The decision of a bench of the Delhi High Court of comprising Justices D N Patel and C Hari Shankar on Friday September 27, to issue notices to different government bodies – the Ministry of Corporate Affairs (MCA) and its wings, the Serious Fraud Investigation Office (SFIO) and the Registrar of Companies (RoC), the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and the National Housing Bank (NHB) – to investigate the allegations levelled in a public interest litigation (PIL) filed by a non-government organisation, the Citizens Whistle Blowers Forum against Indiabulls Housing Finance Limited, companies in Indiabulls group and its founder, promoter and chairman Sameer Gehlaut, predictably resulted in share prices of group companies tanking.

Even as sections of the media have focussed attention on the allegations of financial irregularities against the group, including extending loans to companies in the Anil Ambani-owned Reliance Anil Dhirubhai Ambani Group (ADAG), the DLF (formerly Delhi Land and Finance) group headed by Kushal Pal Singh, the Vatika group, the Chordia group and the Americorp group, that were re-routed and round-tripped back to the Indiabulls group and its promoters, what has been less talked about are the political connections of Gehlaut that transcend political lines and includes the two largest parties in the country -- the Bharatiya Janata Party (BJP) and the Indian National Congress.

One of the country’s richest men, Gehlaut’s links reflect how crony capitalism works in India. In the book Business and Politics in India, edited by Christophe Jaffrelot, Atul Kohli, and Kanta Murali (Oxford University Press, 2019) academic Aseema Sinha writes: “…the representative power of business … increases the legitimacy of business by giving political legitimacy to business actors.”

Political Opportunism of Krishna Gahlawat

Sameer Gehlaut’s mother, Krishna Gahlawat, who entered politics in 1996, is currently an executive member of the Haryana BJP and the chairperson of the national council of the state’s agricultural marketing board. She left the Congress to join the BJP in February 2014. A report in the Hindustan Times stated that she left the Congress because the party was not willing to let her contest the 2014 Lok Sabha elections from the Sonipat Parliamentary constituency.

Photograph of Krishna Gahlawat with Prime Minister Narendra Modi

She was given a ticket by the BJP to contest from the Rai Assembly constituency in the 2014 Haryana Vidhan Sabha polls held in October that year but she lost the elections, coming third after the candidates of the Congress and the Indian National Lok Dal. (In the elections, the BJP came to power for the first time in Haryana by winning 47 out of the 90 seats in the Assembly.) According to the election affidavit filed by Krishna Gahlawat when she contested the Assembly elections, her assets were valued at more than Rs 46 crore while her liabilities were around Rs 2 crore.

Her political career spanning more than two decades has been marked by opportunism. She had been a minister in the Bansi Lal-led Haryana Vikas Party (HVP), which was in power in the state between 1996 and 2000. According to a report in rediff.com dated July 20, 1999, Gahlawat was expelled along with 11other legislators for “anti party activities” by the then HVP president and Chief Minister of the state, Bansi Lal.

Gehlaut’s Powerful In-Laws

Sameer Gehlaut’s brother and Krishna Gahlawat’s elder son, Narendra Gehlaut, is married to Jyoti Mirdha Gehlaut, who hails from a prominent political family from Rajasthan affiliated to the Congress. Jyoti Mirdha is the granddaughter of veteran Congress politician, the late Nathuram Mirdha, and the niece of former Congress MLA from Rajasthan, Richpal Mirdha. She was also elected to the Lok Sabha as an MP from Nagaur, Rajasthan in 2009. In the 2019 general elections, she lost in the same seat to BJP candidate Hanuman Beniwal. Details of Jyoti Mirdha’s association with various corporate entities were published in the Mint in May 2014.

Narendra Gehlaut is also a director of Indiabulls Real Estate Limited, a company in the Indiabulls conglomerate, while Jyoti’s paternal uncle, Prem Prakash Mirdha, is on the board of directors of Indiabulls Housing Finance Limited. Jyoti Mirdha’s sister Sweta (also known as Hemsweta) Mirdha is married to Congress leader Deepender Singh Hooda, three-time MP from Rohtak and son of Bhupinder Singh Hooda, who was Chief Minister of Haryana between 2005 and 2014.

An article published in October 2012 in The Hindu by Shalini Singh pointed out that companies like Mariana Infrastructure, Selene and Juventus – all of which operate out of a common address in New Delhi’s Connaught Place (Rajiv Chowk) and are linked to the Indiabulls group – obtained licences to develop land during the tenure of the Hooda government.

A profile on the Indiabulls group by Mahesh Nayak, published in Business Today on October 21, 2007, claimed that the group’s competitors made negative comments about the way it functioned. An unnamed promoter of a Mumbai brokerage told the publication: “At times they’ve got away with murder (figuratively, of course) courtesy their financial muscle power and close proximity to 10 Janpath (the residence of Sonia Gandhi, President of the Congress party…)”

Sameer Gehlaut’s name had also come up in the Panama Papers published by, among others, the Indian Express in April 2016, that stated that he had acquired at least three properties in London through family-owned corporate entities in tax havens like Bahamas and Jersey, besides the United Kingdom, Karnal and New Delhi.

It is interesting to note that a trustee of the SG Family Trust owns the London properties of Sameer Gehlaut. The trustee in this regard is a corporate entity, Perpetual Management Private Limited, which is owned by Sumita Singh, his mother-in-law and the mother of Sameer Gehlaut’s wife, Divya Gehlaut – Sumita Singh is a two-time Haryana MLA and former president of the Haryana Pradesh Mahila Congress – and her husband Jagdeep Singh Virk. Incidentally, the Income Tax Department had raided Sumita Singh’s residence in July 2016.

