YSR model: “Doling out” state resources in lieu of 'investments' in own business empire

The CBI has quizzed N Srinivasan of India Cements who was also allegedly using the same model of quid pro quo

From the ongoing investigations against YSR Congress chief Jaganmohan Reddy in the disproportionate assets cases is emerging an interesting business model. Jagan Reddy apparently gave away scarce state resources like land and mines to businessmen if they invested in various Reddy companies.

The CBI (Central Bureau of Investigation), in its three charge-sheets filed against Jagan and others, has alleged that he and his father had hatched a conspiracy to defraud the Andhra Pradesh (AP) government with Jagan influencing Rajasekhara Reddy, the then chief minister, in doling out certain favours to various investors, who made investments in Jagan's businesses.

The latest corporate on CBI's radar is N Srinivasan, one of the most influential personalities in Indian industries as well as in the cricket world. He is chief of the Board of Control for Cricket in India (BCCI) and managing director of India Cements. According to a report from PTI, the sources from CBI had said that cement companies could be asked about water and limestone allocations made during the tenure of Rajashekhara Reddy as chief minister of Andhra Pradesh.

Mr Srinivasan, while speaking with a news channel, claimed that the company has not done anything wrong and that it is ready to cooperate with the investigating agency.

Accoording to a PTI report, he said, "The company has responded in detail to the CBI and whatever water rights were given within the industrial policy of Andhra Pradesh, all this has been explained to them. So therefore we are very confident that as far as India Cements is concerned, they have not done anything wrong and that will be proved,".

The CBI, which has so far arrested Jagan, his financial advisor V Vijay Sai Reddy (currently out on bail), former AP Minister Mopidevi Venkatramana Rao, industrialist Nimmagadda Prasad and senior bureaucrat KV Brahmananda Reddy, has also quizzed two other AP Ministers—Sabitha Indra Reddy and Dharmana Prasada Rao—over government orders (GOs) that allegedly benefited some companies.

Nimmagadda Prasad alias Matrix Prasad, touted as entrepreneur with a golden touch in the pharma industry, is also alleged to have followed the YSR/Jagan model of investing in their companies in return for getting access to various resources. Prasad has been charged with investing Rs100 crore in Jagati Publications that publishes Sakshi Telugu daily, besides putting in another Rs244 crore in Bharati Cements and Rs200 crore in Carmel Asia, all floated allegedly by Jagan.

In return, Jagan's father, late YS Rajasekhara Reddy, allegedly allotted 15,000 acres of land in Prakasam and Guntur districts to Matrix Enport, the company owned by Prasad, for development of the Vadarevu-Nizampatnam Port and Industrial Corridor. Till date the project, initiated in 2007, has not made any progress. (read more N Prasad of Matrix Lab arrested for sweetheart deal with Jagan Reddy)

Just on Thursday, the CBI grilled AP information technology minister Ponnala Lakshmaiah for over eight hours. The agency questioned the minister regarding GOs issued during 2004-09 by the irrigation department, when he was the major irrigation minister in the cabinet of late YS Rajasekhara Reddy, on supply of water to manufacturing plants of some cement firms. These firms allegedly made investments in Jagan's businesses, says the report from PTI.

Senior IAS officer Adityanath Das, who was the then principal secretary of irrigation, was also quizzed with regard to the GOs, sources said.

Even the Enforcement Directorate (ED) has registered separate cases against Jagan under the Prevention of Money Laundering Act (PMLA) and Foreign Exchange Management Act (FEMA). The ED is probing alleged contravention of foreign exchange rules in his financial transactions and investments.

According to media reports, the network and influence of Jagan and his father reached across states. Last week, the AP government cancelled its memorandum of understanding (MoU) signed with Karnataka's former minister Gali Janardhana Reddy owned Brahmani Industries. The MoU was signed by YS Rajsekhara Reddy in 2007. The AP government had allotted 5,666 hectares (ha) to the company for setting a steel plant with a capacity of 2 million tonnes per annum and a private airport. Brahmani Industries was also allowed to take 142 million cubic meter water from a nearest reservoir.

