Sardar Sarovar Narmada Nigam Bonds: Investors’ plight and fight continues
Himanshu Upadhyaya 11 February 2016
Even as next round of legalese start on the issue of deep discount bonds, shouldn’t citizens ask questions about the institutions, which failed to carry out due diligence in 1993 and even neglected sane advice from the CAG?
On 8 February 2016, two news items appeared in the newspapers. The first was about an announcement by Mukesh Jhaveri, Director of Sardar Sarovar Narmada Nigam Ltd (SSNNL) that Narmada waters will reach Pragpar Chokdi in Mundra by end of this year, after a delay of many years. The second news ironically was about investors, who had put their money in Deep Discount Bonds (DDB) of SSNNL and planned to wait for 20 years to get the return on investment as promised and had to come to terms with Gujarat model’s anti-investor face
The second news story was in reference to a recent Gujarat High Court verdict  that termed SSNNL (Conferment of Power to Redeem Bonds) Act, passed in Gujarat assembly in March 2008 as “ultra vires” and “void”. The Act was resorted to when SSNNL suddenly faced a situation wherein servicing the debt liability on these bonds till the maturity turned out to be a task that may drive its coffers dry. Investors had approached Gujarat, Maharashtra and Karnataka High Courts and the petitions were clubbed together when the matter reached Supreme Court. In December 2013, Supreme Court clubbed all these similar petitions together and sent the matter back to Gujarat High Court for combined hearing.
The latest High Court verdict however does not yield immediate relief to bondholders, as it stipulates many riders. The first hurdle that investors have to cross is to prepare themselves to further legal proceedings as High Court verdict directs them to approach the Civil Court to adjudicate and determine the amount of loss incurred by them due to the Act. The Court verdict also restricts such a forum for adjudication to only those bondholders, who received proceeds of premature redemption of bonds enabled by the impugned Act, if and only if they had recorded their protests! So, investors are again planning to move to Supreme Court on this matter.
Is the question merely that of investors being lured with promises of higher returns backed by state government standing guarantee or should we be asking more fundamental question on the due diligence by regulatory institutions in this entire episode of indiscriminate market borrowing resorted to by SSNNL and then the manner in which it went about to pre-retire the debt unilaterally? 
The sordid tale of how these investors were lured to support a controversial dam building project by putting their hard earned money as investment into bonds and thereby lend a helping hand to SSNNL to portray as if that controversial dam enjoyed popular support started unfolding in early 1990s. Thanks to an audit report by Comptroller and Auditor General (CAG) for Gujarat (Commercial) for FY2001, citizens know that in the revised cost estimates of 1991-92 had remained unapproved. But oblivious of this, SSNNL was allowed to indulge in market borrowing in February 1993 and then again in November 1993. None of the cost-benefit estimates had identified this route of project financing and hence failed to calculate the debt liabilities arising from them.
On 1 November 1993, SSNNL announced a public issue of DDBs and Non-convertible Bonds (NCBs) to raise a part of finances required for a project, which had come under heavy criticism by World Bank appointed Independent Review Mission. So did SSNNL stand a chance to lure investors to subscribe to these bonds? It appears that SSNNL had initially planned to sell it to non-resident Indian (NRI) segment to raise the money, but the promotional events in the US were stormed by protestors. If a letter to editor by Narmada Bachao Andolan (NBA) published in Economic and Political Weekly is to be believed, it appears that the efforts by SSNNL to access investments from financial market were hit by roadblocks raised by two religious agglomerations: Bharat Sant Samaj and Mumbai Jain Sangh. The size bond issue was Rs300 crore and SSNNL was allowed to retain 25% extra of the size of public offer in case of it getting over-subscribed.
The NBA alleged that SSNNL spent Rs30 crore on media advertisements and hoped that the issue will get 12-fold subscription, but eventually could raise around Rs570 crore, even as underwriters themselves subscribed to the issue. It was also alleged by NBA that SSNNL’s claim that bonds were supported by state government standing guarantee to this were hollow, since all that existed were “letters of comfort”. NBA also alleged that the Reserve Bank of India (RBI) had made strong reservation against cooperatives investing into the bonds and even the National Bank for Agriculture and Rural Development (NABARD) had taken strong exceptions to cooperatives investing into bonds. A public interest litigation (PIL) was filed in Gujarat High Court by Ashwini Bhatt and others and the case was pending as of early 1994.
(Himanshu Upadhyaya works with Azim Premji University. Opinions expressed in this article are personal.)
3 years ago
They have 3 to 4000 cr as money to build a statue but they feel helpless when they have to return the 7000 cr to investors?
Replied to Anil comment 7 months ago
I have also a bond what we do
3 years ago
So what's the status of this matter? Will the investors are getting full amount?
Vijay Kumar
4 years ago
Mr Ramesh from SSNNL contacted me and said they will be returning money to govt and they will stop the redemption from 20 oct2018 onwards.
What is the truth hear? When such notice issued. In 2016 High court given verdict againt BOND early redemption is illegal.
What we have to do
please any one guide
[email protected]
Vijay Kumar
4 years ago
what is latest info SSNNL bond redemption . How we can redem now and how much we can get per bond
Ashwani Nirankari
6 years ago
we will win
Arun Purushottam Kamat
6 years ago
As far as I have seen , the bonds has got Put Option for investors as well as call option for the issuing company , every 5 year and the amount for which it can be made.

