Internal documents of the Income Tax Department relating to an investigation into the assets held in various offshore accounts by Indians tell an amazingly convoluted story of how the late Dhirubhai Ambani’s international personal investments were channeled into a complex corporate structure involving holding companies located in multiple tax haven jurisdictions and bank accounts in Switzerland, following his death on July 6, 2002. This structure allegedly sought to stash more than ₹2,100 crore away from the gaze of the country’s tax authorities in accounts in a Geneva branch of the HSBC Bank.

Dhirubhai Ambani was India’s richest man. Parts of the story of his overseas assets are known. Bits and pieces have appeared in the media in recent years. Here is the full story being told for the first time, based on classified documents that are in the possession of these writers.

The core of the information being probed by the Income Tax Department originated in internal documents of the HSBC Bank (formerly the Hong Kong & Shanghai Banking Corporation) that were leaked by a whistle-blower in 2008. The first time the Indian public heard about these offshore accounts of Indians was on November 9, 2012, when Arvind Kejriwal and Prashant Bhushan held a press conference in New Delhi under the banner of “India Against Corruption”, the civil society anti-corruption activist movement that was later to morph into the Aam Aadmi Party.

At that press conference, Kejriwal said the Indian government had received from the French government in July 2011 a list of names of around 700 Indians and entities controlled and/or owned by them in whose names there were accounts in the Geneva branch of the HSBC Bank. Most of these individuals and entities had allegedly hidden their foreign assets from the country’s tax authorities. The list read like a virtual “who’s who” of India’s rich and powerful, including several captains of industry.

In the list was a company named MoTech Software Private Limited that has been associated with Mukesh Ambani, Dhirubhai Ambani’s older son and like his father before him, India’s richest man, who heads Reliance Industries Limited, the country’s largest privately-owned corporate entity.

MoTech Software was, at one point, managed by Annu Tandon, a former Member of Parliament belonging to the Congress party, who represented the Unnao Lok Sabha constituency in Uttar Pradesh. She is the widow of the late Sandeep Tandon, who had worked in the Reliance group as a senior executive­. He had joined the group in 1994 as a consultant after relinquishing his post as an officer of the Indian Revenue Service with the Enforcement Directorate ­– responsible for enforcing the Foreign Exchange Management Act (earlier Foreign Exchange Regulation Act) and the Prevention of Money Laundering Act – that had investigated certain foreign currency transactions of companies in the Reliance group.

The allegation leveled by Kejriwal and Bhushan against MoTech Software was that it held ₹2,100 crore in a branch of the HSBC Bank in Switzerland. The allegations were dismissed at that time by representatives of the Reliance group, by Mukesh Ambani as well as by Annu Tandon.

Indian Express Investigation

More than two years later, on February 10, 2015 and on February 15 that year, The Indian Express reported on “Swiss Leaks”. The publication was part of a worldwide collaborative journalistic investigation into documents stolen from HSBC Bank in Geneva and leaked to the government of France by the French-Italian whistle-blower Herve Falciani. These were the same documents that had led to the initiation of an investigation in France in 2009, following which, the information was shared by the French government with the Indian government.

Fourteen accounts, including that of MoTech Software, which were associated with individuals and entities with known links to the Ambani family and the Reliance group were identified in the Express reports. It was stated that MoTech Software was the beneficial owner of four offshore entities – namely the Monaco-registered Infrastructure Company Limited and HRJ Holdings NV, HRJ Holdings NV2, and Aberdeen Enterprises, all registered in the Netherlands Antilles, a clutch of islands in Caribbean Sea that serve as a tax haven – which collectively held about US$472 million or ₹2,100 crore in accounts with HSBC Bank.

The Express report identified six more companies – Stayer Corporation, Tremaine NV, and Bartow Holdings NV all registered in the Netherlands; Alloy International Ltd, and Antalis Management registered in the British Virgin Islands; and Lasemo Holdings Incorporated, registered in St. Lucia, a sovereign island country in the Caribbean Sea and a tax haven – as representing the beneficial holders of the first set of companies.

While the Express could not identify the ultimate beneficial owners of this corporate loop, it named two individuals common to all the companies – James Walfenzao and Jairaj Sampat. Walfenzao heads The Corpag Group, a worldwide fiduciary management consultancy specialising in setting up trusts and tax-exempt structures in offshore tax havens. Sampat is identified in the report as the managing director of Reliance Global BV based in the Netherlands.

Based on the documents which are in our possession, we are now in a position to shed new light on several of these offshore entities and accounts and the role that they played in a scheme to manage Dhirubhai Ambani’s personal offshore assets following his demise intestate (or without leaving a will) in July 2002. This is the first time this information is being publicly disclosed.