The Gali Reddy brothers of Bellary, especially Janardhana Reddy, were allegedly very close to YSR and the Jagan family. However, he was arrested last year by the CBI and is now in remand in a jail in Bengaluru. His company, Brahmani Industries, is among other companies named by the investigation agency in its first information report (FIR) against Jagan.

The Gali Reddy brothers of Bellary, who devastated parts of the Karnataka-Andhra Pradesh border region, have similarly been arrested after decades of amassing wealth (reportedly Rs50,000 crore). There are allegations of irregularities in the mining activities of Obalapuram Mining Co (OMC) which is owned by the brothers—G Karunakara Reddy, G Janardhana Reddy, G Somashekara Reddy, as well.

Even the Comptroller and Auditor General of India (CAG), in its report, said the land allotted to Brahmani Industries was in violation of rules and involved alienation of 273 ha of water bodies.


Sensex, Nifty may see minor correction: Friday Closing Report

Nifty may find its resistance at around 5,100

The market which was trending lower till the post-noon session, witnessed a splendid rebound in subsequent trade to settle in the positive, making the fifth consecutive close in the green. Yesterday we had mentioned that the Nifty has to firmly close above 5,100 for the upmove to continue. Today the index almost reached that level, hit an intraday high of 5,084. The benchmark may find its first resistance at 5,100, after which there may be a minor correction. The National Stock Exchange (NSE) saw a volume of 61.67 crore shares.

The market, which had rallied over 4% in the last four days, opened in the negative as the Asian markets were in the red in morning trade in the absence of any comments from US Federal Reserve chief Ben Bernanke about any new stimulus to boost the economy. Besides, fresh concerns about Europe dwarfed China's rate cuts that were announced on Thursday, also weighed down on investors. The Nifty opened six points down at 5,044 and the Sensex resumed trade at 16,612, a loss of 37 points over its previous close.

The rupee lost 21 paise to 55.15 against the dollar in early trade, snapping the three days of gaining streak due to the greenback gaining against the euro overseas. The local unit had ended higher by 42 paise at 54.94 on Thursday, its highest closing since 18th May against the dollar on sustained FII inflows.

Oil & gas, auto, power and technology sectors witnessed heavy selling pressure in early trade, which pushed the indices further southwards. However, the market picked up some momentum in a short while on select buying.

The gains were short-lived as selling pressure again once again intensified after Reserve Bank of India (RBI) deputy governor KC Chakrabarty said that interest rates were not too high to impact growth. The indices extended their losses after a media report revealed that Spain is expected to make an appeal for funds to help its banks in dealing with their liquidity crunch. EU leaders are likely to announce their decision on Saturday.

European indices which were trading around 1% lower in early trade added to the woes of the local market in the post-noon session. The benchmarks dropped to their lows with the Nifty going down to 4,995 and the Sensex going back to 16,485

The market emerged into the positive on the back of a splendid rebound in late trade on support from banking, capital goods, fast moving consumer goods and power stocks. The upmove helped the indices hit their day's high with the Nifty touching 5,084 and the Sensex surging to 16,768.

The market pared a small part of the gains, closing in the green this entire week. The Nifty gained 19 points to 5,068 and the Sensex climbed 70 points to settle at 16,719.

The advance-decline ratio on the NSE was in favour of the losers at 802:875.

Among the broader markets, the BSE Mid-cap index gained 0.22% and the BSE Small-cap index rose 0.20%.

The sectoral gainers were BSE Capital Goods (up 1.78%); BSE Realty (up 1.40%); BSE Fast Moving Consumer Goods (up 0.89%); BSE Power (up 0.74%) and BSE Bankex (up 0.51%). The main losers were BSE IT (down 0.75%); BSE TECk (down 0.38%); BSE Consumer Durables (down 0.13%) and BSE Healthcare (down 0.01%).

