The essence of communication is to say as much as you can in as few words as you can. However, for some media houses, investigative journalism essentially means saying as little as they possibly can in long-winded articles, that confuse the reader with such unnecessary, irrelevant details, that the reader eventually gets tired and without applying his reasoning, accepts the faulty assertions as the gospel truth.

A similar method seems to have been deployed by Caravan Magazine in its latest article. The article headlined “Amit Shah Omits Liability That Secured Credit For Son’s Business In Electoral Affidavit; Dramatic Increase In Credit Facilities To Son’s Firm In Last Year” makes certain assertions that one has to work hard to find.

The Caravan article’s headline talks about Amit Shah failing to mention his “liability” that secured credit for his son’s business. They also added a graphic that detailed the credit facilities received by Jay Shah in exchange for mortgaged properties. In that graphic as well, Caravan mentions “Amit Shah….. did not disclose this liability in election affidavit”.

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Before we delve into the fallacies of the argument, it becomes essential to understand what ‘Liability’ means.

A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. The question one must ask is whether there is an obligation on Amit Shah to pay today? The answer is No. If not, then is it a “liability”? The answer is no again.

Their first few charges levelled by Caravan are these :

1. Amit Shah mortgaged two of his properties for his son Jay Shah’s venture Kusum Finservice LLP which has “recorded a dramatic increase in credit facilities in recent years despite poor finances”.

2. Amit Shah’s ‘contingent liability’ concerning this credit facility is, however, missing from his 2017 electoral affidavit.

3. The credit extended to Kusum Finserve has gone up by nearly 300 per cent in the last year, even while its latest reported balance sheets show a net worth of only Rs 5.83 crore.

Firstly, a firm “recording a dramatic increase in credit facilities” is hardly an allegation when they are admitting in the article that to avail that credit facility, legitimate properties were mortgaged.

The article asserts that Kusum Finserv, Jay Shah’s company is an LLP. An LLP is a limited liability partnership, which, according to the Limited Liability Partnership Act 2008 is a separate legal entity, that is a body corporate. When an LLP takes a loan, it is the liability of the LLP itself, since the LLP is a separate legal entity according to the law. If the LLP has drawn the loan, then there is no legal reason why the loan should reflect in Amit Shah’s personal affidavit. It has to be thus clarified that a loan extended to an LLP is by no stretch of the imagination, Amit Shah’s liability. It will not even be his contingent liability if he is not a guarantor, a point which Caravan makes shoddily, by firing off imaginary shoulders.

What perhaps happened here was that Amit Shah gave the Power of Attorney (for his property) to Jay Shah (as also mentioned in the Caravan article). Jay Shah became Mortgagor No. 1 and also a guarantor since he is the partner in the LLP which is taking the loan. Amit Shah was Mortgagor No. II (as also mentioned in the Caravan article) since he was the legal owner of the property. In such a scenario, there is neither a liability on Amit Shah nor a contingent liability.

Hence, Caravan’s assertion that “The BJP national president’s contingent liability with respect to this credit facility is, however, missing from his 2017 electoral affidavit” doesn’t hold water.

Kusum Finserve has not taken any fund based loan from Kalupur Commercial Co-op. Bank Ltd. Only a non-fund based working capital facility in the form of Letter of Credit (LC) of Rs.40 crores has been sanctioned and is availed from time to time. This facility has been secured on usual banking terms which include hypothecation of the goods purchased under LC, Cash margin of 10% and collateral security of properties belonging to Amit Shah and another property of Kusum Finserve.

In fact, the goods purchased under LC are stored at the warehouse/port under CM (Collateral Manager) arrangement and goods are allowed to be lifted from the warehouse only on the basis of PICK & PAY, meaning thereby, upon deposit of the full amount of the goods sought to be lifted, in a fixed deposit. The bank issues Delivery order after receiving full payment and then goods are released from the custody of the CM. The bank receives payments before the retirement of LC on its due date resulting in this being non-funded and no-risk facility for the bank.

The article also makes some financially and legally unsound points. When a property is mortgaged, the property itself doesn’t become a liability as has been insinuated in the article. The ownership of the property is not transferred. Since the ownership of the property remains unchanged, and the loan drawn is by the LLP which a separate legal entity, one wonders what liability does Caravan expect Amit Shah to declare in his affidavit.

The article maintains that Amit Shah omits liability that secured credit for son’s business in the electoral affidavit, thereby explicitly saying that the property mortgage itself is to be treated as a liability that should have been disclosed in the electoral affidavit. Only zero understanding of the law would inspire one to imply that a property mortgaged is a liability thereby conflating the mortgage as a sale or transfer of ownership.

In one looks at the Election Commission affidavit that one is meant to fill and analyses the liabilities section of Form 26 which needs to be submitted by all candidates, nowhere does it ask if the candidate has pledged his asset as collateral. Collateral isn’t a loan or due.