Aside from the intrinsic issue of financial assets being hidden from India’s tax authorities, the information also contains allegations relating to an “illegal” attempt to shut down the operations of one of the companies involved, to avoid investigation and assessment proceedings by the Income Tax Department that were underway.

After receiving a list of bank accounts held by Indians in the Geneva branch of HSBC Bank from the French government, the Income Tax Department initiated “re-assessment” proceedings on the account holders. The term “re-assessment” is used because the actions of the Income Tax Department were taking place in 2011, while the information that had been received pertained to the period between 2006 and 2008, and the tax assessments for the relevant individuals would have been presumed to have been completed and all compliance requirements fulfilled.

The implication of the bland bureaucratic term thus, was straightforward but not said in so many words – the people and the corporate entities being investigated were being probed because they had allegedly hidden income from the income tax authorities.

Controversial MoTech Software

One such firm was MoTech Software. First incorporated in the year 2000, MoTech was promoted by companies related to the Ambani family. Annu Tandon had been the company’s managing director until her resignation in January 2008 and her subsequent election to the Lok Sabha from Unnao on a Congress party ticket.

The company had faced a controversy in 2007, when it came under the radar of the Securities and Exchange Board of India (SEBI) along with eleven other companies because of charges of “insider trading” in the shares of Reliance Petroleum Limited. In May 2017, a decade later, the case was finally decided with SEBI banning all twelve companies, including MoTech, from trading in the equity derivatives market for one year. SEBI also ordered Reliance Industries Limited (with which Reliance Petroleum had merged in the interim) to disgorge (or pay back money obtained in an illegal manner) a sum of nearly ₹1,000 crore.

The investigation wing of the Income Tax Department first issued summons to MoTech’s directors in August 2011. Right from the outset MoTech denied holding the accounts that were attributed to it in the leaked HSBC Bank documents. As the proceedings moved on to the assessment unit of the department in November 2011, several hearings took place through till August 2013 when MoTech was given an opportunity to challenge the re-assessment process.

Meanwhile, the Indian government made a request for information to the Swiss government through the Foreign Tax and Tax Research Division of the Central Board of Direct Taxes (CBDT), which is the government department concerned with liaising with equivalent authorities in other jurisdictions to enforce cross-border tax compliance. The Income Tax Department too comes under the CBDT in the Department of Revenue in the Union Ministry of Finance.

In a hearing that took place on July 24, 2013, the tax authorities asked MoTech’s directors to provide a “consent waiver” to enable the investigative authorities in Switzerland and consequently, the Indian authorities, to directly seek records from HSBC Bank relating to particular bank accounts that would otherwise be considered “privileged” under banking secrecy laws. At this stage, MoTech Software’s officials stumped the tax authorities by informing them that the company had been dissolved on May 30, 2012!

The documents of the Income Tax Department with us describe this as an attempt to “keep the department in the dark [while] actively taking steps to dissolve MoTech while attending re-assessment proceedings.” It turned out that soon after the investigation process had started, in March 2012, the company had filed an application before the Registrar of Companies (RoC) in Mumbai under its Fast Track Exit Scheme. It did not inform the RoC that it was facing active re-assessment proceedings at the time.

‘Inadvertently Unnoticed’

The RoC included MoTech in a list of 193 companies that it sent to the Income Tax Department in April 2012 proposing to strike these companies off the register and inviting objections from the department. Apparently this list went “inadvertently unnoticed” and no objections were raised. The company’s directors continued to attend re-assessment hearings, and sources indicate, did not inform the department that it had filed this application to dissolve the company.

Accordingly, the RoC struck MoTech off the register in May 2012 and this was published in its official gazette in March 2013. The department challenged this, terming the dissolution of the company “illegal and invalid” and filed a petition before the Bombay High Court.

In the meantime, more requests for information were made to Switzerland once again, and to four other countries – France, Netherlands, Jersey and the British Virgin Islands. Presumably these requests for information were to ascertain further details about MoTech’s offshore holdings and companies related to it beyond what was available from the original HSBC Bank documents, because, on March 31, 2014, a re-assessment order was passed declaring that MoTech held undisclosed income through four foreign entities: Infrastructure Company Limited reportedly held ₹1,822 crore, Aberdeen Enterprises NV ₹36 crore, HRJ Holdings NV ₹315 crore and HRJ Holdings NV2 ₹19 crore, the total coming to ₹2,192 crore.

Responses to the requests for information were received from the British Virgin Islands in two installments, on September 11, 2014 and on June 11, 2015. It is from the second packet of information that the tax authorities in India were able to construct a part of the story behind these foreign funds.

