 Hello and welcome to NewsClick. I am Paranjoy Guha Thakurtha and we are going to discuss what is nothing short of a scandal pertaining to a company called Gift. Gift is an acronym for Gujarat International Finance Tech City. It's setting up a major project in Gandhinagar in Gujarat. And it's got embroiled in a scandal because it's affiliated closely to the scam-tainted IL and FS, that is the Infrastructure Leasing and Financial Services Group. I have with me here in the studio a person who blew the whistle on the scandal concerning Gift City. Let me welcome Sri Divya Bhash Chandrakant Anjaraya. Mr. D.C. Anjaraya was the first independent director of Gift Company and headed its audit committee, the finance professional who worked for 20 years with Citibank in four different countries and is currently also a trustee of the Consumer Education and Research Society of Ahmedabad which runs the Consumer Education and Research Centre. Thank you so much Mr. Anjaraya for coming here. The Gift project was touted as a showcase project by the Gujarat government and that time it was headed by Mr. Narendra Modi. He was the chief minister then. And a project which was supposed to cost 25,000 crore in 2008, 10 years ago. Today the price has gone up well almost three times to 70,000 crore. Is this part of the scandal? I would say yes by hindsight because this 344 fold increase was not necessarily due to inflation or prices. It is simply by taking over more and more land. What started off with a project that would have needed let's say 250 acres for a special economic zone, island affairs interest was in getting more and more land until they got to almost 900 acres of land instead of 250. And these more than 800 acres of land according to you was virtually gifted by the government of Gujarat because they got it, the company got it for a ridiculously low price of 1 rupee per acre on a 99 year lease. And it has been calculated that if indeed that land was sold or leased at market prices, the price would have been 440 crores or thereabouts. More, more. 880 acres when it started would be at least 880 crores and today it is let's say in excess of 2,500 crores. And they've got it for next to nothing? Actually nothing because there's no rent, there's nothing except the later on, in fact it was my advice which was adopted, which was later on to say that look you have not only the land but you have right to sell it at commercial prices. Therefore the profit you make should be shared back with the government. And however you take as your incentive let's say 20% share back, you know give back 80%. Even that has not been done. Mr. Anjaria this project which is being established by gift company is a 50-50 joint venture between the government of Gujarat and IL and FS. And it seems and that this project was subsequently given on a contract on agreement by another entity which is called Fairwood Holdings. And the manner in which Fairwood Holdings was given a contract to develop this project didn't follow the due process and according to you it didn't follow the guidelines and the rules which were laid down under the Gujarat Infrastructure Development Act of 1999 and one of the irregularities was it seems and that this contract went to this consortium headed by Fairwood Holdings even before the project had taken off. How was this done? That's correct. So there was an MOU, first of all I was involved in pointing the finger to likely participants in the development of this project to the state. That means you told the government that this can be done? Yes it can be done. For example IDFC, Infrastructure Development Company headed by Rajiv Lal. Yes. And of course Deepak Parik. Yes. Another name was Kotak because they had just set up a big real estate fund and would have supported this. Third was an international architectural firm based in New York who have experience in global city development. After all this for various reasons ILNFS was chosen by the government. At that point I was not part of the government or there was no formal improvement. Were you an independent director at that time? No because the company didn't exist. So the government chose its joint venture partner independently except I pointed fingers to all these possible joint venture partners as a sort of a friend of the Gujarat government. I had no formal role or capacity. And they decided to go with ILNFS. Now this company Fairwood Holdings which led that consortium operated out of an office of an ILNFS associate if not a subsidiary which is the Delhi Noida toll company. And according to you it got essentially what is called a sweetheart deal which some would call a gold plated management contract. It got a consultancy fee of 20 lakh rupees a month excluding taxes and out-of-pocket expenses. One of the clauses in the contract said that the advances once made could not be recovered even if the services were not provided. And according to you this company Fairwood Holdings got in excess of 400 crore rupees in fees during the two-year period it was on this project and thereafter after around two years its contract was terminated because it failed to deliver. Am I correct? A few corrections. Essentially you are correct but a few corrections. The contract to Fairwood was not terminated until I left and it was done probably in 2014 which means good seven years after that. And even after that it has been subjected to an arbitration which is not going anywhere in terms of decision. Five years already and no decision. How much Fairwood was however what was wrong was its selection because they had no track record in putting up a global kind of city the vision that was a project of this kind. Correct. And what I found out later on after we came into contact was that all they had was a small office given by Al and FS to them in the Noida deli. Deli Noida toll company. Toll and that toll gate. That's correct. All they had was a few thousand square feet and no real experts on their board. But you tell me how much is according to you owed by this Fairwood Holdings to gift? How much is owed? How much is owed? You know this arbitration has been going on. As you say my information says it's been going on for almost four years. Now four years plus. Almost close to five years. And there have been 25 hearings that have taken place in