The Sensex was led by Sterlite Industries (up 3.50%); GAIL India (up 3.06%); Larsen & Toubro (up 2.53%); BHEL (up 1.58%) and Hindustan Unilever (up 1.36%). Maruti Suzuki (down 1.66%); Infosys (down 1.38%); ONGC (down 1.37%); Bajaj Auto (down 1.06%) and TCS (down 0.75%) were the major losers on the index.

The top performers on the Nifty were Reliance Infrastructure (up 5%): GAIL India (up 4.15%); Sterlite Industries (up 3.70%); L&T (up 3.47%) and IDFC (up 2.78%). The top decliners were Cairn India (down 1.65%); ONGC (down 1.63%); Maruti Suzuki (down 1.42%); Power Grid Corporation (down 1.16%) and Bajaj Auto (down 1.16%).

Markets across Asia closed weak as the US Fed chief refrained from making an announcement about any new initiatives to boost the economy. Also, ratings agency Fitch on Friday downgraded Spain from 'A' to 'BBB' citing the cost of recapitalizing the country's banking industry and a lengthening recession. The move ignited fresh concerns among investors, dampening sentiments.

The Shanghai Composite declined 0.51%; the Hang Seng dropped 0.94%; the Jakarta Composite fell by 0.40%; the KLSE Composite lost 0.30%; the Nikkei 225 tumbled 2.09%; the Straits Times declined 0.77%; the KOSPI Composite was down 0.67% and the Taiwan Weighted tanked 1.14%.

At the time of writing, the key European indices were down between 0.64% and 1.11% and the US stock futures were trading with losses.

Back home, foreign institutional investors were net buyers of shares aggregating Rs675.48 crore on Thursday while domestic institutional investors were net sellers of equities amounting to Rs33.74 crore.

Piramal Healthcare today said it has completed acquisition of the US-based Decision Resources Group (DRG) for $635 million (nearly Rs3,400 crore). Piramal will now operate DRG as a stand-alone business and it will remain headquartered in Burlington, MA, the company said. The stock gained 1.64% to close at Rs444 on the NSE.

Leading supplier of technology and services Bosch today announced it would relocate manufacturing activities with related support functions of its city plant at Adugodi to Bidadi in two phases from 2012-13 to 2015-16. The company has acquired 97 acres in Bidadi for construction of the new facility and would invest nearly Rs600 crore for development of the facility in both phases, a company statement said. The stock lost 0.11% to settle at Rs8,876.50 on the NSE.

Tecpro Systems has bagged domestic orders worth Rs510 crore while its Singapore subsidiary won a Rs183 crore order to build a coal and ash-handling plant for Hyundai Rotem in Vietnam. The stock gained 3.28% to close at Rs159 on the NSE.




5 years ago

Can some one plz review this plan for me? I am planing to buy this plan..

Thanks in advance.


5 years ago

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Life after Death

What happens to what you leave behind depends on how you leave them behind. Planning your legacy can be a complex affair. Shalini Amarnani tells you all that you need to know about Wills, nominations, trusts and the rest of succession planning

Isn’t it the eternal complaint of all parents that their children don’t listen to them? Well, here is your chance to make sure that your children follow your wishes at least when you’re no longer around. Estate planning or succession planning is essential, if you wish to avoid disputes over your assets when you are no more. It acquires special importance when you want to distribute the assets in an unequal manner. It could be that you wish to leave the controls of the assets with your wife instead of your children or you may also want to make a bequest to your friend or a trusted old-age companion.

All this can be done only by means of a clearly written Will. Though a Will is considered the best method of leaving your legacy according to your wishes, it is not the only way. You can also nominate the property or gift it before death. Each method has its pros and cons; so let’s examine them.

