Insurance
Is Reliance Life’s corporate agent AB Capital involved in fraudulent “interest-free loan” offers? Will Reliance or the regulators initiate action?

Moneylife Foundation’s Insurance Helpline has received a second  case of fraudulent “interest-free loan” offer from AB Capital. This time, the victim took a loan of Rs2 lakh to pay the high insurance premium, lured by the carrot of a fat, interest free loan of Rs10 lakh

On 4th July Moneylife Insurance Helpline received an email from Prashant Gupte (name changed) saying that he had purchased two Reliance Life Insurance  policies for himself and his wife by paying a Rs1 lakh premium each. Worse, Mr Gupte did not have the money. He took a personal loan to pay the premium, because AB Capital, a corporate agent for Reliance Life promised him an “interest-free” loan on Rs10 lakh on buying the Reliance Money Back Guaranteed Plan. He wrote to us on reading out reports about Dr Sujay Verma (name changed) who was similarly trapped and how our intervention led to a refund. Also, there was no sign of the interest-free loan he was promised. Clearly, a second case of outright cheating ought to make the regulator sit up, but until they do, people are getting trapped into taking a loan to buy high premium insurance plans of trivial value with the lure of an “interest-free” loan of 10 times the premium.
 

Read Is Reliance offering 10-year interest-free loan for buying insurance?
 

Moneylife Insurance Helpline immediately wrote to the head–corporate communications of Reliance Capital. While we are still to hear form the company, our communication had immediate effect. Mr Gupte has written to say that he received a call from AB Capital on the same day (4th July) and from Reliance Life customer care asking the bank details for refunding the amount. He also received another call from the Senior Manager, Compliance, at AB Capital. Mr Gupte says he was very apologetic and promised to refund the full amount shortly and he also promised to initiate strict action against the persons involved in the fraudulent sale. He also requested Mr Gupte not to take the complaint to the next level for fear of damaging the company's reputation.
 

Earlier, the intervention by Moneylife Foundation’s Insurance Helpline had helped Dr Verma in getting refund of Rs60,000 premium for Reliance Life policy fraudulently sold by the same corporate agent—AB Capital, with the false promise of an “interest-free” loan of Rs6 lakh from Reliance Capital. Dr Verma was running pillar to post for six months to get the refund without any success, but within two hours of our taking up his case with the company, Reliance Life promised to make amends.
 

Read Reliance Life refunds Rs60,000 in a suspicious transaction: Another Moneylife success
 

At that time, Reliance Life Insurance had claimed to us that “the calls are made by spurious callers, a menace faced by the industry, and not part of any mis-selling. The industry has sought help from the EOW and we, as Reliance, have also filed over 170 FIRs against these spurious callers.” Reliance Life pointed to an article in the Times of India which assures us:  “These complaints have not made much headway since there was no transaction.” This is not entirely true. Moneylife Insurance Helpline has now forwarded two such cases with full details, which are not about nuisance calls of “interest-free loan” but actual transactions involving a Reliance Life insurance policy purchase which amount to outright cheating because they customers were denied the promised ‘interest free’ loan from Reliance Capital.
 

Moreover, AB Capital is clearly listed as a corporate agent of Reliance Life on its website http://www.reliancelife.com/Contactus/CorporateAgents/CorporateAgentsDetail.aspx?CityId=1. It has IRDA license number 5484516 and IRDA agent code 20879724. The license is valid from 22 June 2012 to 21 June 2015. The name of director is Raj Kumar Bhatter / Padma Bhatter /Anubhav Bhatter. Sharmistha Banerjee is the chief insurance executive. Its address is: 14/1, Paul Mansion, 6 Bishop Refroy Road, Kolkata, West Bengal-700020.
 

Can Reliance Life adopt a hands-off attitude? If the agent is peddling lies on its own, shouldn’t Reliance Life discontinue its relationship with AB Capital? Will the Insurance Regulatory and Development Authority (IRDA) act quickly to cancel AB Capital’s license before it cheats more people? We will be tracking this story to bring you updates.

 

UPDATE: Reliance Life has refunded Rs2 lakh to Mr Prashant Gupte
 

Read:

 

Reliance Life ULIP mis-selling: Justice served

 

Life insurance: Don’t fall for assured returns, look for comprehensive cover and avoid dubious agents who promise you fantastic combination plans

 

Are your insurance details all in the public?