this period of time but the dispute hasn't been resolved. So what exactly is the dispute that this company is claiming how much from Fairwood? Okay. So the genesis of this is that Fairwood one was selected as head of a consortium with the Chinese architectural firm called Akadi. The contract to them was given by Al and FS directly for working on the land of Gujarat government based on only a memorandum of understanding which was signed with the state in February or so 2007. So even Al and FS didn't have the contract yet they went ahead and gave the contract to Fairwood. So that's where it all sort of starts. How much is owed? I mean Fairwood holdings, what is being claimed by gift, by way of dues or damages or whatever you want to, whichever way you want to classify it. So at the very least they were promised, you know, fees of different slabs but almost close to two percent of the value of the contract. Now this is an area where a lot of games were played. It started with a small area to be developed then, you know, 880 acres. Yeah, from 25,000 crore to 70,000 crore and if it's 1% of 70,000 crore is 700 crores. But they were promised close to 2%. 2% is 1400 crores. 1400 crores was promised of which in my experience while I was on board close to 400 crores has been paid to them and so much of it as advance and the real story came out when I alleged all these irregularities, when they did not perform, etc. that they claimed that the advances once paid to them were not recoverable. I mean this is an amazing clear window. This is truly amazing that in a contract you should have such a glaring loophole. And that too from a so-called infrastructure development expert company like ILNFS. ILNFS. So the expertise was into how to draw it out. What kind of expertise is another story with today being compared to Lehman Brothers and with a huge debt and the whole scandal around the inability of the ILNFS group to repay its dues. But be that as it may, you have alleged in your public interest litigation that minutes of board meetings were not properly maintained. So what were the circumstances under which you left the company and the head of its audit committee? Right. So I joined from day one 2007 and exactly five years later my directorship was not renewed. The last six months were of course very special in that they were already upset. They wanted me to be removed in 2011 year end. I lasted another six months because at that time Narendra Modi led Gujarat government supported me and said you can't remove him like that. In any case there is a legal process for the removal of a director. And the reason it happened was a crucial audit committee meeting where from 7 to 11 based on four years experience with Fairwood and in line with the normal duty of an audit committee I brought in a resolution which was passed with the government support that they have not performed money paid to them should be recovered. It's as simple as that. This non-performance has been recorded in the minutes and so on. In this decision these recommendations of the audit committee are also recorded. And what they did, what they wanted to do, the chairman and the other directors and notably Island FS as the manager of the project was to remove me and then redo all the minutes and everything so that the irregularity did not happen. What made you move a public interest litigation against the company in the Gujarat High Court in 2015? What prompted you and also please tell us what is the current status of that case? So this has been sort of the last measure that I could take but before that a lot of things happened. I believed that I was an advisor so to say to the government because I had recommended the whole project, structured the whole project and was kept on the board as an expert on this while they focused on infrastructure development and so on. The financial sector development was to be my area of contribution. However, I was also taken as audit committee chairman because I was the only independent director in the company. And you had a background in finance and you were a finance professional. And I'm also on the audit committee chair of other Gujarat government companies like GSFC. And you have a background. You studied at the Indian Institute of Management. I'm at the bar. I'm at the bar. Before that also commerce, audit, education, etc. So that's fine but that turned out to be the problem because as audit committee if I saw most of the irregularities and the money going away and non-performance and that's what pointed out. So that's what prompted you to move court? So first I kept all these questions before the audit committee and made all these observations internally. Not much happened. So I interacted with the chairman and saying this is all wrong. It should not do. Issues were corporate governance, fair word contract and other irregularities like award of contracts to subsidiaries of ILNFS without any bidding process. Irregular, completely. And non-transparent too. Considering that it's a public, I mean it's a joint venture. Exactly. It's a public-private partnership. Half of the project is being funded by the state government. Exactly. Now in response the management and unfortunately blessed by the chairman appointed by the government kept coming up with some deceptive kind of... Are you talking about the present managing director and chief executive officer Mr. Ajay Pandey? Before him was one Mr. Ramakanth Ja and before him was an ILNFS employee. He was relatively junior. He lasted for some initial two years. And on the board were eminent persons including two professors at the Indian Institute of Management? No. Now all this happened only after I left. I see. I was kept as the only independent director. Four directors from government, four from ILNFS, only independent director. So obviously the voice was not as influential as it could have been if like today. All these people were brought in when I made all those observations and said that fair word has not performed and the money paid to them has really gone. You have already said that. I'm just cutting you here just to say, so you correct me if I'm wrong, you felt frustrated and you moved the high court. Correct. And you moved what you say is a public interest litigation. Because the chairman didn't get action, input to