See the gravity of the charge. JD Group gave Rs 8.64 cr loan free of interest to Vasan Eye Care group — in cheque. It also gave substantial amount of Rs 40 cr in cash — that is, black money — ‘all on a single day’, ‘as a single transaction’ to one Dr A M Arun, Vasan Eye Care’s original promoter. The cash paid to Arun went to an influential politician in Tamil Nadu who was a Cabinet minister in the UPA regime for 10 years. What is JD Group? Which is Vasan Eye Care? And who is Dr A M Arun? These can wait. Now move to the heart of the story. The charge of black money payment by the JD Group to the former Cabinet minister via the Vasan Group is no anonymous complaint. It is in the sworn statement of M Srinivasa Rao, Commissioner of Income Tax (Central), then at Chennai, in his petition (June 16, 2015) to the Central Administrative Tribunal (CAT), Delhi, against his transfer that he termed as malafide. The top official’s serious charge in the petition was based on the evidence uncovered in a tax search on the JD Group. Srinivasa Rao swears that his transfer was ‘to punish him for not heeding to the unlawful expectations’ of higher officials who ‘conveyed’ to him ‘repeatedly… to go soft on the tax evaders and money launderers’. [Rao’s petition para 1] But Rao refused to budge and initiated criminal prosecution against JD Group in which, he asserted, the former minister was involved. [para 5.L]
Rao’s petition also mentions [para 4.6] that the JD Group had made black money payments of Rs 100 cr to Vasan Group. He avers that notings on the loose papers seized by tax officials label the cash payments of JD Group as protection money to run its illegal chit funds business. Investigation beyond Rao’s petition to the CAT now shows that the amount paid by JD Group in cash to Vasan Group [Vasan] was not just Rs 40 cr or Rs 100 cr but more: Rs 223 cr all in cash — unaccounted money. Seized papers showing the black account payments of Rs 223 cr are lying with the Income Tax department.
Finding that Rao had made out a prima facie case, the CAT first stayed Rao’s transfer on June 19, 2015. But the Central Board of Direct Taxes [CBDT] swung into action and got the stay vacated. It defended Rao’s transfer on technical grounds contending that he was only a commissioner who is subject to transfer anytime and not a chief commissioner who is not. Shockingly, the CBDT brought in an Additional Solicitor General of India (ASG) to fight Rao who was chasing the corrupt. But the very same CBDT refuses to mandate a high law officer to fight tax evasion of Rs 900 cr by NDTV in the Income Tax Tribunal, thus clearly signalling to all concerned what the CBDT is more concerned about — namely not chasing tax evaders but punishing those who chase them. This is just the side show. Now back to the main narrative.
Who got it?
Who was the influential Tamil Nadu politician in the UPA Cabinet who received the JD Group cash payments? Rao does not beat about the bush. He straightaway names the former minister in his petition. Rao says he is Palaniappan Chidambaram (PC) — the media celebrity finance minister in the UPA regime, who had headed the Income Tax department for almost two-thirds of UPA’s 10-year term and appointed most of those who head it now. No surprise that his loyalists punished Rao for his audacity to act against their former boss. PC and his son Karti Chidambaram (KC) are crucial players from behind Vasan with benamis and dummy companies, the usual actors in corrupt structures, fronting for both. Now, come to the other actors in the theatre of the corrupt — the JD Group, Vasan and Dr A M Arun. The unknown JD Group bears the acronym of its even more unknown owner J Dinakaran. It seems to dabble in black money almost exclusively, running unregistered, illicit chits. The JD Group was raided by Income Tax officials in December 2014 — six months after the new government took over. That was how the tax fraud and bribery came to light, only to be suppressed later, almost, though some honourable officials like Rao managed to keep it alive. Rao says in his petition (para 5.V) that he was transferred because ‘any impartial inquiry into JD Group would lead to the former finance minister’ (PC), which the loyalists of PC wanted to avoid at any cost.
