Sucheta Dalal :Chain Roop Bhansali is on a comeback trail (15 July 2002)
Sucheta Dalal

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Chain Roop Bhansali is on a comeback trail (15 July 2002)  

The last few months have seen some of the worlds biggest and most reputed organisations crash and disappear from the face of the earth. Enron and Arthur Andersen have fallen off the world corporate map, Worldcom is sliding fast towards bankruptcy and skeletons are popping out of corporate America’s cupboards with astonishing regularity. Then, the global accounting problem came to our shores when mighty Xerox announced that its Indian subsidiary was routinely bribing government babus to get business.

Were we surprised? Not at all; but the government pretends that it is. The new Finance Minister has ordered a thorough inquiry and the financial press tells us that the Department of Company Affairs (DCA) has made a lot of progress in getting to the bottom of the payoffs. That is another surprise.

Are we to believe that the DCA, in under a week, has made more progress in unearthing the dirty payments of ModiXerox (that is what it was called when it made the payments) than it has with companies who colluded with Ketan Parekh a couple of years ago? All those cases have apparently drawn a convenient blank. Or does the DCA have more powers to investigate Xerox’s old payments than it does to investigate a live issue like DSQ Software, which has brazenly sold most of its business to a non-resident Indian group led by Ramesh Vanghal? It gets worse. While DCA is working hard on Xerox, the notorious Dr Chain Roop Bhansali, who created the CRB Group and built a Rs 1000 crore financial empire, is set to make a comeback.

The entire CRB group had collapsed like a pack of cards in 1996, leaving millions of shareholders, unitholders and investors high and dry. After the mandatory publicity event when Bhansali was arrested and locked up for a couple of weeks the case went into limbo.

Now Bhansali hopes to come back, armed with a Delhi High Court order based on his claim that reviving the CRB Capital Markets is the only way to pay back creditors. Under orders from the Court, CRB Capital Market held meetings of secured and unsecured creditors and shareholders of CRB Capital Markets on July 1 and 2 at Delhi during which the company’s lawyers claim that its stakeholders had approved the modified revival scheme proposed by the company after a “brain storming” session. The meetings were chaired by a retired judge of the Delhi High Court, and await final clearance by the Delhi High Court. A press release by CRB’s lawyers tells us that “a large number of people who had already given up hopes of recovery of their dues are in for a pleasant surprise” and are “eagerly awaiting the court’s sanction to the scheme”. In fact, several organisations that fought to make recoveries were not even represented there.

So what is this eagerly awaited scheme about? Legal documents available with me show that CRB’s lawyers (M D Jain and Associates) have made out a very strong case to show steady dereliction of duty on the part of various regulatory authorities - especially the Reserve Bank of India (RBI). They also show that once CRB began to default, the RBI went into a defensive hyper-drive and initiated several hasty actions.

What exactly has CRB offered? On paper, a cool Rs 133 crore which it claims can be recovered and paid back in the first year after revival — the actual recovery by various liquidators so far is just Rs 21 crore.

Another Rs 32 crore is expected by selling off investments in shares and bought out deals - but that is hardly a sure bet. A whopping Rs 40 crore is to come from CRB Capital’s investment in mutual funds and group companies - which is another big question mark. The balance Rs 38 crore comprises court cases filed for recovery. Even the most optimistic of CRB’s stakeholder cannot expect this recovery to happen for a few years at least. Yet, these fanciful promises have been approved by stakeholders.

The reason is not hard to find. The scheme promises 100 per cent payment of principal (not exceeding Rs 10 crores) within a year for senior citizens, disabled persons, retired government servants and widows. Others are to get 50 per cent of principal in five annual instalments with shares of Rs 10 each for the balance. Cooperative banks are to be given “special treatment” and 25 per cent of principal is to be paid to them within three months of the court sanctioning the scheme of arrangement. Secured creditors are to get 10 per cent of the crystallised dues upfront and the balance in 10 quarterly instalments. In a system where there is almost no precedent of scam-hit investors ever getting their money back, CRB’s stakeholders are willing to clutch at any straws.

The question is who will do business with a discredited CRB? CRB has tried to address that too. His prayer to the court states “it is just and equitable that the company should be revived and a congenial environment is created so that it can function without any obstacle in the best interests of the depositors and public at large”. Every word in that outrageous claim reflects the rot in our system where industrialists who have destroyed public confidence and looted public institutions can continue to call the shots. They are in parliament, on the Prime Minister’s advisory committees, and pervert the system from within. But let’s not disturb the Finance Minister - after all, he doesn’t want to be a policeman. And isn’t it much more urgent and in national interest to investigate Xerox’s confession to the US Securities Exchange Commission?

-- Sucheta Dalal