If there was rise in the interest rate in the economy , investors would have exercised put option. But since, rate of interest fell , the issuing company exercised call option.

Since , most investors do not read the terms of the issue printed on the reverse of the bond certificate , they claim it as fraud on the gullible investors !

Kamal Garg
Replied to Arun Purushottam Kamat comment 6 years ago
To my knowledge, there was no 'put' or 'call' option as per the Bond Certificate terms and conditions.
If that had been the case, no questions would have been asked.
Why the Gujarat Govt. was required to pass a legislation in the Assembly to prepay the debentures holders is simply because of the fact that there was no such enabling clause of 'put' / 'call' option in the debenture holders agreement and trust deed executed.
It is a case of plain cheating and reneging on your commitments in the form of debenture agreement and trust deed executed by a State Government and Hon'ble High Court has erred in upholding the decision and act of the State Govt.
How can you differentiate between a debenture holder who put debentures for forcible redemption 'under protest' and a normal debenture holder and say that a debenture holder who submitted 'under protest' is entitled for 'additional interest'.
This is simply not the right thing and a right decision.
And to execute even a falsified judgement of the court, the debenture holder would have to approach a district court to make his/her claim executed.
Kamal Garg
6 years ago
Why the discussion is veering towards Banks and NPA issue.
The blog/article talked about SSNNL bond issue and its reneging on its commitment to honour the terms of the bonds.
Our discussion should focus on SSNNL bond issue, role of bonds trustee and Government's as well as Court's role in resolving the issue raised by concerned investors in the bond issue.
Kamal Garg
6 years ago
How can a State Govt undertaking go back on its word and commitments. It amounts to cheating by a State Govt. undertaking as the said undertaking is going back on its legal commitment.
Even the judgement of HOn'able High Court has not given any respite to the aggrieved investors nor solved their problems.
Had it been a private party not honouring its commitment, all hell would have broken loose on them - be it by SEBI (by the way SEBI is responsible to administer and monitor all collective schemes), RBI, CBI and many more.
My opinion is that aggrieved investors should approach Supreme Court for their grievances so that a proper and just verdict is given by the Court.
tapan sur
6 years ago
are our investors so dumb that they cannot riot on this issue to get back their hard earned money back?where as they have successfully created a billionaire babaji selling what difficult to examine,or creating a RadheMa?If we r so gullible then let us face the tune?
Replied to tapan sur comment 6 years ago
Didn't understand what babaji or radhe ma have to do with this issue, irrespective of their credentials! They certainly are not responsible for SSNNL's actions....
Sunil Rebello
6 years ago
Dear All,
This will keep on coming.
Unit 64 is still vivid in many Senior Citizens mind.
then there are the many infra projects which have become inviable, due to the Government changing the rules and goals daily.
But the big dragon is coming up in 2017 - when most of the PSB NPAs will be exposed and their liabilities known.
Thanks to our RBI chief Rajan. Hope the Governments of the future never have the LOAN Melas which was the starting point of the misery of our Indian PSB. All the world over the banks are in a similar mess.
Replied to Sunil Rebello comment 6 years ago
Also, infra projects are definitely a problem because of changing rules, but an equally big problem is promoter integrity, corruption at banks which turn a blind eye to it and continue to lend more and more to cover up a smaller NPA. Solution lies in privatisation of these banks. Sell them lock stock and barrel and get rid of its corrupt staff and ancient impractical organisation structures.
Replied to Sunil Rebello comment 6 years ago
I beg to differ. In general, no where in the world are banks in the kind of mess we see our PSBs in. They are unique with their NPA problems and bankrupt capital position. The reason we think banks outside are equally bad is because they recognise (and fix) problems well before they become messy and hence they appear big, whereas in India, we pretend and delay till the problem goes out of hand. The implicit govt guarantee behind all banks supresses the problem, else there would be a run on all these banks and we would know the reality of how different these banks are v/s their global peers.
Sunil Rebello
Replied to Gupta comment 6 years ago
All banks over the world are in a mess.
it may be bigger than the 2008 mess which was due to the banks lending to the real estate sector.
today most banks over the world have lent money left and right to the commodities sector and who ever thought the crude price would drop from 120 to 30 and same with all other commodities.
now can anyone tell the banks where to lend money.
in Japan the Government has put in negative interest rates. this means if you keep your hard earned money in the banks (where you think it is safe) you will have to pay the banks for keeping your money.
there is no place for money.
the risk n reward concept is very difficult to understand today
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