Constructing Complicated Transactions

The British Virgin Islands sent information collected from an entity named HSBC International Trust Limited (HSBC-ITL), registered in its jurisdiction, which acted as the trustee for Capital Investment Trust, a Cayman Islands registered entity. The settlor of this trust is Chimanlal Jivandas Damani, who is allegedly associated with the Reliance group. (The website indiancompany.info lists Damani or a person with an identical name as a director of Sharedeal Financial Consultants Private Limited.)

Capital Investment Trust is at the apex of a complex structure which the information with us goes on to describe. James and Catherine Walfenzao (of the Monaco-based The Corpag Group), Sampat Jairaj (managing director, Reliance Global BV in the Netherlands) and M K Shetty are identified as officials in the management committee and the enforcement committee of the trust, with HSBC Republic Trust Services (Geneva) serving as its administrator.

The information received by the Indian government from British Virgin Islands came in the form of a series of “file notes” documenting meetings between officials of HSBC Bank and individuals reportedly associated with the Ambani family. The notes of the meetings purportedly show that plans were made to set up a complex structure of multiple entities in different jurisdictions with cross ownership, ultimately connecting back to the Ambani family to handle certain funds held outside India.

According to the file notes, Robert du Plassis, a manager with HSBC Republic Bank (Suisse), Geneva, and Stephen Barney, an associate director of HSBC Republic Bank, London, met with two individuals identified as Damani and the late Sandeep Tandon in Dubai on November 5, 2003. The note states that Damani is Dhirubhai Ambani’s cousin brother and that the two had mutual business interests.

Apparently, in the 1980s, it was agreed that Damani would be responsible for the management of the family’s international personal investments since he resided in Dubai. He acted as the settlor of a holding company named National Industries, which took advantage of banking facilities offered by Credit Suisse, HSBC in Mauritius and Kleinwort Benson.

A part of the folklore around the rise of the Reliance business empire is a story of how the first company Dhirubhai Ambani set up was in partnership with his second cousin, identified in most accounts as Champaklal Damani. In his book Ambani and Sons (Roli Books, 2010), Australian journalist Hamish McDonald described how different business approaches led to the two falling out with each other. Damani thereafter went to reside in West Asia.

What is unclear from the documents with these writers is whether the Damani referred to in the Income Tax Department’s investigation is the same individual or another cousin of the Ambani patriarch.

After Dhirubhai’s death, the question of how these assets were to be handled came up. It was decided that Damani would be entrusted with establishing a trust in which the assets would be held for the benefit of the Ambani family, through a family-controlled company. The company that was apparently chosen for this role was MoTech Software, which is described in the documents as owned by eight family-owned companies which are a part of a network of private companies owned and controlled directly and indirectly by members of the Ambani family.

Moving Across Tax Havens

The structure that was agreed upon in the meeting on November 5, 2003, consisted of a trust, Capital Investment Trust, which would own an intermediary holding company named Thames Global (also registered in the Cayman Islands), which would, in turn, own Infrastructure Company Limited, a company registered initially in the Cayman Islands in October 2004 and subsequently moved to St. Lucia in August 2005.

Thames Global would also own another company named Antalis Management, registered in the British Virgin Islands. These two companies at the end of the chain – Antalis and Infrastructure – were designated to open bank accounts with HSBC Bank’s Geneva branch to hold respectively, the cash and the shares component of the foreign assets, which were to be transferred to them through a separate chain of companies from National Industries.

A holding company named Bartow Holdings NV, registered in the Curacao Island of the Netherlands Antilles (the group of islands in the Caribbean Sea come under the sovereign control of the Netherlands government) was the ultimate beneficiary of Capital Investment Trust and the structure under it. Bartow Holdings, in turn, is a subsidiary of MoTech Software.

A noting on a file goes on to state that “the Ambani family…(is) one of the major Indian industrial families and were originally introduced by senior management in Hong Kong”, indicating the longstanding relationship between HSBC Bank and the family.

The next file note, authored by Raj Parmar, who is described as Global Head of the Global South Asian Diaspora segment of HSBC Republic Bank in London, further substantiates this suggestion of a longstanding relationship, noting that he was in regular touch with a “Mr. Tandon” and a “Mr. MK Shetty” described as the London representatives of the group.

The note describes a corporate account held by National Industries with the Kleinwort Benson Bank in London where Damani was the ultimate beneficial owner, while the assets were managed by the international consultancy bigwig, Deloitte. The note adds that “substantial transactions” took place through this account in 2002-03 before Dhirubhai Ambani’s foreign holdings were being centralised.

In another file note, Parmar addresses the Geneva branch of HSBC Republic Bank stating: “I confirm that I have shown the confidential documentation which confirms that MoTech Software Pvt. Ltd is the ultimate owner of Bartow Holdings NV, and that the ultimate beneficial owners of MoTech Software are represented by Mukesh Ambani, his wife and issue and by Anil Ambani, his wife and issue in their personal capacities.”