Essentially, the Caravan makes the following fundamental errors :

1. The article ends up conflating collateral of property as a sale or transfer of ownership

2. Doesn’t read up on the LLP Act which deems the LLP a separate legal entity

3. Expects a loan drawn by an LLP, which is a separate legal entity, to feature in Amit Shah’s affidavit. Amit Shah’s affidavit will only reflect loans taken by him or his spouse, not by an LLP.

4. Agrees that the loans were extended to Jay Shah’s LLP against property extended as collateral and yet, insinuates wrongdoing.

5. Fails to realise that the loans thus extended are not NPA. There has been no default or litigation initiated against the firm or Jay Shah.

Interestingly, as if trying to debunk their own story, the Caravan details the properties, securities, book debts and stock that was mortgaged to avail the extended credit facility.

It writes, “Kusum Finserve used these properties, in addition to the hypothecation of stock and book debt, to secure a credit of Rs 25 crore from Kalupur Commerical Co-Operative Bank, in May 2016. In September 2017, the same bank enhanced the credit to the firm by Rs 15 crore. That same month, the firm secured an additional credit of Rs 30 crore from the private bank, against goods and book debts. In July 2017, the firm was leased a land of 15,754.83 square metres in the Sanand Industrial Estate, by the Gujarat Industrial Development Corporation, or GIDC. By mortgaging this property, Kusum Finserve secured an additional credit of Rs 17 crore from the private bank in April 2018, one month after the lease was signed. Currently, a factory stands on the mortgaged land in Sanand”.

The Caravan goes on to make some even more wild insinuations. It writes :

Part of the credit facility has been extended to Jay Shah’s firm against three Ahmedabad properties: two plots in Shilaj village of 3,839 square metres and of 459 square metres respectively, and an office space of 186 square metres on the third floor of a building in a commercial complex named Sarthik-II, in Bodakdev.

Amit Shah owns the two Shilaj properties. In a mortgage deed signed between Kalupur Bank and Kusum Finserve in May 2016, he is listed as “Mortgagor no. II,” and an “absolute owner” of the two plots. Jay Shah is listed as the holder of the power of attorney for his father’s mortgaged properties. On being shown the documents, a financial expert said that, when a person mortgages their property for credit, “primarily you are a guarantor—maybe he has no profit share, but he has a stake in this business.”

In the first paragraph quoted above, Caravan itself admits that credit facility has been extended against multiple properties. That would be the very definition of running a business and availing credit facility by legal means. Caravan should have done this article had property not been extended as collateral and the banks had decided to extend loans without property mortgage.

In the second paragraph, Caravan goes on to name an unnamed “financial expert” who says that when a person mortgages their property for credit, “primarily you are a guarantor—maybe he has no profit share, but he has a stake in this business.” This is one of the most outlandish claims a “financial expert” could make. Amit Shah, by virtue of being the guarantor, has absolutely no “stake in the business”.

A guarantor is someone who promises to make good the loans if the person to whom the loan is extended to, fails to make good on his promise to repay the banks and financial institutions or any other entity which have extended the loan. A Mortgagor is someone who gives his property as a mortgage. It is unclear why the Caravan’s unnamed “finance expert” has conflated the two, especially when the report itself says that the only explicit personal guarantee was given by Jay Shah, who is the borrower. If Amit Shah was a guarantor, why doesn’t the report clearly name him to be one (as it has named Jay Shah)? Why fire from the shoulders of an unnamed “finance expert”?

The fact that Caravan includes “Mortgagor no. II” and “absolute owner” in quotes so as to insinuate some sort of wrongdoing is a craft, yet useless tactic.

Caravan then goes on to cite an article by The Wire, the shoddy articles of which were summarily debunked by us. The Wire, at the moment, is also facing a defamation suit for the article in question. That the Caravan had to rely on a shoddy article, laden with loopholes to strengthen their case points towards the lack of their own merit.

The article then goes on to detail Jay Shah’s companies regular business, without really explaining what they are alleging or insinuating. Their hope is that the reader would assume impropriety without the article explaining what the impropriety really is. The article also makes up a 2 line conversation that is fashioned as a “you know who these lands belong to” format. Of course, the conversation is something that can neither be confirmed or fact checked and the reader is simply supposed to take the writer’s word for it.

This entire article published by the Caravan too hinges on the faulty understanding of finance, law, and a shady debunked article that has inspired a lawsuit against a leftist propaganda website. Perhaps Caravan must consider that the act of someone as powerful as Amit Shah having to mortgage his property to secure a loan for his son, is in sharp contrast to hordes of sons and sons-in-law getting unsecured loans running in billions of rupees during Congress regime.