Kerkar is accused of having misused his position as Indian Hotels CMD to prevent full subscription to a Gateway rights issue. The unsubscribed portion was then allotted to Kerkar group affiliates, benefiting them substantially, and fictional minutes of board meetings fabricated to legitimise the deal.
THE MODUS OPERANDI and its aftermath August 1995
Gateway Hotels & Getaway Resorts, fully owned by Taj group,floats a 3:1 rights issue October 1996
Ajit Kerkar uses his position as CMD Taj group to ensure that issue is not fully subscribed by group companies.
Unsubscribed shares picked up by Cox & Kings Travel, subsidiary of Cox and Kings promoted by Kerkars son, Peter, and Mayawati Finvest & Leasing, owned by Arshad Wahedna, known to Kerkar.
1.65 lakh shares later sold by Mayawati Finvest to foreign company Youngstown Global Partners at a profit of about Rs 1.81 crore.
October 96 to January 97
GHGR chairperson Camellia Panjabi removed from post after she refuses to sign minutes of a fictional board meeting that purportedly cleared the allocation of the unsubscribed shares. Further records fabricated to depict P K Mohankumar's election as GHGR chairman at a fictional board meeting and his replacement by Kerkar at another non-existent meeting on January 15, 1997 June 1997
Kerkar signs minutes of meeting appointing him GHGR chairman. August 1997 Kerkar is made to resign as CMD of Indian Hotels.
Ajit Baburao Kerkar, till recently chairman and managing director of Indian Hotels Limited (IHL), created a crucial 30 per cent stake in Gateway Hotels and Getaway Resorts Ltd (GHGR), an IHL subsidiary, for companies controlled by his friends and relatives. GHGR operates the 100-room Gateway Hotel in Bangalore, the Gateway Riverview Lodge in Chiplun near Mumbai and other properties in Nasik, Maharashtra.
IHL sources point out that the GHGR transactions involved a clear conflict of interest between Kerkars role as chairman and managing director of IHL and as the person involved in other companies. This deal, which was known to the Tata brass at least as early as March 1997, when Camellia Panjabi told Tata Sons finance director Nausher Soonawala about her having been removed from the chairmanship of GHGR, is said to be one of the main reasons which triggered off the bad blood between Kerkar and the Tata group directors.
Kerkars operation began in October last year and was finally concluded as recently as June this year, by when discord between Kerkar and Tata group chairman Ratan Tata had already reached the boardroom of IHL. Suspicion about Kerkar having used his chairmanship of IHL to create value for companies in which he and his family have interests, at the cost of the Taj group, have been at the core of differences between Kerkar and Ratan Tata, leading to Kerkars ouster from the helm of IHL in late August.
Documents made available to Business Standard by disgruntled elements in IHL show that Kerkar, who was not on the board of GHGR, pushed through the deal by fabricating board meetings, coercing senior executives to sign on the dotted line and finally installing himself as the chairman of GHGR. In the process, Camellia Panjabi, a long-term Kerkar associate, was removed from the chairmanship of GHGR without her knowledge when she refused to do Kerkars bidding.
What is more, one of the companies connected with Kerkar which acquired the shares at par value made a neat killing of Rs 1.81 crore by disposing a part of its stake at a premium of Rs 110 per share. IHL sources charge Kerkar with denying this profit to IHL since, as they claim, Kerkar knew even before the shares were allotted to other companies that the GHGR shares would command a huge premium.
GHGR was promoted by Indian Hotels as a 100 per cent subsidiary to manage hotels and resorts in small towns and cities. Indian Hotels held its 100 per cent stake in GHGR through itself and other Taj group companies, including Taj Investement & Fin,
Taj Services Ltd, Taj Trade and Investment Co Ltd, Taida Trading and Investment Co Ltd and Taj Enterprise Ltd.
This was the position till as recently as March 1996, seven months after GHGR opened a 3: 1 rights issue in August 1995. Kerkar, charge IHL sources, first ensured that IHL and its subsidiaries did not apply for their full entitlement to the right issue. This was later offered at par (Rs 10) to two, perhaps three, companies belonging to Kerkar and his associates, thereby giving them a stake of between 30 and 35 per cent.
One of the companies allotted shares (3.7 lakh shares, 10 per cent) was Mayawati Finvest and Leasing Pvt Ltd. Mayawati is owned by Arshad Wahedna, an associate of Kerkar, documents available with Business Standard establish.
The other company is C&K Travel and Finance Ltd (a subsidiary of Cox and Kings, promoted by Kerkars son, Peter Kerkar), which today has 18.8 per cent of GHGR. IHL sources suspect that a third company which also picked up the unsubscribed rights shares, Indian Portfolio (Mauritius) Ltd, is connected with Kerkar but they have no proof of this.
The real ownership of Indian Portfolio, which still has a 7.5 per cent stake in GHGR, is not known.
Of its 3.7 lakh shares, in June 1997 Mayawati sold 1.65 lakh shares to Youngstown Global Partners, an overseas company belonging to Arshad Zakaria, son of ex-Maharashtra minister, Rafiq Zakaria, at a premium of Rs 110 per share, resulting in a profit of Rs 1.81 crore to Mayawati. Mayawati still has 9.3 per cent of GHGR.
Documents available with Business Standard show that Kerkar was aware in July 1996, much before the allotment of shares, that he would be able to sell the GHGR shares subsequently at a profit of Rs 110 per share.
The key to the entire operations lay in ensuring the share transaction. At the time of the share allotment, on October 2, 1996, A B Kerkar was not on the board of GHGR. Camellia Panjabi was the chairperson. Under the Companies Act, 1956, a board of directors can allot shares at its discretion.
Documents available with Business Standard show that pushing through these transactions involved major administrative irregularities like the removal of Panjabi without a resolution or resignation from her, fabrication of the statutory records of the company, false record of board meetings which were never held and fake minutes of these purported meetings.
It was at one of these purported meetings that the GHGR shares were supposed to have been allotted.
Panjabi was informed that she was no longer chairperson when she gave a routine notice of her directorship and interest to IHL on February 19. To her shock, the legal department of IHL informed her that Mr ABK (Kerkar) has been appointed chairman.
In an affidavit filed in June, Panjabi has recorded that she had never attended or presided over any meeting in October 1996 when the GHGR board is supposed to have decided on the allotment of shares of the unsubscribed portion of the rights issue.
The need for fabrication of meetings and minutes arose when Panjabi refused to sign the minutes of a meeting which, as recorded in her affidavit, was never held. According to IHL sources, this refusal led to another fabrication.
This time a new set of fake minutes were circulated recording the election of P K Mohankumar, director of GHGR, as chairman in the absence of Panjabi.
The minutes of this meeting were approved at another fabricated meeting on January 15, where A B Kerkar was appointed chairman and director of GHGR.
Company records show that P K Mohankumar and Rajiv Narain, who were shown present for the January 15 meeting, were not even in Mumbai on that day. Mohankumar was in Cochin while Rajiv Narain was in Agra.
Both have signed affidavits stating that they did not attend any such meetings and that they were coerced into signing the attendance register at a later date by Kerkar.