From Indian Express, November 24, 2017

Sameer Gehlaut denied any irregularities relating to the transactions in the Panama Papers. He told the Economic Times: “I have made overseas investments after paying full taxes in India, each and every overseas remittance is disclosed to (the) RBI on the date it (was) … made.”

Despite his political connections in both Congress and BJP, the Indiabulls group has been under the radar of investigative agencies. In July 2016, the Income Tax Department raided 20 premises of the group located in New Delhi, Mumbai and Chennai. Nearly 1,000 officers were involved in this exercise.

Indiabulls Real Estate had to cough up a hefty sum when it was asked to pay Rs 300 crore by the Income Tax Settlement Commission as tax on undisclosed income detected in the course of the investigation.

Gehlaut and five other promoter entities in the Indiabulls group had approached Securities and Exchange Board of India or SEBI in January 2018 to settle proposed adjudication proceedings in a case related to violations of takeover regulations. In December 2018, SEBI agreed to settle the case after it received close to Rs 48 lakh from Gehlaut and the five entities. The SEBI settlement order stated that companies in the Indiabulls group were able to settle the claims on them “without admitting or denying the findings of fact and conclusions of law.”

The Business Today report from 2007 had also pointed out that an order to ban Indiabulls by SEBI was once cancelled in less than 24 hours. The report claimed: “The company top brass was apparently able to convince SEBI that the IPO (initial public offering) shares heaped in their accounts were those of clients.”

A market man had told Business Today on condition of anonymity: “The day that the orders were passed, the doors of SEBI were opened as early as 6:30 in the morning for them.”

Indiabulls was founded by Sameer Gehlaut in 1999 and was listed on the Bombay Stock Exchange in 2004. According to the Indiabulls website, the net worth of the company in 2017-18 was Rs 75,838 crore.

As has already been widely reported, BJP MP Subramanian Swamy had alleged on July 29 that he had “evidence” to link the Indiabulls group to “embezzlement” of a huge amount of money in excess of Rs 1 lakh crore and publicly released a letter he had written to Prime Minister Narendra Modi on June 28, in which he claimed that Congress leaders like P Chidambaram and Hooda were linked to the group. He said the group was “heading now for a financial collapse and bankruptcy.”

Indiabulls refuted the allegations and stated: “The loans outstanding as on date from NHB to Indiabulls Housing is zero. Indiabulls Housing, in its history, has never taken any loan or refinancing facility from NHB. The total loan book of Indiabulls Housing is about Rs 87,000 crore.”

The Indiabulls group had first come under the radar of controversy when Canadian firm, Veritas Investment Research, had filed a report written by Neeraj Monga and Nitin Mangal titled “Bilking India” on August 1, 2012. It was alleged in the report that to enrich a small group of shareholders, the management of Indiabulls indulged in corporate malpractices.

The report stated: “We believe that disclosures at Indiabulls Real Estate Ltd (IBREL) and Indiabulls Power Ltd are unreliable and that the sole purpose of IBREL is to bilk institutional and retail investors for the benefit of select insiders The controlling shareholders are running the organisation as a piggybank, while proclaiming propriety and espousing credibility.”

Indiabulls denied the allegations and accused Monga, one of the authors of the report, of demanding money in exchange for holding back the report. A first information report (FIR) was filed against Veritas, Monga and Mangal on August 8, 2012. Mangal was arrested by the Gurugram police on November 24, 2014. Monga is stationed in Canada.

The sessions court in Gurugram granted Mangal bail on December 11, 2014. The proceedings against him have been legally challenged. In an article published in the Wall Street Journal on September 16, 2015, Mangal had told journalist Geeta Anand: “I feared for my life. I did not know what they would do to me.”

He alleged that police took him on a long road trip with Indiabulls lawyer who he named as Ajay Grewal. Mangal alleged that he was asked to drop charges against the Indiabulls group. He claimed he was offered a job if he was willing to blame Veritas in an affidavit.

A second FIR was filed against Mangal in Mumbai. The police filed a closure report in this FIR but the trial court is yet to take cognisance of the closure report, NewsClick has been reliably informed.

Tough Times Ahead

Difficult times lie ahead for Gehlaut and the conglomerate he heads. The chances of his group acquiring control over Lakshmi Vilas Bank and other companies appear to have dimmed.

A petition had been filed against the group in the Supreme Court earlier in June but the petitioner himself withdrew the petition. The Indiabulls management alleged that the petitioner was working at the behest of professional blackmailers who were trying to extort money. Mani Ram Pandey, father of one of the so-called extortionists (Kislay Pandey), who was also allegedly a blackmailer, was arrested in Lucknow by the Gurugram police on June 29 and jailed.

This time round, the situation seems to have changed for the Indiabulls group. Unlike in the past, the PIL – filed by Kamini Jaiswal on behalf of the Citizens Whistle Blowers Forum and argued by C U Singh, senior advocate – has not been dismissed by the Delhi High Court. The court has instead issued notices to various government ministries and departments (MCA, SFIO, RoC), as well as regulatory authorities (SEBI, RBI and NHB).

The PIL has alleged that Indiabulls Housing Finance had been extending huge loans to various companies and these companies were, in turn, routing a substantial part of the loaned money back as investments in equity shares or debentures carrying zero (or low) rates of interest to entities apparently owned and controlled by Sameer Gehlaut, his family members and associates.

These borrowing companies allegedly used these loans to “evergreen” unpaid loans that were obtained from financial institutions. The petition in the Delhi High Court has alleged that the regulatory authorities have not acted on the complaints that have been made on the basis of information in the public domain.

The next date of hearing in the court is December 13.

The writers are independent journalists.