The Telegraph
Since 1st March, 1999
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Probe shadow on Reliance

New Delhi, Feb. 11: The finance ministry is likely to order a high-level probe into allegations of impropriety relating to share allotments by the Reliance group that date back to the period between 1994 and 2000.

The allegations have been levelled by Sangh Parivar ideologue S. Gurumurthy in a confidential letter addressed to finance minister Jaswant Singh.

A Reliance Industries spokesperson declined to comment on the allegations, pleading that he needed time to respond to the issue.

Sources said a number of high-level meetings have been held on the issue since Gurumurthy’s letter was received late last month. A decision has now been taken to investigate the charges.

Gurumurthy in his letter has alleged, “The Ambanis have virtually smuggled out in their favour 12 crore equity shares representing 11 per cent shareholding in RIL (Reliance Industries Ltd) valued at Rs 3,600 crore by paying less than one fourth of their value through a preferential issue to 34 of their proxy companies under a general body resolution.”

The RSS ideologue, who is also the convener of the Swadeshi Jagran Manch, has pointed out that the resolution was one by which “they could not issue shares to any corporate in which they or any other director is interested.” The shares were issued in the period 1994-2000, Gurumurthy has indicated in his letter.

Reliance has apparently let it be known that it has no connections with the 34 firms which picked up the stake in RIL. But Gurumurthy’s contention is: “That is to say, by private placement of shares, Ambanis parted with 11 per cent ownership in RIL in which they held only 14 per cent shares at that time, to some strangers unconnected to them ... this precisely is the matter for investigation.”

However, Gurumurthy has given no firm evidence of the connection of the 34 firms with the promoters of Reliance. Finance ministry officials said it was the lack of corroborative evidence which had held up earlier investigations that had been launched by Sebi.

In his letter, Gurumurthy also contested an opinion given by former attorney- general Fali Nariman some weeks back, which has been submitted by the Ambanis to the government on share allotments to Unit Trust of India.

The UTI allotments had been under the scanner for some time as there were allegations of improprieties there also, with charges that they had been deliberately over-priced to milk the mutual fund.

The RSS ideologue has pointed out that the promoters of Reliance first issued non-convertible debentures to themselves for Rs 300 crore in January 1994, entitling them to acquire 12 crore shares in the year 2000 at an effective cost of Rs 30 per share.

Under the same resolution (No 13 passed by the general body meeting held in March 1992), another lot of NCDs worth Rs 300 crore was issued to UTI in March 1994 which would turn into 74.8 lakh shares at a price of Rs 401 a share.

“That is 12 crore shares to themselves at a (cost of) Rs 30 a per share and 74.8 lakh shares to UTI at Rs 401 a share,” Gurumurthy's letter points out. “UTI was cheated and defrauded.”

Reliance has, however, contended before the government that the allotment to UTI was made under a separate resolution No 15. Gurumurthy, in his letter to Singh, has, however, pointed out that even resolution No 15 allowed the price to be set at Rs 250 a share only.

“What is relevant is what was the representation to UTI to make up its mind to invest and what were the facts told to UTI and what facts suppressed,” the letter states.

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