Random Reflections

In a reply to the questions raised by Dr John Brittas, a CPIM MP from Kerala, the Minister of State for Finance gave a reply on 21st March, before Rahul Gandhi’s conviction on the 23rd. Probably the Ministry would have been more careful if the reply was after his conviction.

The first question was, will the Minister of Finance be pleased to state the details of offshore shell companies whose ultimate beneficial ownership (UBO) is held by Indian citizens?

The reply given was, “It is submitted that an offshore shell company is not defined in the Acts administered by the Ministry of Finance. Dates and details regarding offshore shell companies owned by Indian citizens are not available.”

My question is- is it because an offshore shell company is not defined in the Acts administered by the Ministry, the Ministry doesn’t have any data?

The same government issued a press release on 8th June 2018 on the activities of the ‘task force on shell companies,’ calling them a ‘menace.’ Does this not mean that they have the data, but they are not willing to share it? Who are they protecting? Is it Adani and his family members?

If they do not know what is a shell company, why did they form a task force on shell companies?

In the same reply the Minister says, “India has entered into Double Taxation Avoidance Agreement (DTAA), Tax Information Exchange Agreements (TIEA), Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC), SAARC Limited Multilateral Agreement Tax treaties with foreign jurisdiction which inter alia, provide for exchange of information that is forcibly relevant for administration or enforcement of domestic laws concerning taxes.”

All these deal with shell companies.

Oxford Dictionary defines a shell company as “an inactive company used as a vehicle for various financial manoeuvres or kept dormant for future use in some other capacity.” Our Finance Ministry needs to be given a copy of the dictionary.

The shell company issue is directly linked to Adani, which is why the Finance Ministry is in so much confusion and is using misinformation.

Hindenburg report gives details of 38 shell companies in Mauritius where Adani’s brother Vinod Adani or close associates are involved, and those companies have links with the companies of Gautam Adani in India. Hindenburg has also identified entities that are also surreptitiously controlled by Vinod Adani in Cyprus, UAE, Singapore and several Caribbean Islands.

The task force on shell companies constituted in 2018 claims that they identified 2,38,223 shell firms until July 2021. They did not need definitions under an Act or a dictionary.

Let us go back to 2016.

The 2016 demonetisation was all about black money and shell companies involved in money laundering and corruption.

Remember the speech of the Prime Minister on 8th November 2016?

“The evil of corruption has been spread by certain sectors of the society for their selfish interest… We began our battle against corruption by setting up an SIT headed by a retired Supreme Court judge. A law was passed in 2015 for the disclosure of foreign black money…. Agreements with many countries including the USA have been made to add provisions for sharing banking information… A strict law has come into force from August 2016 to curb benami transactions, which are used to deploy black money earned through corruption.”

He said it was a war against corruption, black money, counterfeit currency, and terrorism. He claimed that he had brought down India’s position in the corruption index to 76 from 100. But it increased from 76 in 2015 to 85 in 2021 and remained the same in 2022. It is likely to rise when the next report comes.

The case of Adani 

A Financial Times report has said that almost half of Adani Group’s $5.7 billion in foreign direct investment over the past 5 years came from opaque overseas entities.

Adani Group which initially claimed that Vinod Adani was not associated with them, now admits that “As per the application of Indian Regulations, Mr Vinod Adani is part of the Promoter Group of various listed entities within the Adani Group.”

This was announced only after newspapers reported that the Adani takeover of Swiss Conglomerate Holcim’s Cement and ACC were routed through a Mauritius-based entity called Endeavour Trade and Investment Limited. The laddered holding structures of this entity further revealed that the Ultimate Beneficial Ownership (UBO) of Endeavour was held by Vinod Shantilal Adani and Mrs Ranjanben Vinod Adani, added the news report. So the cat was out of the bag and Adani could not lie any more.

Almost every day, new information is surfacing. Favours given in allocation of ports to Adani, airports bestowed on him, coal auctions going to him, oil import contracts coming his way, and the list goes on. Yet, Adani, who climbed the top of the global rich ladder, has fallen down, and his shell companies have crumbled. Even now, can the Modi government save him at the cost of losing the election?

Adani has become a household name for corruption in India and abroad. I wonder why the masters of the ruling party are trying to save Adani, an individual who is accused of numerous frauds.

I request the readers to please read earlier articles in Finance Matters and reports in the Money Trial to keep abreast of the efforts to save one person at the cost of a party and the government run by the party.

Thomas Franco is the former General Secretary of All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.

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