Of all actors in the fraud scripted by the fraudsters, Vasan seems to be the smoking gun. Rao’s testimony points to who the true owner of Vasan is. Rao asserts that Chidambarams acquired Vasan through front companies in Mauritius and Singapore (para 5.S). Vasan’s is an intriguing story by itself and needs to be told separately and elaborately. Its convoluted ownership structure was designed to hide who its true owner is. Here is a brief intro on Vasan. It was first incorporated as Vasan Health Care Private Limited in June 2007 with Dr A M Arun and his wife Meera Arun (both from Tiruchy) as first shareholders and with its registered office at Tiruchy. According to the company’s filings under the company law, on October 28, 2008, Arun and his wife Meera were issued 27 lakh shares of Rs 100 per share on a premium of Rs 100-plus for each share and three lakh shares were issued to one V Dwarakanathan on similar premium.
But within 48 hours of acquiring the shares, on Oct 30, Dwarakanathan transferred half his holdings (1.5 lakh shares equal to 5% of Vasan’s equity capital) to Advantage Strategic Consulting Private Limited, which was two-thirds owned by Ausbridge Holdings and Investments Private Ltd, which KC owned almost fully. PC was very much the finance minister then. KC’s company got the 1.5 lakh Vasan shares without premium, when Dwarakanathan, who subscribed for Vasan’s shares, himself had paid premium. Why should Dwarakanathan acquire the 1.50 lakh shares at a premium and sell it to KC’s company at Rs 100 per share and incur a loss of Rs 1.55 cr in 48 hours? It is only one of the many questions the intriguing Vasan story will pose.
See how the fortunes of Vasan changed unbelievably. The first eye care unit of Vasan was set up by Arun in 2002 in Tiruchy. It saw no significant growth till 2009-10. Its turnover till 2008-09 was just Rs 13 cr. But soon after the advent of KC in Vasan, things changed dramatically. Within 90 days of KC’s shadow falling on it, Vasan got an investment of Rs 50 cr from a Mauritius-based investor. And within another 12 months it got another Rs 50 cr from the same investor. Soon, Vasan’s registered office shifted to Chennai. In the UPA years from 2009 to 2014, Vasan raised equity and preference capital of Rs 230 cr and debt of Rs 460 cr. Vasan’s turnover grew phenomenally from 2010. Its top line rose from Rs 16 cr in 2009-10 to — believe it — Rs 311 cr in 2010-11! To Rs 462 cr in 2011-12! And to Rs 604 cr in 2012-13! How did the turnover jump 20 times in just one year and some 38 times in three years itself will make the story of Vasan gripping when fully told. Vasan, which had 25 eye clinics in April 2008, boasted of a 175-plus clinic network by 2012-13 with 800-plus ophthalmologists and 8,000-plus eye care members. UPA’s second innings and Vasan’s rise seem to correlate. From nothing when the UPA won a second time in 2009, Vasan’s value topped a billion dollars in 2014 when UPA’s rule ended. India Ratings and Research (part of the globally known Fitch Group) had put a Rs 5,500 cr value on Vasan in its Outlook Report for health sector for 2014. Vasan itself was reportedly looking for investments at a value of Rs 7,000 cr in May 2014.
The extraordinary political clout that drove Vasan’s growth is not a well-kept secret. In fact Vasan openly brandished it. It could get even Prime Minister Dr Manmohan Singh to open its 100th eye clinic at Karaikudi, falling in PC’s constituency in December 2011. The media carried the photo-news of the event with bigwigs — Dr K Rosaiah, Governor of Tamil Nadu, Prime Minister Singh, and PC, then Union Home Minister, seated on the dais at the function, making them virtually its political brand ambassadors. Imagine the Prime Minister and Home Minister dropping all national work and flying down to cut ribbons for an eye clinic in far off Karaikudi! Of course, opening of Apollo’s outreach hospital was also included in the function so that it did not appear that the bigwigs came only for Vasan.
Government departments concerned with health, the insurance sector, State government departments and top public sector companies queued up to get listed as “associates” of Vasan. The galaxy of government departments, institutions and companies proudly listed as associates in Vasan’s website (www.vasaneye.in) included the RBI, SBI, BSNL, Doordarshan, All India Radio, MMTC, Air India, Airports Authority of India, Indian Bank, IDBI, BHEL, ICF, FCI, all nationalised insurance companies — in all 34 of them.