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COMMENTS

Sandeep Shukla

2 years ago

AB capital also given false information about Policy to me and cheated. Please guide me i have invested 94000 in relience how do i get my money back.
My contact number- 9773613685
[email protected]

reshma

3 years ago

I am also the victim of the Fraud of Reliance Life Insurance, Kindly requesting you to advise me to How I will recover my Money and What's the procedures to complaints regarding the Fraud selling of Life Insurance with the promise of giving lower interest rate loans.,but still not get any reply. Pls help me. Thanks.


[email protected]

DHARMA PATIL

3 years ago

Dear Sir,

AB capital also cheated me and asked me to buy policies of 30k and 75k. Last three years i am paying premiums with great difficulty.

There may be thousands of people cheated by AB capital.

Dharma Patil M:9325218518
email:[email protected]

satwasheel U Mohite

3 years ago

I am also the victim of the Fraud from AB Capital, Kindly requesting you to advise me to How I will recover my Money and What's the procedures to complaints against the AB Capital. I am also mail many times to the Reliance Life Insurance regarding the Fraud selling of Life Insurance with the promise of giving lower interest rate loans.,but still not get any reply. Pls help me. Thanks.

Mo. 09326260960
[email protected]
Satwashil Mohite, Pune.

pradeep

3 years ago

As complained earlier, now I am getting calls again to deposit security of Rs.28000/- for getting the loan. Pls see in this matter

pradeep

3 years ago

As complained earlier, now I am getting calls again to deposit security of Rs.28000/- for getting the loan. Pls see in this matter

Vamsi Pala

3 years ago

Hi,

The following policies are done for me from Reliance Insurance Company fraudulently.

Policy number :

1. 50670727
2. 50759202
3. 50724154
4. 50700125
5. 50676972

They have informed me that they have outsourced the policy business to 3rd Party company called AB Capital which has done these policies.

The caller calls says he is from Reliance Insurance Company and he promises bonus of 2000 per month on each policy and other stuff and has done these policies. They told there is a verification call which I have to tell in specific way and they ask me to deny everything, that nothing is promised. They even told me that everything was converted into one time.

Reliance has accepted that AB Capital was doing fraud and they have terminated their service but they are not willing to cancel my policies.

I am not in a position to pay 2 lakh per Year for these policies. As I am not capable of paying this huge sum.

Even after repeated complaints to Reliance about this, I get the call from fraud asking for NOC for cancelling the policies, there is no good response from Reliance. I have decided to take this up further so that nobody can suffer like this.

Please help me on this, so that I can cancel the policies.

REPLY

Shreyas Nayak

In Reply to Vamsi Pala 2 years ago

Madam,
My name is shreyas nayak & I am from Dombivli (Mumbai suburb)& I am also victim of these people & duped for 75,000/- but I am not going to keep quite. I request you to join me & I am also contacting others to strong our voice in Police case. If you are ready & really want to get help from police then mail me on my email address on [email protected] I have evidence against these fraud people which I am going to submit to police if you want to join us then your complaint will also be registered at same time.

