Money for nothing: DLF-Vadra 'alibi' on land deals is hogwash

The Sphinx broke its silence on Sunday. In a statement, Sonia Gandhi’s son-in-law Robert Vadra gave expression to injured innocence and claimed that the allegations against the metoric rise in his business fortunes, levelled by anti-corruption activist and newbie politician Arvind Kejriwal, were “utterly false, entirely baseless and defamatory.”

Vadra said that that his business transactions were “fully reflected in financial statements filed before appropriate government authorities in compliance with the law.” The attempt by Kejriwal and senior lawyer Prashant Bhushan to point to Vadra’s dealings with real estate developer DLF as embedded with the seed of corruption amounted to deliberate misrepresentation of numbers in his companies’ financial statements. They were, he added, an attempt to “manufacture lies and malign my family” in order for Kejriwal and Bhushan to gain “cheap publicity” tied to the launch of their political party.

Earlier, on Saturday, DLF came out with a point-by-point rebuttal to the allegations levelled by Kejriwal and Bhushan against the ‘ sweetheart deal ’ between the company and Vadra. In it, the company said that contrary to Kejriwal’s claim that DLF had proffered an unsecured, interest-free loan to Vadra’s companies (the proceeds of which were used to purchase DLF-developed properties at a steep discount to market price), the company had in fact offered no such loan.

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[caption id=“attachment_218137” align=“alignright” width=“380”]  The son-in-law also rises. Reuters[/caption]

“We wish to categorically state that the DLF has given no unsecured loans to Mr Vadra or any of his companies,” DLF said. Instead, it claimed, DLF had given a total of Rs 65 crore “as business advances” for the purchase of land “as per standard industry practice” in respect of two property transactions. The first of them related to a 3.5 acre plot in Gurgaon that Skylight Hospitality, one of Vadra’s business entities, had offered for sale to DLF for Rs 58 crore; and the second related to a land parcel in Faridabad, which was offered for sale, which however wasn’t consummated because of “legal infirmities” associated with the land. In the latter case, therefore, DLF secured a refund of Rs 15 crore that it says it paid as “advance”.

On the face of it, this may seem a plausible explanation. As _Firstpost_ had noted earlier , from acursory look at the balance-sheets of Vadra’s companies, it wasn’t clear if he got an unsecured, interest-free loan (in the way that Kejriwal and Bhushan suggested) or if he secured an advance on land sold to DLF. DLF’s case is that it was the latter.

DLF further dismissed the allegation that these payments to Vadra’s companies were linked in some manner to the land allotments that the company secured from the Congress-ruled Harayana government. “DLF vehemently denies any quid pro quo in its transactions with Mr Vadra and his group of companies,” the statement claimed. It noted that the company had been in the business of real estate development in Haryana for over 40 years and had implemented large projects by purchasing land from individual land owners directly at fair market prices and developing them “in strict compliance of all rules, regulations and applicable laws.”

But the alibi that DLF trots out on behalf of itself and Vadra to defend their land dealings rings untrue. It hardly seems “standard business practice” for DLF to pay up to nearly 90 percent of the property transaction value to Vadra’s company as an “advance” - and for that amount to remain listed on Vadra’s company’s balance sheet for two years and more as an “advance”. Indicatively, even as of 31 March 2010, Sky Light Hospitality lists a Rs 50 crore payment from DLF as an advance on sale of Manesar land, and an additional Rs 10 crore from DLF as “advance… (Land A/c)”. Despite the nature of this classication,in spirit, there is nothing to distinguish these payments from an interest-free loan to Vadra’s companies.

In any case, Real Earth Estates Ltd, one of Vadra’s many companies, lists a Rs 5 crore loan from DLF in its balance sheet for 2009-10, which effectively knocks down DLF’s claim that no loan was ever proffered to Vadra’s companies.

All those payments from DLF were pivotal in putting Vadra’s business fortunes into a vastly higher orbit than he had been operating in earlier. At best a middling businessman with family interest in brassware, he struck pay dirt from 2007 onwards, when he established five different entities in the real estate, hotel, trading and airline charter businesses. All with a very small paid-up capital base (of only Re 5 lakh, in some case).

By 2010, on the strength of what DLF says was an “advance” on land sales, but clearly reeks of an interest-free loan, Vadra’s companies entered into a flurry of real estate deals, all worth several multiples of their paid-up capital, catapulting Vadra into the big league.

Nobody grudges a businessman his fortunes if they were amassed fairly and in a transparent. But everything about the business empire that Vadra built and grew at an exponential rate, particularly since 2007, reeks of cronyism, given he is who he is: the son-in-law of Sonia Gandhi.

It is nobody’s case that the proximate family members of leading politicians must go into abject self-denial when it comes to charting their professional or entrepreneurial paths. But given the reality of our political culture, where typically anyone close to positions of power enjoys enormous clout, and the unnatural rise in Vadra’s business fortunes particularly pegged to what, despite DLF’s clarification, reeks of an interest-free loan, the bar for transparency must be set a lot higher than for ordinary businessmen who aren’t married to the First Family.

DLF’’s and Vadra’s disavowals notwithstanding, there is a compelling case for an independent investigation into Vadra’s business empire. Congress apologists may buy readily into the alibis proffered in defence of the deals, and the party, beholden to the First Family, may seek to brazen it out. But the renewed focus on the non-transparent business transactions of Vadra’s business empire is certain to cast a long shadow. The stench is only growing in intensity.