On 8th August, I wrote about an unprecedented case where the independent director and audit committee head of Gujarat International Finance Tec-City (GIFT City) had filed a public interest litigation (PIL) alleging that the showpiece Rs70,000-crore project had virtually been gifted away. The beneficiary was its private sector partner, Infrastructure Leasing & Financial Services (IL&FS), at a huge cost to the government and the people of Gujarat. (Read: Is GIFT City Gujarat’s Gift to IL&FS through One-sided Deals?
What made this particularly newsworthy is the fact that IL&FS is cash strapped and a series of its projects are in deep trouble. It has outstanding loans of over Rs1.2 lakh crore (source: Moneycontrol) and has been directed by the Reserve Bank of India (RBI) to reduce debt exposure of group companies by March 2019 (source: Business Standard). This infrastructure group, with a large footprint and massive debt, has been repeatedly accused of gold-plating projects in several states.
While everybody has stories about IL&FS’s inefficiencies, very few are willing to speak openly, or on record, because IL&FS and its network of 174 direct and indirect subsidiaries, joint ventures and associate companies has an army of powerful former bureaucrats and politically connected persons on its payroll as employees, consultants, advisers and directors.
In the circumstances, the fact that an independent director and audit committee head of a 50:50 joint venture with a state government (that, too, Gujarat) chose to take the matter to court on behalf of the people of Gujarat is bold and admirable.
My article provoked a sneaky reaction from GIFT City, which provides an insight into the hostile reaction that DC Anjaria, a highly regarded senior finance professional, is up against. Moneylife had asked GIFT City as well as Hari Shankaran, vice-chairman of IL&FS (who is now occupying the chairman’s office without a formal appointment) for comments before we published our report of 8th August. Neither of them has responded so far.
Instead, on 13th August, Ajay Pandey, the MD and CEO (managing director and chief executive officer) of GIFT City, chose to respond through a advertorial by a third-party (Skoch Development Foundation), published in Business Standard (see image). The advertorial about Gift City included a half-page interview of Mr Pandey, which makes no reference to Moneylife while countering the charges made by Mr Anjaria reported in my column. A Skoch representative confirmed that Mr Pandey’s interview was to counter Moneylife.
The advertisement, in the form of an interview, had a screaming headline: “Allegations are false, malicious, factually incorrect and misleading”. Since an advertisement apparently does not have to follow editorial norms, it does not say who made the allegations or where they were published.
Much of the interview is a defamatory attack on the petitioner, Dr Anjaria, ascribing motives to his courageous whistle-blowing. In the process, Mr Pandey glosses over key facts and details, which are part of the PIL. This column will not go into the allegations against Mr Anjaria simply because he and his lawyers are in the process of taking up the matter of his defamation with GIFT City, Mr Pandey and the newspaper.
What is of concern is that the MD&CEO of a joint venture with a state government has breezily made several factually inaccurate statements mainly to defend the financially beleaguered IL&FS
, whose giant debt exposure is worrying
RBI. Here are some of the issues with Mr Pandey’s advertorial interview.
The main allegation in Mr Anjaria’s PIL against GIFT City is that IL&FS, a 50% partner, picked a consortium led by an entity called Fairwood Holdings, without following due processes, to prepare a master plan, concept and design. This was done before GIFT City formally came into existence.
The backdated contract was pushed for ratification by the GIFT City board of directors without even tabling the contract at the meeting. Further, that Fairwood Consultants were paid over Rs400 crore in fees and did not deliver on their contract.
Mr Pandey, in the advertorial, responding to Moneylife’s article, alleges that Mr Anjaria was an independent director throughout the period when the contract was awarded and acquiesced with the decisions.
He cleverly does not provide any dates, although the PIL (copy available with us) is packed with details and chronology of events, the formation of GIFT City and how the contract was brought to the board. Nor does he answer the simple question of whether bids were invited, in line with the Gujarat Infrastructure Development Board’s guidelines, before handing out the contract.
Mr Pandey ends up proving Mr Anjaria’s allegations—of the lack of competence of Fairwood Holdings to handle the project—by admitting that the contract was terminated within two years of its appointment—putting paid to the claims that it was selected after great deliberation.
Further, he says that GIFT City is in arbitration with Fairwood Holdings to “recover money paid for work not done by the consortium.” Anyone with any dealings with the state or Central government knows what a Herculean task it is to recover even legitimate reimbursements. And, yet, here is GIFT City, a 50% state undertaking, saying it is in arbitration with Fairwood since December 2014 to reclaim money paid for work that was not delivered.
Mr Pandey says that 25 hearings have already taken place and the next one is scheduled for 25th August—two days hence! Since arbitration tends to be an expensive process, it is pertinent to ask how much GIFT City has spent on these 25 arbitration hearings over four years, because it apparently failed to choose the a major consultant with adequate due diligence.
Perhaps deliberately, there is no mention of the sum claimed from Fairwood by GIFT City through arbitration. Sources tell us it is a whopping Rs5,740 crore. And, yet, we understand that the balance-sheet of Fairwood, as on 31 March 2010, showed that it had a net worth of Rs77 crore. What does this tell you about Gift City’s chances of recovering anything from Fairwood? My sources say that Fairwood has not even been paying salaries to its employees on time.
So, is the expensive arbitration meant to cover up a bad decision and how the consultant was selected? Meanwhile, typical of IL&FS’s projects, the cost of the project has soared from Rs25,000 crore
in 2008 to over Rs70,000 crore and the project itself looks very different from the original videos available on YouTube. The irony is that Mr Pandey, who chose a half-page advertorial to defend the deal, wasn’t even with GIFT City when the contract was awarded.
Here’s another shoddy falsehood by the Gift City MD&CEO. In response to a question, he says that the PIL No 260 of 2015 in the Gujarat High Court (filed by Mr Anjaria) is “against GIFTCL (GIFT City), IL&FS and the Government of Gujarat.” On the contrary, Mr Anjaria had strategically ensured that the Government of Gujarat is not a party to the litigation—in fact, he considers it to be a victim.
That the MD&CEO of a large and prestigious joint venture of the government would make such a silly mistake in an advertorial to defend the project, smacks of arrogance. It also raises questions about the causal manner in which he has chosen to defame the petitioner, who was selected as an independent director because of his contribution to the very concept of Gift City. It is shocking that the head of a government venture would resort to such a stratagem and distortion.
My sources believe that Mr Pandey’s interview was at the behest of IL&FS, a company that ought to be focusing on reducing its debt, answering questions raised by a whistleblower, and drastically shedding or closing down pointless ventures which it had no business starting in the first place.
Here is a rectification published on 7 September 2018 by the same newspaper
And a rejoinder to the advertorial...