pradeep

3 years ago

Complaint of Fraud against Reliance Capital and its agent- AB Capital
On 21.3.2012, I received a call from a lady caller and introduced herself as Ms. Avantika from Reliance Capital office, New Delhi. She then illustrated a Life insurance plan with interest free loan facility upto the maturity value. On consequent discussions with her and later with her senior, Mr Rajiv, they described that ‘U pay Rs. 25000/- for 10years in Reliance Guaranteed Money Back Plan. You will be given of loan of Rs. 250000/- within two months of the purchase of policy. At the end of the policy, we will not get anything. As such, a policy of Reliance Guaranteed Money Back Plan was purchased on 26-3-2012.
The details of the policy are as follows:
Name of the Policy Holder- PRADEEP KUMAR BEBARTA; Policy No.-50887724; SA-Rs.206000/-; Premium Amt: Rs. 24847.00; Yearly mode; Paying Term-10years; Client Id- 85897711
In this conversation, first they called from a call center no and later she gave her mobile no-09711320171 and her senior Rajeev’s no is 09015147362. As such, I received my policy on 25th of April’2013. Then I contacted them back. She told me that your application is in process and will soon get the loan. But that was the last call recd. And from then, the no of Rajeev was out of service and Avantika’s number was either ringing or switched off.
After a period of 4months, on 26.06.2013, suddenly I received a call from a person named Bipin Choudhary calling from Reliance Capital Office with his no-07503089567 and told me ‘U had applied for loan with the above policy. Are u still interested?’ I gave the answer ‘Yes’ and then he said that he is sending the file for processing. After 2days, he again called me up and told that Ur application is in process and is scrutinized. According to the company norms, I have to deposit Rs.20000/- as security and this will be sanctioned within 3days and the security amount will be released after 7days of sanction. Firstly, I doubted and tried to avoid and told him to call me up at evening as I am busy at office. He told me that I will be calling from the new no- 08285406012. Again in evening, he called me from his new no and repeated the same question and also said that u had been offered as per the conversion with Avantika during the purchase of the policy. When he took the name Avantika as reference of the policy, then I believed that it may be true and then I agreed to pay. He gave me an account no of the Sales Manager of Bodhgaya [[Name- Syed Shahbaz Mujtaba; Account No- 1616000100129632; Bank- Punjab National Bank, Bodhgaya branch]]. I asked me to give an A/c no of any SBI as it will be appropriate. But he told me that no one is having any account in SBI. Later he gave no of a Sales Manager, Arun Kumar, A/c No.- 12641050055794, Bank- HDFC Bank, Gurgaon Branch. But the local bank officials refused to deposit the amount in the said account as it is Salary Account and as per the norms of RBI, cash cannot be deposited by third party. When told to Bipin, he again gave me another account no of Ravi Prasad, A/c No.-14431050003704, Bank-HDFC Bank, Gurgaon Branch. But again, the local bank officials refused to deposit the amount in the said account as it is Salary Account and as per the norms of RBI, cash cannot be deposited by third party. Later on 02/07/2013, I went to the Punjab National Bank Jeypore branch and deposited cash in the account of Name-Syed Shahbaz Mujtaba; Account No- 1616000100129632; Bank- Punjab National Bank, Bodhgaya branch, Transaction No- M380744 Srl No-40. Again, after 2 day he said that the application is in process but as per the terms, the required amount is Rs.45000/- for security. So I had to pay another Rs.25000/- for the loan. Then I paid the said amount of Rs.25000.00 on 05-07-2013 in the same account of Mr. Syed Shahbaz Mujtaba, Account No- 1616000100129632; Bank- Punjab National Bank, Bodhgaya branch, Transaction No- M410278 Srl No-55. And the same was confirmed by Bipin Choudhary regarding the receipt of the total amount of Rs.45000.00. And then the number of Bipin was not reachable/ switched. After 10 days, when called from a different number, he revealed that the application is in the process. After that day the number is switched off.
After 3months i.e. on 25th September’2013, a call was received from Mr. Manish Mittal from Reliance Capital and revealed that the application is in process and I had to pay Rs.20000/- for the approval of loan. When asked about the earlier deposit of Rs.45000.00, he said that this amount is received. Also he said that “ when u believed Bipin Choudhary, have faith on me and I will let the file processed.” When I asked for the receipt, he also said that he will provide the same. He gave the file no- RLI-RC-0079157117 of the loan application.
Hence, this is the brief.

Pradeep Kumar Bebarta
Qr.No.SSF/D/4, Irrigation colony,
Jeypore, Dist: Koraput,
Odisha-764003

Mayur

3 years ago

I am also the victim of the Fraud from AB Capital, Kindly requesting you to advise me to How I will recover my Money and What's the procedures to complaints against the AB Capital. I am also mail many times to the Reliance Life Insurance regarding the Fraud selling of Life Insurance with the promise of giving lower interest rate loans.,but still not get any reply. Pls help me. Thanks.

Mo. 09924271217

Niraj Kumar

3 years ago

I would like to state that I have been a victim to a similar situation. please advise me to how to recover the money from those situation.

Niraj
9099981218

Moneylife Foundation

4 years ago

Mr Ray,

Greetings!
Moneylife foundation has launched a FREE Insurance helpline for Moneylife foundation members and subscribers to Moneylife magazine, providing one to one basic help and guidance on issues and problems regarding insurance.

To avail the free insurance helpline. We would suggest you to become a moneylife foundation member. It is FREE.

