The Inter-connected World of Indian Defence Business
Sudhir Choudhrie, India's biggest arms agent and lobbyist, who is being investigated by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED), has made enough through his deals to have reportedly entered the real estate business.
Investigating agencies tracking his activities say he is constructing a network of cinema halls, lifestyle malls and luxury hotels. 
These investigations are also providing telltale clues into how closely networked the world of defence contracts is—and that there are neither permanent friends nor permanent enemies among those in the defence business. 
For instance, Alpha Design Technologies, a Bengaluru-based company with links to Mr Choudhrie, which was acquired by Adani Defence Systems and Technologies in December for Rs400 crore cash, has links to Russian and Israeli players and is promoted by Vasaka Promoters and Developers. Adani Defence Systems and Technologies is a wholly-owned unit of Adani Enterprises of the Gautam Adani-led group. 
Alpha Design, which has got industrial licences to manufacture defence equipment in India, had the following shareholders on 31 March 2018: Vasaka Promoters and Developers (3.21 crore shares and 85.8% holding), Col HS Shankar (retd), who manages the company (no shares) and One Earth Capital Ltd of Mauritius, a foreign institutional investor or FII (0.53 crore shares, or 14.15% holding).
On 1 December 2018, Alpha Design Technologies allotted equity shares to the following entities: Elara India Opportunities Fund Ltd, an FII (0.03 crore shares, 0.79% holding for Rs8.24 crore), Astraea Fund Ltd, Cayman Islands (0.01 crore shares, 0.26% holding for Rs4.52 crore) and Cogent Global PCC, Mauritius (0.01 crore shares, 0.26% holding for Rs3.21 crore). 
Following this, there was a change in shareholding status. Vasaka Promoters and Developers held 84.68% in Alpha Design and Technologies, One Earth Capital Ltd of Mauritius held 13.98% and Col Shankar (retd) held 0.03% while FIIs together held 1.31% of the company. 
There are two interesting aspects of these deals—one, the transfer of 13.98% equity stake of Alpha Design from three companies linked to Mr Choudhrie and his associates to One Earth Capital, Mauritius and, two, the holding of Vasaka Promoters and Developers: the first because of the interlocking shareholding and, in the second case, the family relationships involved. 
Vasaka Promoters is a special purpose vehicle (SPV) promoted by the Murugappa Group, Karvy Group and Amarjit Singh Bakshi and his company, Safdarjang Estates Pvt Ltd. The family connections build on from here. 
Mr Bakshi is chairman and managing director of Bakshi group, which is involved in the automotive, infrastructure, defence, real estate and hospitality industries. Safdarjang Estates is a Bakshi group company and has on its board Amrita Bakshi, wife of Amarjit Singh Bakshi. 
Continental Defence Solutions Pvt Ltd, another Bakshi Group company, has been granted industrial licences for defence manufacturing by the government's department of industrial policy and promotion (DIPP). Mr Bakshi's daughter, Simrin is married to Bhanu Choudhrie, Sudhir Choudhrie's son. 
Now, to cut a long story short, all the companies mentioned above—the Bakshi Group companies, the Murugappa Group, the Karvy Group, Vasaka Promoters, One Earth Capital, Mauritius and Elara India Opportunities Fund Ltd -- have links with Alpha Design Technologies Pvt Ltd, a Sudhir Choudhrie front company, which has now been bought over by Adani Defence Systems and Technologies.
The rationale for the acquisition is obvious. It pitchforks the Adani Defence Systems into the big league where it can match the Tatas, Reliance Defence and the Mahindras. 
Mr Choudhrie, whose name figures among the biggest account-holders in the infamous Panama Papers, has been one of the beneficiaries of the offset programme in defence. 
The Panama Papers Link
On 17 October 2016, six months after the Panama Papers and days after the Indian Express reported on several offshore firms linked to London-based arms agent Mr Choudhrie and his son Bhanu, a Mossack Fonseca employee had raised the red flag, new data from the law firm revealed.