Nomination Is Not Enough
Whenever one opens a bank account or buys an asset, one fills up a nomination form along with it. Most of us believe a nomination means that the asset will be transferred to the nominee after the death of the asset owner. Nomination, however, simply means a right to receive the asset and not own it. For instance, if you nominate your daughter for your flat, then your other children or wife can contest it in a court of law and, if they win, the asset will be divided according to law. Says Gautami Gavankar of Kotak Mahindra Trusteeship Services Limited, “Nomination, as per a Supreme Court decision, only indicates the hand which is authorised to receive the amount/property on payment of which the person paying gets a valid discharge of his liability. Nomination only provides for the convenience of transferring the property in question from the name of the deceased to the nominee. The asset, however, can only be claimed by the heirs/ legatees of the deceased in accordance with the law of succession governing them”. 

A nomination can, however, be useful when there is no possibility of contest - if there is only one beneficiary or if all the beneficiaries are in agreement about the nominations.

A Loving Gift
Another interesting way to leave a legacy is through a gift deed. The gift deed must be made during the lifetime of a person. It is required to be registered under the Indian Registration Act, in case of immoveable property. You have to pay stamp duty of 2% on the value of the gift, i.e., the property in question, at the time of registration, if the gift is made to a family member. This too can avoid any confusion and smoothen the process of transfer property.

Choose to gift away your property after much thought. Gifts, once given, cannot be taken back easily. It has to be done with the consent of both the parties. This leaves a grey area where the person making the bequest may not feel comfortable losing control over the asset during his lifetime.

The Way of Wills
One should make a Will soon after one has acquired some assets. Wills are not necessarily for old people. In fact, it is better to make a Will at a younger age. One advantage is that it avoids the possibility of the legality of the Will being contested on grounds of unsoundness of mind at the time the Will was made. A Will becomes operative only after death. There is no restriction on the way a person can deal with his or her property even after writing the Will.

To make a Will actually work, there should be an executor, who would be entrusted with the responsibility of ensuring that the assets are distributed according to the provisions of the Will. Do make sure s/he is willing to take up the responsibility. A Will should be signed by the testator (the person whose Will is being made) in the presence of at least two witnesses. The full names and addresses of the witnesses should be clearly indicated in the Will. Though not essential, it is better if one of the witnesses is a medical practitioner, who should certify that the testator is of sound mind, especially if the testator is at an advanced age. A witness should neither be a beneficiary nor an executor of the Will.   {break}

A Will must always be dated. If more than one Will is made, the one of the latest date will nullify all the previous ones. In fact, it would be better to make a statement nullifying all other Wills. The pages should be numbered to avoid fraud. A Will should be simple and, as far as possible, unconditional. Says Gaurav Mashruwala, Financial Advisor, “The Will should be uncomplicated. Too many pre-conditions, before the beneficiary receives the property, create unnecessary problems and delays in the execution of the Will and gives added responsibilities to the executor of the Will”. A Will can be hand-written or typed. No stamp paper is necessary. It need not be registered.

The value of assets often fluctuates, so it is better to expressly mention the value that each beneficiary will receive in percentage terms rather than absolute numbers, unless it is pure cash. Whenever changes in the family circumstances or other reasons necessitate a change in the Will, the structure of the Will can be amended. Even if there are changes in the nature of the property or assets, an amendment may be needed. So take it out at regular intervals and read it.

Creating a Trust
A Will carries several disadvantageous in its execution. Obtaining a probate and distribution of assets is a time consuming and expensive process. Another increasingly popular way to manage your assets is to create a trust. A trust involves transferring of one’s estate to a trustee for certain beneficiaries. A trust provides for management of the estate during one’s lifetime and also provides for distribution and management of one’s wealth after death.

The trust route can be used for distribution of assets not only for the present generation but also for future generations. The money can be held and managed by trustees for minor children until they reach maturity. The trust, as a route, is just about catching up in India, although it is a very popular concept in the West. There are some companies which provide professional services for creation and management of trusts. “The trust avoids family disputes leading to disintegration of family businesses. It retains confidentiality, as one is not required to obtain a probate,” says Gavankar of Kotak. A trust is usually created with a small amount, say Rs10,000/-, since the trust deed needs to be stamped depending on this amount. Assets can be added later into the trust. But the trust laws are more than a century old and very cumbersome; sweeping powers are vested with the Charity Commissioner to regulate trusts.