Our helpline is on a best effort basis. We would request you to send us a synopsis of your issue in not more than 500 crisp words at [email protected]



Nilay Ray

4 years ago

I would like to state that I have been a victim to a similar situation. I am surprised to see that so many people has faced the same fate. I've got the call several times from the number 9022927749 in the month of Feb/Mar 13. The caller was "sweta or sneha". Later on, I've taken the policy from them with the assurance of interest free loan of 4 lacs against the insurance of Rs.40000/annum. During that time Mr.Amit Jain called me and told me that, my loan is confirmed and I'll get two verification calls. If I face any problem, I can call him back. I also got the calls - in one they confirmed me the loan & in another one, they confirmed me the insurance. I got the insurance papers also. They told me that, within 45 working days, the loan will be disbursed. When it was nearing 45 days, I called several times to 9022927749 to talk to Mr. Jain. But, the call always got lifted by some other girls and they repetitively told me "Sir is busy, he'll call you back". But, no call came. In the mean time, I got the SMS confirmation stating that "Dear Premier Customer, your loan application has been accepted and is now under process. Your Loan Ref no is LAPMUM0008230. For further queries kindly contact the service help desk no 022-32260758". I contacted them and intimated that, I will get the final verification call between 7-17th of July. But, no call. Since morning I'm trying the no and it is continuously busy. I talked in this no last on 8th july. I do not know what will be my fate. The other no 9022927749 is "temporarily out of service". I tried to search any alternate no of Reliance with the help of 022-32260758 and surprisingly got this link.
If I don't get this loan I don't know how to survive further. As I have arranged money from my friends and taken the insurance in the hope that, with the help of this loan, I can clear all my credit card dues and also give back the money back to my friends. Can anyone please help me?????

sudiptachandra

4 years ago

I would like to state that I have been a victim to a similar situation. I received a call in mar'13 as a telecaller from reliance loan deptt. called of availing personal locan for rs 2 lac by taking up a reliance insurance policy of rs 20000/ annum. i was assigned a representative by the name of amit jain as he also shared his emp id and the contact details (ph no: 9022962973) which worked for a week and then was out of service. this gentleman explained that the loan will be disbursed directly to my bank account after the policy is issued which is (15 + 45 days = 60 days)from the dat of signing up for th policy. i received a sms from the number (022-32260758 )stating that my loan is confirmed with a loan ref number (LAP0008230) in may'13 and they would process the loan after a final verification. i have received the policy document from reliance. everytime i contact the reliance loan department number as mentioned (022-32260758 ), they keep postponing the verification dates and the lady receiving calls keeps changing her name; hence it becomes utterly difficult to trace the person. Infact I hve asked for their office location and they were not ready to divulge their information.

I fail to undertand why would a branded and reputed company like reliance take such cheap steps in duping the people of the country. I am an existing customer of reliance and use couple of other services offered, but insurance scheme was the worst I have ever experienced.

If you have been able to successfully resolve other cases as mentioned, please provide me assistance.

Name: S Chandra
Contact: 865-278-3262

sudiptachandra

4 years ago

I would like to state that I have been a victim to a similar situation. I received a call in mar'13 as a telecaller from reliance loan deptt. called of availing personal locan for rs 2 lac by taking up a reliance insurance policy of rs 20000/ annum. i was assigned a representative by the name of amit jain as he also shared his emp id and the contact details (ph no: 9022962973) which worked for a week and then was out of service. this gentleman explained that the loan will be disbursed directly to my bank account after the policy is issued which is (15 + 45 days = 60 days)from the dat of signing up for th policy. i received a sms from the number (022-32260758 )stating that my loan is confirmed with a loan ref number (LAP0008230) in may'13 and they would process the loan after a final verification. i have received the policy document from reliance. everytime i contact the reliance loan department number as mentioned (022-32260758 ), they keep postponing the verification dates and the lady receiving calls keeps changing her name; hence it becomes utterly difficult to trace the person. Infact I hve asked for their office location and they were not ready to divulge their information.

I fail to undertand why would a branded and reputed company like reliance take such cheap steps in duping the people of the country. I am an existing customer of reliance and use couple of other services offered, but insurance scheme was the worst I have ever experienced.

If you have been able to successfully resolve other cases as mentioned, please provide me assistance.

