Selling them for a song

The manner in which a Rajasthan’s Special Court rejected an earlier closure report of the CBI and ordered it to file FIRs against former Disinvestment minister and Editor, Arun Shourie, and a former IAS officer for selling the Jodhpur’s Laxmi Vilas Palace Hotel for peanuts (Rs.7-43 crores) when it’s valuation was more than Rs.150 crores.

This revival of case is unusual, as the CBI had not mentioned Shourie’s name either in the 2014 FIR or found any conspiracy suggesting enrichment. Was his name added now as he has been a hostile voice against the NDA government and has also petitioned on Rafale issue or is there merit to the case?  While the court has stayed the arrest Shourie and the accused ex-IAS officer , what is remarkable about this case is that malfeasance in the deal was visible, but it was ignored in the name of a policy shift.  In its desperation to get out of managing hotels, the government engaged in a strategic sale of these valuable assets even when it meant handing them over to their favorite cronies. Many companies and Hotels with huge land parcels were sold for prices that were not enough to get a house in Lutyen’s Delhi. Destiny, whatever the circumstances, seems to be catching up with those who were most enthusiastic in selling these public assets. Arun Shourie, despite his image of being a crusader against corruption as the former editor of Indian Express cannot shake himself off the charge of how he could sell off a public sector asset that had been preserved through public funds for so little a price to cronies.

The same story is playing out even now with other government entities and tribunals engaged in recovering dues from debt strapped companies. When public sector companies and properties were sold for nothing the outrage was limited to trade unions as the government that owned these companies wanted to sell them without recognizing the fact that they were custodians of public interests. In the case of those private companies that took hefty loans from public sector banks for building their businesses same principles apply. Under no circumstances, should the sale of these companies violate the cardinal fact that the principal amount invested in a company should be recovered. However, what is at display defies imagination and it could come up for the scrutiny of the court and probe agencies when they discover that a Rs.1000 crore worth of company has been sold for Rs.100 crores or so. In a complaint to Chief Vigilance Commissioner, a Gujarat and Rajasthan based Hotel group, Neesa Leisure limited has complained that 7 of its properties that have been referred to NCLT as it has piled bad debt due to a difficult market are being sold at rock bottom prices. Surprisingly, Resolution  Professionals/ entities like KPMG  was brought with big fan fare  by  Arcil , one of the lenders to arbiter this sale have not justice to their work. Not too long ago, KPMG were accused of playing around with valuation of other companies also. These properties have been put for sale to pay off bankers. What is being played out smells of a scandal no different from how the public sector companies were sold for a song. NLL is being handed over to an agglomeration of individuals with no hotel experience. This is out of desperation of the lenders who just want to park these properties to someone. If these hotels are indeed sold to these bidders at these low prices then it would be mean the banks would take a haircut of Rs.500 crores- the investment they had made in these properties and would lead to extraordinary enrichment of those who win this bid. The promoters of this property had offered competing offers that involved selling only 2 or 3 properties out of 7 to pay off the debt and to use rest of them to service the remaining part of it, but was refused.

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