What Successors Must Know
As per the Indian law, the assets received by the successors are not taxable at the time of receipt, as there are no estate duties. In case of nominations, the nominee will have to apply for the transfer of asset along with the nomination papers and the death certificate. After the claim is verified, the asset will be transferred to the nominee.

In case of a Will, the executor has to file a probate petition in the court of law. If all goes well, the probate takes six months to a year. A probate is identified as the copy of the Will certified under the seal of the court of competent jurisdiction. No right as executor or legatee can be established unless a court has granted the probate of the Will. Probate can be granted only to the executor appointed by the Will. The cost of getting a probate includes legal fees as well as stamp duty on the value of the property being willed. The stamp duty varies from state to state.{break}

6 Factors to Keep in mind while Planning Your Estate
1. Assets:
The nature of the estate. Are there any assets which are family assets which should always remain with the family and never sold to third parties?

Who would be the beneficiaries of your estate? Whether the beneficiaries would only be the first generation or one wants to provide for future generations also? Are there any mentally or physically disabled beneficiaries or old or dependant people or minor children in the family who need to be taken care of financially over a period of time and, if so, who will take care of these beneficiaries?

3.Distribution Vs Growth:
How is the distribution of the estate to be done amongst the beneficiaries, i.e., is it to be disposed off immediately or it is to be kept for the beneficiaries to be distributed over a period of time? Do you want your estate to be managed by a professional to effectively grow it over a period of time?

4. Chance of Disputes:
Is there even a remote possibility of disputes in the family and, if so, which mode of estate planning would mitigate the disputes? By what mode can you achieve a harmonious and planned succession?

5. Risks:
What mode of estate planning would take care of unforeseen eventualities, the smooth management of your business affairs thereafter and transfer of your assets to your future generations.

Is your business risky when the planning is being done and may run into huge losses? If this happens, are your family assets protected?

4 Myths about Estate Planning
Myth 1: “My assets are so small that a Will is not necessary.”
Fact: Think again. Few people are worth so little any more that a Will is not necessary. Add together the value of your home, car, furniture, jewellery, savings account and investment portfolio. Subtract your personal debts from this total. The bottom line is that you are generally worth far more than you think, especially since the resale value of a flat is anywhere between Rs50 lakh-Rs1 crore in many urban areas. Even if some items do not hold great monetary value, they could hold an enormous amount of sentimental value. Failing to indicate who receives these treasures can cause friction between family members that lasts for decades. Few families recover.

Myth 2: “When I die, my spouse will get all of my assets.”
Fact: If you and your spouse own assets jointly, on your death. your share of the assets will automatically go to the surviving spouse. But, what happens when your surviving spouse dies? What will your children receive? Does your spouse have the financial know-how to manage the family wealth?

Myth 3: “I can create a Will on my own and save the legal costs.”
Fact: ‘Do-it-yourself’ Wills often do not contain all the necessary components as required by law and are frequently ruled as invalid by courts. A vaguely-worded clause can result in lengthy legal battles. Anyone who might benefit from the invalidation of your Will can contest it, and if the courts decide in his/her favour, your estate may be required to cover all legal costs. 

Myth 4: “I am too young to create a Will.  I’ll create a Will later in my life.”
Fact: A Will is an extremely flexible document whose terms can be changed as often as needed. In fact, any legal expert will tell you that a Will should be re-examined periodically to make sure it is up-to-date. A Will should be reexamined whenever there is a substantial change in your life. Remember, the terms of a Will become effective only at death.



Florida Estate Planning Lawyer

7 years ago

I found this very interesting, In the United states what you call a nomination, is actually a beneficiary designation and would not require a will to transfer the account on death.

I always enjoy learning about estate planning in other countrys

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