Name: S Chandra
Contact: 865-278-3262

mohammed faisal

4 years ago

i think in this case irda should investigate with call detail also take help from hi authority this is clear fruad case irda should take immediate action against all involed person not only cancelled licene but also black list person who innvoled in directily in this case also make a system who watch regulary black listed company and black listed person with name and identy and photo should be show all financial releated department and in future prohabited for that kind of person life time in india and abroad, and arrange system that person find in that kind of case and after investgation if person find in fraud case irda can make rule and issue guide line to all life insurance company that no experience certificate would be issue to that kind of person in future join purpose or other company job purpose,and all life and financial web site should arrange option link to fraud list in india and to make arrange link in wesite who involed in fraud case and name photo and age with adress with qulification and last joining and nauture of fraud also shuld be mention in this colum,
company etc.

and i request to irda and govt of india to arrange a web portal only for fraud person and should category can view like life insurance fraud,gerneral insurnace,mutual fund stock market,nbfc,chitfund etc
website regulary and govt should adopt tecnology to create a website for indian consumer who can directly approach and upload that kind of fraud case to consult depart ment with also should provide unique email id from govt department as a proof that information which sent with customer have life time proof that particular time date was email sent to department with that kind of file,

Sensex, Nifty still directionless: Friday Closing Report
The Nifty has to break above the recent high of 5,904 for the bullishness to continue 
 
The market settled higher for the second day, but tapered its gains in the second half of the session on profit booking and a weakening rupee. The Nifty has to break above the recent high of 5,904 for the bullishness to continue. The National Stock Exchange (NSE) registered a lower volume of 48.66 crore and advance-decline ratio of 705:667.
 
The domestic market opened firm on supportive cues from the Asian markets which were trading higher in morning trade following the European Central Bank and the Bank of England’s decisions on Thursday to keep interest rates unchanged at 0.5%. However, investors were cautious ahead of the release of the US jobs data later in the day.
 
The Nifty opened 53 points higher at 5,890 and the Sensex resumed trade at 19,569, climbing 158 points over its previous close. Buying in fast moving consumer goods (FMCG), realty, capital goods, PSU and power stocks helped the benchmarks hit their intraday highs in initial trade itself. The Nifty rose to 5,900 and the Sensex stood at 19,640 at their respective highs.
 
However, the indices came off the highs and were range-bound in morning trade as FMCG majors Hindustan Unilever trimmed ITC trimmed early gains on profit booking.
 
The market gave up some more gains in noon trade as two of the three key European markets opened lower. The benchmarks continued to slip in the late session (though still in the positive) as selling intensified.
 
The indices touched their lows in the final minutes of trade on selling in technology, IT, and auto shares and fall in the value of the rupee. At the lows, the Nifty slipped to 5,858 and the Sensex went back to 19,478. 
 
The market finally settled near the lows of the day, but in the positive for the second straight day. The Nifty gained 31 points (0.53%) to close at 5,868 and the Sensex finished the session at 19,496, up 85 points (0.44%) over its previous close.
 
Among the broader indices, the BSE Mid-cap index rose 0.18% and the BSE Small-cap index advanced 0.26%.
 
Except for BSE TECk (down 0.54%) and BSE IT (down 0.29%) the remaining sectoral indices ended in the green. The top sectoral gainers were BSE Oil & Gas (up 1.49%); BSE FMCG (up 0.89%); BSE Metal (up 0.62%); BSE Capital Goods (up 0.49%) and BSE PSU (up 0.47%). 
 
Out of the 30 stocks on the Sensex, 16 stocks settled higher. The gainers were Jindal Steel (up 3.51%); ONGC (up 2.25%); RIL (up 2.15%); BHEL (up 1.83%) and HDFC Bank (up 1.53%). The main losers were GAIL India (down 2.05%); Bharti Airtel (down 1.89%); Mahindra & Mahindra (down 1.40%); ICICI Bank (down 1.21%) and Coal India (down 0.67%).
 
The top two A Group gainers on the BSE were—Thermax (up 5.58%) and IDFC (up 4.43%).
The top two A Group losers on the BSE were—Wockhardt (down 7.89%) and Gitanjali Gems (down 4.98%).
 
The top two B Group gainers on the BSE were—Impex Ferro (up 18.97%) and KBS India (up 14.59%).
The top two B Group losers on the BSE were—Avance Tech (down 12.50%) and Diana Tea (down 9.96%).
 