the whole board didn't get... So it's been like if I'm not mistaken, correct me if I'm wrong. It's been some time now. It's been more than three years now. I think almost four years now since you moved court. What is the current status of this case? The next hearing is 28th of November now. All right. Coming up. However, so far there was only one hearing where the notice was allowed to be issued only to the company itself, but neither to the chairman as we have required, nor to LNFS as we have required. Okay. So we'll have to wait till the 28th, Wednesday the 28th of November to find out how the Gujarat High Court acts on this matter. My last question to you is after Sucheta Dalal in Money Life wrote an article about the scandal, the gift city scandal, so to say. Something very unusual happened. Mr Ajay Pandey, the managing director and chief executive officer of Gift City, he inserted what we in our media parlance call an advertorial in a newspaper, the business standard. This was on the 13th of August through a third party, interestingly, and the third party was Scotch Development Foundation where you, the allegations that Sucheta had made in her article were sought to be sort of answered, except that according to her, the second article that she wrote after this appeared, that they got some of the facts wrong, including that this case had been filed against the Gujarat government, whereas it was only against the company. And according to her, this advertorial could be construed as defamatory. Would you like to comment on what she's said? Yes, in fact, I've got legal advice also that this is defamatory because it is based on incorrect facts. Everything that they alleged, for example, that I was part of the contract given that decision to award the contract to Fairwood. That you were supposed to be part of that. But you never had. I was neither in the government nor yet the company was not formed. They gave the contract. So the current chief secretary, current chairman, was the one who authorized it. And they are trying to pass on the blame to me when I was not even associated with the project. The company didn't exist, nothing. They started questioning it once I joined the board of the new company. And for four years, they tried all kinds of techniques to convince me that this was okay. They talked about it as a consortium when it wasn't. The Chinese never really signed the agreement. Their name was being used. Then to get out of this, all kinds of innovative solutions like saying that, okay, if Fairwood tells us that this is a consortium, it is a consortium. Okay. That sort of thing. My absolutely last, last question to you. Only time will tell how the court adjudicates this matter. But the critics of the Gujarat government and the critics of Prime Minister Narendra Modi claim that what has happened in Gift City is kind of an example or symptomatic of the so-called Gujarat model of development where public monies is expended for private profit. For private profit. Would you go along with this? I have a very mixed response, maybe partly disappointing. Narendra Modi made some key decisions right in the early stages of this game which were actually correct. For example. In this project? In this project. For example, I had put this project up. The report that I wrote to the Gujarat government which was accepted as my recommendation was one that financial center has to be developed. Because there was a rivalry of having that financial center either in Gandhinagar or in Mumbai. And many believe it should have been in Mumbai. After all, Mumbai is the financial center. I tried to have it in Mumbai but I got nowhere with Maharashtra government. Then I gave this input to the committee that was formed by Mr. Chidambaram, headed by the ex-World Bank chief, Mr. Mystery. And I said that we should take this opportunity. It was set up to make Mumbai an IFC. So I said if you want to do that, you should follow it. In IFC, you mean the International Financial Center. If you want to make Mumbai an IFC, you can do it through a special economic zone law which allows for creation of such a center. But they rejected that proposal. Instead it went to Gujarat. Then I went to Gujarat and approached Narendra Modi and he said yes. Then what happened after that? He asked me to write a detailed report for an entity called Gujarat State Financial Corporation, headed by Smukhadia, who later on became the finance secretary. And the report I gave said three things. One is that India needs a financial center because it is now a freer, more globalized economy. Secondly, that it can come up only on the basis of world-class infrastructure because if you want financial professionals to come and work there, you need to provide that, like Singapore or whatever. And the third part was the use of technology to support this. Is Mr. Modi aware of all these scandals that have happened? Yes, not only, even at that time and he made the right decision. Then why hasn't he done anything to rectify the situation? That's where the problem starts. So at that time he said, look, fine, if you need land we will give you land, you develop it that, but that's a separate project. As a public-private partnership, government is not an expert in this. So correct decision. But people who were interested in this project were not for financial sector development because money was in the infrastructure development. So would I be correct in saying that despite being aware of the scandal, Prime Minister Narendra Modi has apparently done little or nothing to rectify matters? In a sense, yes. All right. I have to conclude the conversation now. Mr. Anjarya, thank you very much for giving us your time and for explaining this rather complex issue in simple language. And let's wait and watch what happens and how the court rules. You've just heard and watched DC Anjarya. He's the former independent director of Gift Company. Gift is an acronym for Gujarat International Finance Tech City, which is a showcase project of the Gujarat government. And he's made a startling disclosure saying Prime Minister Narendra Modi is aware of certain scandalous developments concerning the implementation of this showcase project, but done nothing to rectify or improve the situation. Thank you for being with us and keep watching NewsClick.