According to the report, "The 'compliance note' pointed out that both father and son were arrested in 2014, as part of a SFO probe in London for allegedly helping Rolls-Royce pay bribe to secure contracts in China and Indonesia. In India, it noted, the Ministry of Defence also ordered a CBI inquiry into the purchase of aero engines by Hindustan Aeronautics Ltd (HAL) from Rolls-Royce."
On 27 October 2016, two entities from British Virgin Islands (BVI) - Anterna Ltd and Belinea Services Ltd, associated with the Choudhries were served a 90-day notice by Mossack Fonseca to change their registered agent.

"The latest data shows that Mossack Fonseca's UK office informed its BVI arm that Bhanu had resigned as director of Anterna on 27 January 2016, after all 50,000 shares were transferred in November 2015 from a Seychelles entity - Protype Services Inc - to Sumant Kapur, the son of Sudhir Choudhrie's uncle BK Kapur," the report from Indian Express says.
Rolls-Royce Connection
In February 2014, Mr Choudhrie was detained by the UK Serious Fraud Office (SFO) in a bribery investigation into Rolls-Royce Holdings. According to an investigation by BBC and The Guardian, Rolls-Royce had paid the money to companies linked to Mr Choudhrie, a known arms dealer.

A report from BBC said, "The joint investigation has also found evidence of a suspicious payment that was made in cash. It involves Mr Choudhrie's son, Bhanu, who accompanied an arms executive called Peter Ginger on a trip to Switzerland in 2007. During the trip, Mr Ginger made a cash payment amounting to hundreds of thousands of pounds into a secret bank account. The account was opened in the name of 'Portsmouth' and bank documents seen by Panorama later showed a balance of more than 1 million Swiss francs. Mr Ginger was a key negotiator on the sale of Hawk aircraft to the Indian government. All of the planes had Rolls-Royce engines and the deal was worth around 400 million pounds to the company."

Both Mr Choudhrie and his son Bhanu were arrested in February 2014.
Mr Choudhrie denied any wrongdoing, was never charged and was released on bail without conditions. The Sunday Times reported that the bail was completely lifted in July 2014.
The company, Europe's largest maker of commercial jet engines, agreed in January 2017 to pay about 670 million pound to settle US and UK investigations into allegations its representatives bribed foreign officials, says a report from UK Telegraph.
This report from October 2018 also stated that Bhanu Choudhrie was taking legal action against his wife Simrin to prevent her disclosing 'pillow talk' about his part in a Rolls-Royce corruption inquiry. Simrin Choudhrie had filed for divorce in May 217, but was living with her husband till November that year. The couple is going through divorce proceedings.
In UK, Mr Choudhrie is regarded as a long-term backer of the Liberal Democrats and has supported the party financially since 2004, making over £1.5million in donations, in personal capacity and from his company.

In 2015, Liberal Democrat leader Tim Farron had appointed Mr Choudhrie as his adviser on India, a role involving helping the party develop its relationship with the British-Indian community and providing advice on Britain's foreign and business relationships with India.
According to a report from Deccan Chrinicle, Israel-based international defense electronics company Elbit Systems Ltd gave its first megabuck order for export of high technology jammer power amplifier to Alpha Design Technologies during the the Aero India 2019. These amplifiers would also be sold to Indian armed forces later.
Bezhalel Machlis, President & CEO, ELBIT Systems, said the company selected Alpha Design Technologies as their technology and production partner for manufacture of new generation jammer power amplifiers to meet requirements worldwide and would ensure that large export orders accrue to Indian manufacturers.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Ralph Rau

    2 years ago

    Moral of the story.

    If you have a "dirty" business and are being tracked by ED and CBI simply sell it to Mr A or Mr A and it will be instantly sanitised and all will be forgiven.

    Meenal Mamdani

    2 years ago

    This is so murky, wheels within wheels.
    What a life!! A person cannot trust his own wife! Whew!
    Looks like money is more important than anything else in life for these folks.

    My question is this - does this hold for the defense industry only or is it the modus operandi for all large trans-national deals?