Of the 50 stocks on the Nifty, 30 ended in the in the green. The major gainers were IDFC (up 4.35%); Jaiprakash Associates (up 4.10%); Jindal Steel (up 2.77%); NMDC (up 2.72%) and Asian Paints (up 2.60%). The key losers were Gail (down 2.32%); Bharti Airtel (down 2.04%); Lupin (down 1.71%); ICICI Bank (down 1.18%) and Mahindra & Mahindra (down 1.02%).
 
Markets in Asia, with the exception of the Seoul Composite, ended higher on European optimism as the ECB and the BoE decided to keep interest rates low for some more time.
 
The Shanghai Composite added 0.05%; the Hang Seng surged 1.89%; the Jakarta Composite gained 0.46%; the KLSE Composite rose 0.05%; the Nikkei 225 jumped 2.08%; the Straits Times advanced 72% and the Taiwan Weighted settled 1.37% higher. Bucking the trend, the Seoul Composite fell 0.32%.
 
At the time of writing, two of the three key European markets were lower while the US stocks futures were trading with gains, indicating a positive opening of US stocks later in the day.
 
Back home, foreign institutional investors were net buyers of shares totalling Rs164.56 crore on Thursday whereas domestic institutional investors were net sellers of equities amounting to Rs76.20 crore.
 
Energy and environment major Thermax has bagged a Rs1,700-crore order from a petrochemical company for the supply of nine circulating fluidised bed combustion high pressure boilers of 500 TPH each for two of its plants. The stock jumped .47% to close at Rs620 on the NSE.
 
Srei Infrastructure is planning to set up 100 third-party ATMs (also called white label ATMs) across rural areas at an estimated cost of over Rs5 crore. To be run on a pilot basis, roll-out of these ATMs is likely to begin by the end of this fiscal. Srei Infrastructure Finance fell 0.24% to close at Rs20.85 on the NSE.
 
Hinduja flagship firm Ashok Leyland today said it won an order for 2,610 buses from the Institute of Road Transport, Tamil Nadu. However, the company did not share financial details. The stock fell 0.27% to close at Rs18.50 on the NSE.
 

 

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Jet-Etihad deal: Chronicle of coincidental collusions

The deal was finalised only after receiving appropriate ministerial push. Here is the chronology of how Jet pulled it off. Incidentally, well before the FDI limit in airlines was raised, the major shareholder in Jet was Isle of Man based Tailwinds

The deal between Naresh Goyal-led Jet Airways and Etihad Airways, the national airline of the United Arab Emirates (UAE), and the signing of the bilateral between India and Abu Dhabi comprises chain of events taking place one after another. The “smooth and automatic” flow of events makes one wonder whether these incidents were mere coincidence or part of collusion.

 

It all started on 14 September 2012 with the Cabinet Committee on Economic Affairs (CCEA) approving the proposal from the Department of Industrial Policy and Promotion (DIPP) to permit foreign airlines to invest up to 49% in scheduled and non-scheduled air transport services in India.

 

During January 2000 to April 2012, total foreign direct investment (FDI) inflows into the air transport sector were $434.75 million, constituting only 0.25% of the total FDI inflows in India.

 

Interestingly, the move to allow 49% FDI in airlines was looked upon more at facilitating the ailing and debt-ridden Kingfisher Airlines. In fact, the Vijay Mallya-led carrier was the first to initiate talks with Etihad. But by that time, Kingfisher was merely surviving on hopes. After scaling down the fleet, in October 2012 Kingfisher finally decided to cease operations. This gave a chance for Naresh Goyal, a non-resident Indian (NRI) to push for the deal between Jet and Etihad. It also opened up opportunity for SpiceJet, which was rumoured to be in talks with Malaysian carrier AirAsia and UAE’s Qatar Airways. However, there is not much progress on SpiceJet’s deal.

 

In January 2013, officials from both Jet and Etihad met Ajit Singh and Anand Sharma, minister for commerce and industries. After the meeting, Singh confirmed that both the carriers were negotiating a stake purchase deal.

 

On 1st February, the board of Jet Airways approved stake sale to Etihad and was expected to finalise the deal within a week. However, it did not materialise as expected. Even as both the carriers were negotiating the deal, on 27th February, Etihad paid $70 million to buy Jet's slots at London's Heathrow Airport, said a report from Reuters. Etihad was quoted in the report as saying that the deal to buy slots was a part of a “sale and lease-back” agreement, and Jet would continue to operate flights to London using those slots.

