The use of shell companies is distressingly familiar in India.
Despite the loud protests of Congress spokespersons, few seriously believe the CBI raids on the homes and premises of Karti Chidambaram, son of former finance minister P. Chidambaram, and the income-tax crackdown on Lalu Prasad Yadav, a Congress ally in Bihar, are unfair. The junior Chidambaram has a reputation that precedes him. He frequently found mention in the 10 years of the UPA government (2004-14) for suspicious deals, including to do with the broader telecom scandal. In the current case, a company owned by him was contracted as a consultant by an investor — Peter Mukerjea’s INX Media — that had run into trouble for violating income-tax rules and Foreign Investment Promotion Board norms. The accusation is that Karti Chidambaram was used to influence the authorities and bail out INX Media. At that time, his father was finance minister.
Karti Chidambaram has also been accused of opening bank accounts in a variety of international locations — from Singapore to London, San Francisco to Monte Carlo — without informing the Indian authorities and the Reserve Bank of India, and without revealing this information in the wealth and income affidavit filed before the Election Commission when he (Karti Chidambaram) stood for the parliamentary election in 2014.
In Lalu Yadav’s case, it is said a series of shell companies — paper companies with an address that may physically exist but where the company has no office or facility and no relationship at all — have been used by his family, including his sons, who are ministers in the Bihar government, to buy properties in Patna, Delhi, Kolkata, Gurgaon and elsewhere.
The use of shell companies is distressingly familiar in India. These are deployed by corrupt politicians and businessmen to funnel and launder black money and illegal cash income. Lalu Yadav is not alone to fall back on such a mechanism, presuming the charges are correct, but obviously the investigation against the Yadav clan has reached critical mass and enough evidence has been found to make a strong case.
It is telling that among the premises raided in connection with the latest Lalu Yada corruption affair were those of the family of P.C. Gupta, RJD MP. Politely known as “Lalu’s bagman in Delhi”, Gupta was minister for corporate affairs in UPA-I (2004-09). Subsequently, his sons were found to have incorporated a new company that quickly and astonishingly won coal block allocations in what later became the coal scandal.
A battle against “benami property” — property purchased using the names of other individuals or institutions, by deploying undeclared cash income — is a promise of Prime Minister Narendra Modi. It is also a logical implication of the war against black money, of which demonetisation was presented as a part. As such, the cries of vendetta from the Yadav family and the RJD as a whole are that much less tenable. Indeed, that anti-money laundering measures in New Delhi, following the demonetisation exercise, touched even senior businessmen with Sangh Parivar links has only added to the Modi government’s credibility.
The Modi government came to office promising action against corruption. It exploited voter disgust with the stench of swindle that marked the UPA era. In the past three years it has worked hard to repair India’s reputation. Take foreign investment, for example. Rules and regulations have become simpler and India has a fairly liberal FDI regime today.
That aside, influence of the sort that has been alleged in the INX Media-Chidambaram nexus has been carefully guarded against by the BJP-led government. Anecdotal evidence from business groups and investors today, as opposed to in the UPA years, is there for all to see. At least the upper echelons of this government have been remarkably free of charges of wrongdoing. This culture has seeped into the government, with the feeling that the Prime Minister and the PMO are playing watchdog.
In the UPA years, in contrast, it was a free for all. Whether Manmohan Singh, as Prime Minister, was even aware of what Karti Chidambaram was doing or what Lalu Yadav and P.C. Gupta were cooking remains a mystery. What he could have done with the information, should he have had it, is another matter. He simply didn’t have the political authority to impose corrective action.
It can be argued that all this is ancient history. Three years have passed since the UPA government was voted out. Surely it’s time to stop blaming it and to look at what the Modi government has or hasn’t done? While this is true and while the Modi government will be judged in 2019 on the basis of the entirety of its five-year record — not just in terms of a comparison of its probity vis-à-vis its immediate predecessor — the fact is that corruption remains an important issue.
Narendra Modi did not rush into a series of symbolic raids and arrests in the months after his 2014 victory. That would justifiably have been called knee-jerk action and vendetta. Rather, he waited patiently for enough material to be gathered in specific cases. Politicians and public officials may be guilty in a dozen cases but there may be incontrovertible evidence in only one or two. Therefore it is important to pick one’s battles. The Americans gangster Al Capone was responsible for bootlegging, organised crime and even murder. He was ultimately put behind bars for income-tax evasion.
Given this, and given the geographical expanse of the multi-city raids against the Chidambaram and Yadav families — 14 properties linked to Karti Chidambaram were searched, and 22 locations associated with Lalu Yadav — it would appear the authorities had done their homework. Congress spokespersons bristled but underneath there was a lingering question: Who’s next? As for the RJD and Bihar, there’s another question there altogether: what will chief minister Nitish Kumar do next?