it seemed frustratingly impossible.
But I do believe that if we all work to keep up the pressure on regulators, we can force them to become more accountable.
IRDA is most shocking. SEBI doesn't care, NO investor has got back money, although SEBI itself has collected crores and crores through consent orders and settlements. That money does not go back to a cheated investor. They did one shady disgorgement for dubious reasons.

RBI is the best of the lot -- we had a receptive DG in Mr Chakrabarty. Earlier, after the global financial crisis and the collapse of Global Trust bank, Dr Y V Reddy had become extremely pro-active. It is such a pity that stalwarts like Dr Reddy, who continue to have so much clout, do not raise their voice for investors and consumers. We would love their support and guidance!

pankaj nagpal

In Reply to Sucheta Dalal 3 years ago

Dear All,
would like to bring in your kind notice of all of you to one more issue which needs attention. Builders asking for illegal transfer money for issuing NOC to banks for sanction of loans. The demand by builders for issuing NOC is only because the banks insist for a NOC from builder and in turn the developer demands cash to give the same. The amount ranges from Rs 500 to 1000 per sq.ft tuning upto 5 lacs and more.I know a developer in Chandivali who is minting money from the NRI Clients mostly based in Dubai . If you support i can ask these investors to stand up and complaint.I am reachable on 8080808081 pankaj nagpal

Getting back to mining targeted coal would be tough!

The new government may take months before the roadblocks to resume full-scale production

We had recently covered various issues relating to the coal production in the country and the enormous difficulties that the exclusive monopolistic producer, Coal India, faces in its day to day activities.  For the fiscal year 2013-14, we have been advised, from time to time, by the coal India and the ministry of coal that we should be able to achieve the target production of 482 million tonnes.
 

No doubt, one the impediments, in the production, came through the cyclone, Phalin, which not only disrupted actual mining activities, but left a number of mines flooded.  There is nothing one can do against nature's fury.
 

Coal imports directly and on behalf of clients from international suppliers, at higher prices, have also come in, but these faced unexpected problems as a result of weak rupee.  Imports became costlier than projected earlier!
 

On the top of these, as though they were not enough headaches, power generators also did not lift the ordered cargo, in addition to which, as usual, we had problems relating to transport clogs at pit heads!  What more can you ask? Railways' supply of wagons, delays in the completion of dedicated corridors etc have put a tremendous strain on CIL.
 

Actually, the last fiscal production was 452 million tonnes and the supplies have just grown by a meagre 2% to reach 462 mt, thus falling short of the target of 482 mt

It may be remembered that one major problem relating to  the caloric value with supplies effected to NTPC, and which caused the later to hold up payments, got resolved only recently with mutual consent.
 

Now it is only less than a week away for the elections to commence and no major decision can be taken till the results are announced, which are scheduled by the end of May.
 

So, everything will be at a standstill; it will probably take a week or ten days more after the new government takes over when major decisions on all these pending issues will be taken, including the reallocation of coal blocks; whether the status quo for CIL would be maintained or new direction given!
 

This is a crucial time for the country in every way.  It can be only hoped that those officials in charge of mines (collieries) in the country do their very best so that the wheels of the nation can move smoothly.

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