 

It is important to note that initially the Jet Airways deal was to be consummated and concluded on the 28 February 2013. This had been announced much earlier by Jet and Etihad themselves. At that time, the chairman of Etihad—a member of the ruling family—stated that all the requirements of Etihad and Abu Dhabi had not been fulfilled and hence Etihad’s investment in Jet was yet to be concluded.

 

DGCA swings into action

On the next day, i.e. on 1 March 2013, the Director General of Civil Aviation (DGCA) issued fresh guidelines as approved by the ministry of civil aviation. Clearly, the changes made in the 2008 guidelines were aimed to facilitate the deal between Jet and Etihad. Here are the modifications made in the guidelines...

 

2008 - Clause 1.7 states “A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline shall not have agreements such as shareholders agreements, etc. with a foreign airline, containing provisions/arrangements empowering such foreign airlines or others on their behalf to have effective control in the management of the domestic airline”.

 

1 March 2013 - this was deleted.

 

2008 - Clause 1.8 states “A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline shall not enter into an agreement with a foreign airline which may give such foreign airline the right to interfere in the management of the domestic operator.”

 

1 March 2013 - replaced by Clause 1.5 that states “A Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline other than those who have FDI by foreign airlines shall not enter into an agreement with a foreign airline, which may give such foreign airline, the right to interfere in the management of the domestic operator”.

 

It is evident from the above change that a foreign carrier, through its investment in a domestic operator, can now interfere with the management of the Indian carrier. These changes in guidelines are in total contradiction to the policy, which mandates the effective control in the hands of an Indian shareholder. It is therefore obvious as to why this clause has been diluted and the clause earlier referred to namely, Clause 1.7 has been delegated—the reason to dilute the definition of effective control.

 

In order to facilitate Jet in receiving the consideration of $300 million through a soft loan at 3% the guidelines were required to be changed. 

 

2008 - Clause 1.9 states “A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline may enter into financial arrangements with a bank and/or other financial institutions for the purpose of lease-finance, hire-purchase or other loan arrangements, but such a tie-up shall not be permitted with a foreign airline”.

 

1 March 2013 - Clause 1.6 states “A Scheduled Air Transport Service/Domestic Scheduled Passenger Airline may enter into financial arrangements with a bank and/or other financial institutions including foreign airline for the purpose of lease-finance, higher purchase or other loan arrangements”.

 

The bilateral and sealing the deal

The 48-hours between 22nd and 24 April 2013 are most crucial in finalising the Jet-Etihad deal. On 22nd April “under the direction of the Prime Minister” the Cabinet Committee approved the signing of the grant of 40,000 additional bilateral seat rights per week to Abu Dhabi. However, the prime minister's office in a note issued on 13 June 2013 clarified that “the decisions were not taken under the direction of the Prime Minister”.

 

In short, 22nd April was the most crucial day at the government level. It was on the same day, Ajit Singh convinced PM Manmohan Singh to urgently clear the bilateral deal between India and Abu Dhabi. Prime Minister Singh then directed finance minister P Chidambaram to hold a meeting with Ajit Singh, Anand Sharma, and Salman Khurshid, minister of external affairs. This meeting was held on 22 April 2013 itself.

 

Immediately after this meeting, Chidambaram along with the other three ministers and Shivshankar Menon, National Security Advisor and Pulok Chatterji, principal secretary, met the PM. This time, the PM raised some issues about the bilateral. However, Ajit Singh and other ministers assured the PM that all these concerns were considered while arriving at the enhancement.

 

“The finance minister and external affairs minister were in agreement with and endorsed the views of the other ministers. On the basis of the above, it was agreed to give an ‘in principle’ go-ahead to the negotiating team as per the formulations (40,000 seats per week),” the note from the PMO says.

 

Although PM Singh directed the matter to be brought before the Cabinet for a decision before operationalizing any agreements, on 24th April, the bilateral was signed.

 

Immediately after signing the bilateral (thus granting 40,000 additional bilateral seat rights per week to Abu Dhabi), Etihad and Jet finalised their stake purchase deal. As per the proposal, Jet Airways would sell 24% stake to Etihad for about Rs2,058 crore.

