Last year, just after the Securities and Exchange Board of India came out with its first preliminary inspection report, Shankar Sharma, the man who is now famous for funding the sensational Tehelka.com sued the Express Group and this writer for defamation. The court was however pleased not to grant a stay on our writings because the three articles that attracted Sharma’s suit were based almost entirely on the Sebi inspection report. Shankar Sharma, along with his wife Devina Mehra, own the First Global Group of firms, which ran a brokerage business in Mumbai. As one of the biggest sellers in the market in the run up to budget 2001, First Global came in for investigation on March 2,2001. For the record, the Tehelka expose happened on March 13, 2001. A lot has happened since then.
First, Sharma has hurled reckless allegations against various individuals, newspapers and regulators. Second, he was arrested by the Enforcement Department on allegations of dubious dealings in the private placement of the shares of Himachal Futuristic Communications Limited. Sharma has held several press conferences to charge that he is being victimised for having dared to finance Tehelka and has threatened to sue the union government. After this, several powerful writers, editors and economic thinkers have campaigned for Sharma and his wife and vilified the state enforcement machinery for wrongly harassing and incarcerating him for over two months. Interestingly, none of the agencies attacked by Sharma and his intellectual sympathisers have been in a position to defend their actions publicly. Does Sharma’s belligerence and the state’s silence indicate that Sharma is a victim? Or are there several questions that are not being asked for fear of inviting defamation suits, or worse, being accused of acting as an ‘instrument of state terrorism’ by Sharma’s vocal clique among the intelligentsia? At the risk of such branding, let me raise a few questions that remain unasked and unanswered about the Shankar Sharma story. These are based on official documents.
1. The Enforcement Directorate began to investigate Sharma’s role in the HFCL private placement only in 2001, but I have documents to show that the Reserve Bank of India’s March 31, 2000 inspection report had specifically pulled up Global Trust Bank for its shady financing of five First Global associates. These companies were given Rs 15 crore each through Non convertible debentures. They were: Vitra Trade & Agencies, Vruddhi Confinvest India, UD & MD Agencies (which later fathered Tehelka.com), First Global Stock Broking and Panchal Components and Appliances. The report says that funding was recommended “despite weak financials and other financial parameters not being in conformity with the bank’s credit policy guidelines”. The money was disbursed on March 7, 2000 without waiting for final approval from GTB’s corporate office. Further, although the NCDs were to fund working capital requirements, the money was actually used only to buy HFCL shares. These shares were later pledged with GTB as collateral against the loan. RBI inspectors write that GTB made no effort to find out whether First Global was cornering HFCL shares to take over the company, which would have violated RBI directives. But neither GTB nor the RBI was inclined to investigate until the matter was handed over to the Enforcement Directorate after the scam. Is this a case of persecution of First Global or a case of dangerous negligence by the highest monetary authority? At the very least, Sharma was involved in dubious financing deals in 2000 — well before Tehelka and its parent Buffalo Network were even conceived.
2. The RBI has in fact been very fair to First Global and Tehelka. For nearly 15 months, in the midst of all the investigations against them, it calmly processed an application from Tarun Tejpal, Kanwar Tejpal and Aniruddha Bahal to transfer 3,670 shares of Buffalo Networks Pvt Ltd (which now owns Tehelka.com) to a Singapore based Non Resident Indian working in Citibank called Mahim Mehra. Incredibly, the final permission was granted just recently, ie on January 5, when Sharma was in prison. The delay, such as it was, in transferring the six per cent stake of Buffalo Network to Mahim Mehra for Rs 57.96 lakh was only because it involved foreign investment in the print media and required additional clearances from the ministry of commerce. The sheer mindlessness of the correspondence over this issue shows no victimisation even when their modified request to transfer 3,670 shares instead of the original 3000 shares presented an opportunity to do so.
3. Further, on June 18, 2001, well after investigations against Sharma began, Buffalo Network transferred another 2,753 shares of the company to First Global (Mauritius) for Rs 27,530 with no questions asked.
4. On the other hand, the records of the Joint Parliamentary Committee hearings show that Shankar Sharma refused to answer questions about who originally set up UD & MD Agencies in 1996, which was purchased by the First Global owners in 2000. Sharma insisted that the question had been answered in his affidavit before the Venkatswamy Commission investigating the Tehelka expose. Curiously, at the insistence of a BJP parliamentarian SS Ahluwalia, the details about Shankar Sharma’s interrogation were not disclosed to the press. If the entire government machinery was after him, why has nobody been able to say who owned UD & MD until Sharma-Mehra acquired it in 2000?
5. Next look at the taxes paid by Shankar Sharma and Devina Mehra. The duo headed a clutch of 11 companies, which cornered a substantial chunk of trading on India’s top bourses. They were also on the verge of going global by acquiring trading memberships in the UK and USA. Crores of rupees were spent on these investments, including Tehelka. Yet documents show that from 1996-97 to 1999-2000, Sharma and Mehra were making paltry tax payments. In fact they paid only Rs 62,172 and Rs 46,000 respectively in the last mentioned year. But 2000-2001 was obviously a super successful year for First Global’s owners. All of a sudden Sharma’s tax payment soared to Rs 3,18,06,308 while Mehra’s to Rs 3,11,62,500. Should nobody ask how?
6. Instead, any attempt by the regulators to question his market operations is met with ridicule by Sharma and others. Shankar Sharma has powerful intellectual spokespersons and takes shelter behind Tehelka, which indeed performed a national service by exposing corruption in defence deals. But isn’t it ironic that he finds himself in trouble mainly because he refuses to answer questions about his own dealings so that the whole truth can be known. -- Sucheta Dalal