As per the Supreme Court’s (SC) order from May, 2002 – directing the Election Commission (EC) to use its power under Article 324 of the constitution – candidates must declare their assets and liabilities in their affidavits at the time of filing their nominations. As per financial experts, as reported by the Caravan magazine, mortgaging property to obtain credit for a business makes that person a stake-holder in the business. Once you become a stake-holder, you have to mention it under your assets or liabilities, however, BJP president Amit Shah, conveniently forgot or intentionally decided to keep such information out of his Rajya Sabha (RS) nomination papers in 2017.
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What is the issue?
In May, 2016, Kusum Finserve LLP – Mr. Jay Shah’s business venture – obtained loans worth Rs. 25 crores from Kalupur Commercial Co-operative Bank (KCCB), one of Gujarat’s largest cooperative banks, using two plots of land that are owned by Mr. Amit Shah as collateral, thus making Amit Shah a guarantor, and, therefore a stake-holder in the business. The credit was later enhanced by Rs. 15 crores in September, 2017, which brought the total exposure of the cooperative bank to Rs. 40 crores. According to reports, Mr. Amit Shah, for reasons known only to him, failed to mention this under liabilities upon him, when he filled his nomination papers for the RS elections in July, 2017. As per Representation of People’s Act, 1951, any ‘defect of substantial character’ will invite punishments under the Indian Penal Code (IPC), in addition to disqualification.
Why were facts concealed?
Delving deeper into the matter reveals serious discrepancies, which go beyond Mr. Amit Shah’s nomination. First, questions arise over why credit of Rs. 25 crores was provided to a company, which has net worth of Rs. 5.83 crores as per its latest balance sheet, has reported a loss nearly every year since FY 2012-13 to 2015-16, has a negative working capital, and, more importantly, for collaterals worth only approx. Rs. 7.5 crores. The issue becomes even graver when we take into the consideration the fact that in September, 2017, KCCB gave an additional credit facility of Rs. 15 crores, bringing the total exposure of the bank to Rs. 40 crores.
Second, days after the KCCB extended the additional credit facility of Rs. 15 crores, a private bank extended a letter of credit of Rs. 30 crores to Kusum Finserve PPL by creating a pari-passu charge with KCCB. A pari-passu charge means that in case of dissolution the banks will share the proceeds from the selling of assets that are provided as collateral. Therefore, for collaterals worth approx. Rs. 7.5 crores, credits worth Rs. 70 crores were provided. This is an apt example ‘Suit-boot Sarkar’, or crony capitalism, and the reasons behind the exorbitant rise of NPAs and why they cannot be easily resolved.
Third, in October, 2017, after story broke out regarding dramatic rise in Mr. Jay Shah’s business, Mr. Amit Shah, at a conclave, stated that his son’s company was neither involved in any contract with the government, nor ever got any government land. This statement is correct, but only par-tially, making it another case of half-truth. After the story broke out, reports claim that Jay Shah’s business moved-on from Temple Enterprises to Kusum Finserve, and Kusum Finserve leased land from Gujarat Industrial Development Corporation (GIDC) in March, 2018, with net allotment price of the land calculated at Rs. 6.33 crores. A month later, the leased land is used as collateral to obtain another loan, worth Rs. 17 crores, from the same private bank as mentioned above, increasing the private banks exposure to Rs. 47 crores. The issue of concern is that as per GIDC there is an established criterion which it must follow. As per the criterion, out of total 100 points, financial base of a company accounts for 20 points. As mentioned above, the financial health of the compa-ny was in a dismal state, therefore, on what basis was the land leased?
Last but not the least. In a very ‘Rafale-like’ scenario, Kusum Finserve received a Rs. 10.35 crores loan from Indian Renewable Energy Development Limited, a public sector undertaking managed by the Ministry of New and Renewable Energy, ‘for setting up a 2.1 MW wind-energy plant in Ratlam district in Madhya Pradesh, despite having no demonstrable experience in wind-power generation’. This brings to the total credit received by Kusum Finserve LLP, from March, 2016 to April, 2018 to Rs. 97.35 crores, of which Rs. 62 crores were obtained since September, 2017. It should also be noted that the company has not filed a statement account for the FY 2016-17, i.e. nine months after the October, 2017 deadline.
These are some gravely serious allegations relating not just to the BJP president’s affidavit, which can potentially lead to his disqualification, but also of alleged impropriety and discrepancies in the business dealing of Mr. Shah’s son. As per report, the BJP president clearly failed to mention the liabilities upon him and, hence, the EC should take cognisance and suo motu initiate an investiga-tion into such grave allegations.