    SEBI Declares Commodity Broking Arms of Motilal Oswal and Indian Infoline 'Not Fit and Proper'
    Market regulator Securities and Exchange Board of India (SEBI) has declared the commodity broking arms of Motilal Oswal and India Infoline (IIFL) as not "fit and proper", as part of the action taken in the NSEL case.
    SEBI is probing as many as 300 brokers for violation of rules colluding with the National Spot Exchange Ltd (NSEL) to defraud investors. In fact, the regulator has named brokerage firms in a first information report (FIR). 
    What this meant was that NSEL did not maintain sufficient underlying stock on trades it allowed even as brokers sold lucrative contracts to investors. 
    This builds defaults and resulted in the exchange denying payments worth Rs 5,600 crore in 2013. 
    "In view of the seriousness of the matter, facts and circumstances of the case, the conduct of the noticee in its functioning as a commodity broker is questionable and has certainly eroded its general reputation, record of fairness, honesty and integrity and has therefore affected its status as a 'fit and proper person' to be an intermediary in the securities market," the designated authorities said in the report submitted to SEBI. 
    In an order uploaded on its website on February 22, SEBI said that the brokers had a close association with NSEL and allowed themselves to "become a channel".
    "Thus the noticee is not a fit and proper person to be granted registration/to operate as a commodity derivatives broker," the order said. 
    SEBI has also ordered both Motilal Oswal and IIFL to transfer securities of all their clients and allow withdrawal within 45 days of the order. 
    Failing this, "the noticee shall transfer its balance clients with their corresponding securities and funds to another person, holding a valid certificate of registration to carry on such activity, within a further period of 30 days", the order said. 
    Also such a person should not be related to the entities being declared not fit and proper person. 
    While the SEBI order deals with commodity trading arms of the two brokerage firms, under regulators unified licence regime, most firms have moved their commodity operations under the same unit that operates stock broking. It needs to be seen what it would mean for the unified broking business of the Motilal Oswal and IIFL. 
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • User 

    Shell companies: e-filing details must for all firms
    Continuing with its crackdown on "fly by night and dummy" entities through stringent KYC regulations, the government has made it mandatory for over 12 lakh active registered companies in India to upload all their particulars including details of registered offices in an e-filing to the government.
    The Ministry of Corporate Affairs has notified the Companies (Incorporation) Amendment Rules, 2019, under which all companies registered before December 31, 2017, are required to file eForm ACTIVE (Active Company Tagging Identities and Verification)-INC22A on or before April 25, 2019.
    Failure to file e-Form ACTIVE will lead to a penalty of Rs 10,000 with companies in default being declared ACTIVE non-compliant. 
    Once a company is marked as ACTIVE non-compliant, it would not be able to make changes to its capital structure or go ahead with merger or amalgamation deals. Such non-compliant companies would also not be able to rotate their directors or make changes in their registered office.
    "The rule makes it amply clear that companies have to e-file all their details so that a proper check is maintained on their operations and creation of shell companies is prevented," said a government official not wanting to be identified.
    Last year, the Ministry of Corporate Affairs had introduced new Know Your Customer (KYC) norms affecting about 33 lakh directors of companies. Under it, directors were required to e-file forms providing details such as personal mobile number, e-mail address, Permanent Account Number (PAN) and Aadhaar number. A video verification that required directors to upload a 30-second clip introducing themselves, was also made mandatory.
    According to the new notification for filing of Form INC22A or ACTIVE, a company must have filed its annual return for the FY18. However, if a company is struck off or is in process of being struck off or is under liquidation, Form ACTIVE need not be filed.
    If ACTIVE is filed on or after April 20, it can only be done after paying a penalty of Rs 10,000. Only after this, will the company be declared ACTIVE-compliant. 
    The e-Form will get all details of a company - its directors, annual filings and a photo (internal and external) showing one of the directors in its registered office.
    This tightening of the noose around companies comes after a major crackdown by the government post-demonetisation in FY18 in which it struck off 2.26 lakh companies that had failed to file their financial statements or annual returns over two or more successive years. 
    Similarly, more than three lakh directors were disqualified for non-filing of annual returns by their companies for three years. 
    In another crackdown last year, the Ministry identified 2.25 lakh more companies for action.
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


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