But things seem to have turned for the worse for Vasan after the UPA lost the 2014 elections. Vasan’s balance sheet for March 2014 due to be out in September last year has not been filed yet. How could a company with huge foreign investment of Rs 192 cr and debt of Rs 460 cr, which it owes to various banks, delay filing its balance sheet for a whole year? This signals that something is seriously wrong with or in Vasan. Its meteoric rise coincided with the UPA rule from 2009 to 2014. Does UPA’s exit from power mean the other way round? The answer will have to wait till the full Vasan story is told.
Attempt to suppress
The Vasan-Chidambarams nexus explains why JD Group should pay such huge monies to Vasan. Can anyone deny the need for a full-scale anti-bribery investigation into Vasan-JD Group dealings? That would first call for a comprehensive tax probe into Vasan. But that was what was snuffed out before it could start. By transferring Rao out of harm’s way, the case was almost buried by PC loyalists in the tax department who continue even today undisturbed by the present regime. They stealthily allowed the JD Group to settle its case by agreeing for a paltry sum of tax. By transferring Rao they ensured that no honest probe would take place. Here is the insider account of how the matter was almost hushed up. Naga Prasad, Director of Income Tax (Investigation), to whom the seized records of JD Group, Chennai, were handed over by investigating officials in the presence of the Joint Director of Income Tax (Investigation), kept the records under lock and key — without acting on them.
Sanjay Srivastava, an income tax commissioner, who unearthed the huge NDTV tax fraud and because of which he was targeted by his own finance minister [PC], met Naga Prasad in April 2015, in the latter’s office at Chennai and asked him about the JD Group matter. Prasad immediately called the Joint Director Investigation in charge of JD Group cases. Srivastava asked Prasad why Vasan and Dr Arun too were not raided immediately consequent to the action on JD Group as per standard procedure when there was enough documentary proof of huge black account payment by JD Group to Vasan. Prasad remained silent. Later the Joint Director told Srivastava that he went by the senior’s instructions — meaning not to touch Vasan. Srivastava also asked Prasad why other domain agencies — RBI, SEBI, CBI, ED, State government and State police — concerned in JD Group’s illegalities were not informed. Prasad again remained silent. Later, the Joint Director informed Srivastava that he had passed on the intelligence to the concerned agencies. In this entire episode, one Guru Prasad @ Guruswamy Naidu, said to be a tax tout and close to Naga Prasad, also figured. Thanks to the attempts to bury it, the case went to deep sleep. But, with at least some in the government waking up, though late, action seems likely now. As the case has begun moving, Naga Prasad, a main player in letting the case getting sedated, is said to have been relieved on voluntary retirement, at breakneck speed, in days when it normally takes six months, even a year, and has got out of service. Relieved from office on August 1, 2015, he is believed to be trying to go abroad and even obtain foreign citizenship.
Sitting on TDS, escaping action
Here is telling circumstantial evidence of the nexus between Vasan and the Chidambarams. Vasan had deducted tax at source but defaulted in remitting it to the treasury — which is a serious criminal offence. The amount was huge — `19.22 cr. It was due for the half year ending December 2014.
With Vasan valued at over a billion dollars and its turnover vaulting by 38 times in three years, it had no reasonable cause not to remit the amount to the treasury. The default meant, in law, jail term for Vasan’s promoter and officials. The Supreme Court has settled that even a few days’ delay in remitting the tax deducted at source is sufficient to attract prosecution. In the case before the Supreme Court, the amount involved was just `1.29 lakh and the delay, a few days. But in Vasan’s case the figure is 160 times the amount and the delay nearly a year. But see what the tax department does in Vasan’s case.
The Chief Commissioner of Income Tax, Chennai, ought to have initiated action against Vasan but did not. For not doing so he seems to have been rewarded. He was in Chennai and his wife, also a chief tax commissioner, was at Kochi and both were favoured with the transfer he was seeking for years — to New Delhi. Later, Vasan itself moved the CBDT on March 19, 2015, admitting the default to pay tax deducted at source and seeking to pay the defaulted amount in instalments. The CBDT should have shredded the application and directed prosecution of Vasan. But it did not. It obviously did not read the report in the Financial Express (Sept 27, 2013) that the managing director of Kitty Steels Ltd in Hyderabad was sentenced to three months rigorous imprisonment for failing to pay a much smaller amount of tax deducted at source and also fined. While others go to jail for not remitting small sums of tax deductions, Vasan, which has defaulted to pay almost `20 cr has got bailed out by just writing a letter to CBDT.