 

It is therefore, obvious that the consideration to be received or received by Jet Airways was clearly linked and co-related to the value of the bilateral that Abu Dhabi was receiving along with its investment in carrier. The sole beneficiary of the largesse of this bilateral deal was Naresh Goyal and not India as the government wants us to believe.

 

This is because the Jet founder controls about 80% stake in the carrier through his 100% ownership in Tail Winds. Earlier in May, Tailwinds, an Isle of Man registered entity sold 2.51 crore shares in Jet to Goyal at Rs570 per share. This was done because Tailwinds cannot trade shares of an Indian company with another foreign company. However, Goyal can sell his personal stake to anyone.

 

As of 7 June 2013, Naresh Goyal holds 65.99% while Tailwinds hold 9.01% in Jet Airways. Another promoter group, Anita Naresh Goyal holds just 1,000 shares. All three promoters or promoter group entity hold 75% stake in the carrier, as per BSE.
 


This is interesting because among the promoter group entities, only those 1,000 shares held by Anita Naresh Goyal, wife of the Jet founder, are shown as from Indian promoter. The rest are owned by foreign promoters, Goyal and Tailwinds. This is also an example of how rules and regulations are being interpreted to facilitate “mutual interests”.


As per the law, foreign companies can hold maximum 49% stake in a domestic carrier. This was permitted in September 2012. However, even on March 2013, Tailwinds, a foreign registered entity, was holding 79.99% stake in Jet Airways. This was way above the stipulated 49% limit of FDI. However, neither the ministry of civil aviation nor any other regulator seems to be bothered by this.

 

According to the company’s Articles of Association, the bulk of Goyal’s shares in Tailwinds are held on behalf of several other individuals who all seem to be resident citizens of India. While Indian government officials have been satisfied that these arrangements do not compromise Jet Airways’ status as an Indian-owned airline that is effectively controlled by Indian citizens, they were viewed as ‘problematic’ by the American authorities.

 

Earlier, it took Jet Airways more than two years to get the necessary clearances from US authorities to fly to the US. The US State Department gave permission to proceed on 15 November 2006. The more serious allegation that delayed Jet Airways being permitted to fly to the US focused on its opaque ownership structure as well as its alleged links to organised crime in India and abroad. Jet was originally set up as a subsidiary of Tailwinds, an Isle of Man-based holding company designed as a tax shelter, whose sole shareholder was Goyal, the airline’s NRI founder and chairman.

 

Even today, Goyal, termed as an NRI, holds nearly 66% stake. He may not be a resident Indian but he is not foreign shareholder either. Classic Indian situation where anything goes!

 

Reported by: Yogesh Sapkale

Read More

Jet-Etihad deal: Handing over benefits to Abu Dhabi on a platter

Jet-Etihad deal: What are the Parliamentary Standing Committee, FIPB, SEBI and CCI worried about?

Jet-Etihad deal: What happened in those 48-hours?

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COMMENTS

Sonia Jaspal

4 years ago

Thanks for highlighting these list of coincidences between Govt actions and owners of Jet-Etihad. It seriously shows how far govt is willing to twist the law to accommodate a few. Airlines FDI restriction was purported to be for national security. Now I would assume that is also a salable and a risk worth taking.

Sonia
http://soniajaspal.worpdress.com

ashwin bahl

4 years ago

A small country like Qatar flies to the following destinations in India daily, most of the time to its 100 per cent capacity and also doing a very good job of it :
Doha to Kolkotta. Mumbai, Ahmedabad, Amritsar, Goa, Hyderabad, Kozhikode, Trivandrum, Chennai, Bangalore, with 11 flights a week to Cochin and double daily to the capital Delhi.
Where the heck are our proud Indian carriers ? Where is there presence ? Why this sordid state of affairs ?Are we not capable to get the market share ? Or we do not want to because of red tape and domestic policies ? Or the aim of private carriers is that once they are established then it is time to re sell it to foreign carriers at a premium ????

REPLY

MDT

In Reply to ashwin bahl 4 years ago

Thanks for your comment.
Request you to read http://www.moneylife.in/article/flying-t... to know the truth about Indian aviation sector.

SuchindranathAiyerS

4 years ago

The Indian Civil Aviation house of cards began to collapse when excess capacity was purchased from Boeing for Air India (together with unnecessary aircraft for the IAF)to curry favour with the US. This smothered an industry that is delicate at the best of the times.

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