The following file note, authored by a D A Whitefield, who is described as the Chief Executive/Chief Director, London of HSBC Bank, records a meeting between him and Parmar, Stephen Barney and another HSBC official, Andrew Bracken. They note how the transfer of assets from National Industries to its ultimate destination was executed.

Apparently the group representatives required a scheme where the directors of National Industries nominated by Kleinwort Benson and Deloitte remained unaware of the ultimate destination of the funds. For this purpose, a new and distinct chain of entities were set up and liquidated after the funds passed through them.

A small footnote needs to be added here. After this episode, Robert du Plassis and Stephen Barney continued as senior professionals in HSBC Private Bank (Suisse) and both went on to become managing directors before HSBC dismantled the Global South Asian Diaspora (GSAD) business which was headed by Raj Parmar.

Long Road Leading to Reliance

Another company named Tocan Asset Trading Incorporated was registered in the British Virgin Islands, which opened an account in HSBC Bank, Geneva. The funds – $400 million in shares (in an instrument known as Global Depository Receipts) of two group companies – flowed from National Industries through another company called Kalmira Limited to Tocan, and from Tocan through to Infrastructure Company Limited. Finally, at the end of this transaction carried out in February 2004, Infrastructure Company held $270 million in shares of Reliance Ports and Terminals Limited, and $130 million in shares of Reliance Utilities and Power Limited.

The entire corporate structure and flow of funds are mapped out in the two diagrams:

Diagram 1: The Corporate Structure

Diagram 2: The flow of funds

Some other incomplete but tantalising nuggets of information are also contained in the Income Tax Department’s investigation report, which is in our possession. Most significant is the fact that HSBC Trustee International Limited, acting as the trustee of the Capital Investment Trust structure, maintained several bank accounts with the First Caribbean International Bank in the British Virgin Islands where in one particular account a large amount of activity was noted between June 2004 and March 2006. This could perhaps indicate that there were further shifts in the family’s offshore assets.

The report also notes that a peak balance of $1.126 billion was seen in the account in November 2004 (almost ₹5,000 crore, according to the currency exchange rates prevailing at that time) and says that the account needs a “thorough examination.” It notes that all the money that was credited to this account was immediately transferred to another account, or to an entity named Lion International.

While the investigations being conducted by the Income Tax Department and other agencies of the Indian government arising from the HSBC list received from the France are still going on, and have been the subject of several tussles between different wings of the government and the judiciary on whether the list of names sent by the French government should be formally made public or not, information about the investigations have been relatively scarce so far.

What the present revelations represent thus, aside from an unusually close look into how a large corporate group goes about allegedly hiding assets from authorities in tax havens and offshore jurisdictions, are a rare instance of inter-government cooperation resulting in the corporate veil being lifted.

On May 11, 2018, one of the two writers of this article (Paranjoy) e-mailed detailed questionnaires to Mukesh Ambani and Anil Ambani. The main findings of the reports prepared by the Income Tax Department were first summarised. It was thereafter pointed out that the documents with us indicated that the department, on the basis of information received from the British Virgin Islands, has alleged that HSBC International Trust Limited, acting as the trustee of Capital Investment Trust held bank accounts numbered 219006020, 219010834, 213000829 and 219006667 in the First Caribbean International Bank, British Virgin Islands, which were reportedly associated with the Ambani family and/or the Reliance group.

It was further added that the account numbered 213000829 was extremely active between June 2004 and March 2006 showing a peak balance of $1.126 billion in on November 8/9, 2004. Credits to this account were immediately transferred to another account numbered 213000810 or to an entity called Lion International.

Moreover, it was alleged that during the course of the investigation by the Income Tax Department and during re-assessment proceedings, there was an attempt to close down the operations of MoTech Software Private Limited through an application to the Registrar of Companies (RoC), Mumbai in 2012, without informing the RoC of the pending re-assessment proceedings and without informing the department of the application to the RoC.

We sought the responses of the Ambani brothers to the following four questions:

1. What is the relationship between the Reliance group of companies and Chimanlal Jivandas Damani?

2. Do you confirm that MoTech Software Private Limited represents the ultimate beneficiary owner of Capital International Trust?

3. Does HSBC-International Trust Limited, acting as the trustee of Capital International, hold the aforementioned accounts in First Caribbean International Bank, British Virgin Islands?

4. Was an application made to the Registrar of Companies, Mumbai, seeking to dissolve the operations of MoTech Software Pvt Ltd on March 17, 2012 while re-assessment proceedings by the Income Tax Department on the company for assessment years 2006-07 and 2007-08 were going on?

At the time of publication, we had not received any responses from either Mukesh Ambani or Anil Ambani or their spokespersons. Their responses will be added to this article as and when they are received.

The authors are independent journalists.