This shows PC’s clout in the finance ministry now headed by Arun Jaitley. It is not just in the Vasan case. In the NDTV tax fraud case, in which too PC is involved, the CBDT is supporting the tax-fraudster by attempting to match-fix the case of `900 cr tax evasion in collusion with NDTV. Is Finance Minister Arun Jaitley aware? Is he listening?
ED’s 11 Posers to Vasan Health Care, Karti Conduit in Multi-crore Deal
The Enforcement Directorate (ED) appears to have finally woken up to the need for a probe into the surreptitious manner in which huge amounts, running into crores of rupees, flowed into Vasan Health Care Pvt Ltd (VHCPL), to which former finance minister P Chidambaram and his son, Karti Chidambaram, are linked.
On August 28, two separate summons were issued by Dr Rajeshwar Singh, deputy director, ED — one to the managing director of M/s VHCPL and the other to V Dwarakanathan — the latter used as a conduit by Karti Chidambaram to increase his stake in Vasan via some front companies. In his summons, Rajeshwar Singh explained that he was investigating under the Prevention of Money Laundering Act, 2002, and that the attendance of the managing director of VHCPL was necessary in connection with it.
In an annexure to the summons, the ED has sought information on eleven different aspects pertaining to the company. They include: (a) names and addresses of companies, firms and trusts in and outside India in which promoters, directors and shareholders of the VHCPL held positions since 2007 to 2012; (b) details of those who exited or entered the company between 2007 and 2012, along with number of shares issued, amount paid, premium, if any; (c) copy of the balance sheet for the same period; (d) net worth, profit and loss and dividend paid during these years; (f) details of shares and debentures issued by VHCPL; and (g) details of deposits received from individuals and companies and loans given during financial years 2007-08 to 2011-12.
n the other summons sent to Dwarakanathan, the ED sought copies of his passports, names of his family members, copy of I-T returns filed from 2004-05 to 2010-11, details of bank accounts and immovable assets held by him in India and outside since 2005, transactions done with companies of Karti Chidambaram and his family, names and addresses of companies in and outside India whose debentures and shares he acquired and transferred since 2005 under secondary sale of shares or in the market. The ED has also sought information about names and addresses of individuals from whom such shares and debentures were acquired and to whom they were transferred, amount paid for acquisition and amount received by transfer.
As reported in these columns, Vasan was first incorporated in 2007 with Dr M Arun and his wife, Meera Arun, as first shareholders, both of whom were issued 27 lakh shares of Rs 100 per share on a premium of Rs 100 plus. Three lakh shares were separately given to Dwarakanathan at the same price and premium.
Then begins the game. Within 48 hours of acquiring the shares, Dwarakanathan transferred half of his holdings (1.5 lakh shares equivalent to five per cent of Vasan’s capital) to a company which goes by the name, Advantage Strategic Consulting Private Ltd. This company is two-thirds owned by Ausbridge Holdings and Investments Pvt Ltd, which Karti Chidambaram (KC) holds almost fully. But the transfer of shares happened without any premium having been paid. In other words, KC’s company secures Vasan’s shares for a lesser price.
Why has Dwarakanathan chosen to buy shares at a premium and then sell them by incurring loss, is the obvious question that the ED has to look into. That could well and truly blow the lid off the entire operation of Vasan, whose turnover grew by 38 times in just three years.
If only the ED pursues the matter to its logical end, the link between Vasan and KC via Dwarakanathan will become known. For the last few years, no one doubted that the de facto owner of Vasan was KC. Otherwise, Vasan could not have raised equity of Rs 230 cr but a debt of over Rs 600 cr.
* Swaminathan Gurumurthy (Tamil: சுவாமிநாதன் குருமூர்த்தி) is a renowned journalist and a successful chartered accountant in India. He is the co-convenor of the Swadeshi Jagaran Manch, an organization for promoting awareness of theSwadeshi Movement, an Indian tradition well-known in the pre-Independence era. He is a strong proponent of the traditional Indian economic wisdom that is a part of every home and village model.