Tata Sons has squarely blamed the Indian Hotels Limited (IHL) management for the potential Foreign Exchange and Regulation Act (Fera) violations in the leave-and-licence agreement signed between IHL and Singapore Airlines (SIA) for the latters office at the Taj Mahal hotel here.
In a press release issued late last night, Tata Sons said that the IHL management had directed SIA to pay security deposits amounting to US $4.9 million to its subsidiary, Taj International Hotels (Hong Kong), instead of receiving the money directly in India.
The release said that this was, supposedly, done pending the approval of the Reserve Bank of India (RBI). However, for more than three-and-a-half years, the management had parked the money overseas without the knowledge and approval of the board of directors and the statutory authorities.
The release claimed that it was only after the Tata Sons directors got wind of the issue was it taken up with the RBI. Subsequently, the RBI, by a letter dated August 6, 1997, condoned the serious lapse. It, however, demanded that the security deposit which was brought to India on August 4, 1997, be repatriated with interest. The regularisation, therefore, took place only on August 6, more than a month after the adoption of accounts.
The release is significant in as much as this is the first time that Tata Sons has gone on record to level charges against the IHL management, albeit by implication. The release also throws light on the role played by Tata Sons chairman Ratan N Tata in the deal. (Ratan) Tata wrote to Ajit Kerkar on June 13, 1993, indicating that he had been requested by the SIA for a 10 per cent reduction in the deposit asked for by the Taj.
SIA had made it clear that they were looking at the properties and if this reduction was not made they would go elsewhere.
The communication from (Ratan) Tata was long before the agreement was finalised. He had no involvement or knowledge of this transaction after this exchange of correspondence with (Ajit) Kerkar, the release said.
The auditors and non-executive directors got an inkling of the incident only in May 1997. At board meeting on June 23 when the companys accounts were being considered Ratan Tata queried whether the deposit with Taj HK constituted a Fera violation..
He suggested that the deposit amount be repatriated immediately and that the entire matter be brought to the attention of the RBI.
The press release states that the Tata Sons directors exercised their fiduciary responsibility in ensuring that the security deposit was repatriated to India and taken into the books of the Indian Hotels.
