Which is what he is being currently accused of. After 37 years with the Taj group, Kerkar, the man who built it up from one badly-run hotel to the country's largest chain, left IHCL on September 2, post some rather public acrimony. The IHCL board accused him of FERA violations, specifically a case of parking money in Singapore, and corruption. There have been other allegations too, but the legendarily media-shy Kerkar has remained silent. Till now. In his first interview since his exit from the Taj—and only the third or fourth in his whole 40-year career—Kerkar met Sandipan Deb for three hours last week to give his side of things. Excerpts from an exclusive interview:
Why this bitter parting between the Tatas and you?
I wouldn't call it a bitter parting. I have never spoken with ill will against the Tatas. The thing is...when they don't have any faith in you, then there is no point continuing, it is better to leave. I just said look, you have made these allegations, so give me three months and let me clear up these allegations. But they were not ready to do that. In the last board meeting, on September 2, Mr Palkhivala told me since you have retired as managing director, you are no longer a director, and you are no longer the chairman of Indian Hotels. But I said no, I am a director and chairman till the Annual General Meeting on October 10, because directors are not appointed by the board, but by shareholders. And anyway, if I am not a director, why did you send me a notice for the board meeting? So someone said oh, that we did as a courtesy gesture. (Laughs) Of course, at one point, I had thought of putting up a fight. In the US, maybe, an executive who has given shareholders 40 per cent return on investment year after year will have a vote or a say, but in India, it's different. So I came away.
Apparently, Bombay House fears that you may try to become a director of IHCL, as a shareholders' nominee, at the AGM on October 10?
Well, you can fear anything, can't you? What does that have to do with reality? I am
not interested in going back to the Taj. That part of my life is over, I am in fact trying to forget it.
There are also strong rumours that you are behind the Assam government's crackdown on Tata Tea for apparently financing ULFA militants...
This is the most ridiculous thing I have ever heard. I have never been to Assam in my life, I have never met Mr Prafulla Mahanta, any Assam minister, any Assam bureaucrat—from the chief secretary to the lowliest desk officer—any Assam police officer.
But the travel agency Cox & Kings, which your son Peter runs, wanted to set up a bank headquartered in Guwahati, which seems an unlikely place to set up a bank, so people see a Mahanta connection there.
What Peter has told me is that there is a lot of cash in the Northeast, and there are hardly any bank branches, so Cox & Kings wanted to go there. But anyway, the bank will only be headquartered in Guwahati, that doesn't mean it's a regional bank for the Northeast. Besides, the bank proposal was passed by the Hiteswar Saikia government and not the AGP government, so where's the connection?
OK, coming to the specific allegations that
Outlook is investigating, there were these three companies—Monkwell, Jana and Sha-miana—which were set up in the US. Were Tata Sons and the RBI aware of these companies?
The Government of India was aware of all these companies, and there are enough documents to prove that. Unfortunately, since leaving IHCL, I don't have access to those documents any more, but the new management should be able to show you those. In fact, in May this year, I cleared up all these allegations with the Finance Ministry, sending them copies of some 300 documents that prove that there have been no FERA or any other violations. Tata Sons too knew all about these companies. With the GDR issue two years ago, the equity structuring of our overseas companies was completed, and these companies were wound up. The entire exercise is covered in the 1996-97 IHCL annual report.
There have been large-scale fund transfers between these three companies and Taj International, and many of these based on oral requests. Much of this money may not have been accounted for?
Why shouldn't there be fund transfers? I am a 100 per cent subsidiary of a company, so when that company asks for funds, I transfer them. About oral requests and unaccounted-for money...these were companies that were audited by PKF, the world's largest specialist hotel business auditors, and they were subject to US tax jurisdiction. And the US tax laws, reporting requirements and all that are far stricter than in India, but they never found anything wrong. All this is stupidity.
Was RBI approval taken for the monthly payments of $20,000 by Ramada Hotel and Quality Hotel, Washington DC, to Ramada Corp and Choice Hotels for staying on their reservation network?
But why should they take RBI approval? These are American companies paying dollars to other American companies in America! These are things that don't come under RBI jurisdiction. And Tata Sons knew about all these transactions, because the majority stake in our Hong Kong company, which had set up these American companies was held by Tata Enterprises Overseas and not Indian Hotels. They may not have known the details, like why did you spend $12.30 on bhelpuri...
Lenny Menezes, chief of Taj's international operations, has apparently amassed assets disproportionate to his income in New York and London at the cost of the Taj Group.
Absolutely untrue. He has not amassed any such assets in New York or London or anywhere else outside India.
But surely he could have amassed that wealth, without you being aware of it?
No, he couldn't have done it. This is an organisation which employs 18-20,000 people: if you do anything like that, the news will become public immediately.
Apparently, Menezes and other senior executives were collectively covered under a $1 million insurance policy against loss of jobs. The premia were paid by Shamiana. Our source claims that the insurance company paid up $1 million after Monkwell, Jana and Shamiana were wound up, and all of them continue to work for Taj International...
No, I do not know about this.
Taj International paid $75,000 as settlement to Neena Helms, an executive who had filed a sexual harassment case against Menezes.Was RBI approval taken?
Again, the question of RBI approval does not arise. Besides, there was no settlement. What we paid was her 11 years of gratuity, six-seven months leave salary, and she had a $10-20,000 loan which I personally wrote off. All these details can be checked up. There was no "settlement". Every government approval that was ever required for anything was duly taken: Finance Ministry, Commerce Ministry, Inter-ministerial Committee, whatever. And all these documents we have supplied to the finance minister.
But if nothing was wrong, why didn't the Tatas want you to continue?
I myself have not been able to answer that. Till the other day, Mr Palkhivala was so nice to me, I can't understand what made him say and do what he has been saying and doing. (Among IHCL directors, Palkhivala has been the most vocal against Kerkar.)
When did it strike you that the IHCL board wanted you out?
On June 24, after the board meeting, Mr Ratan Tata spoke for around four-five minutes. He said IHCL was a very important company in the Tata group, and I had been a very good manager, that I will remain chairman for another 10 years, but now that I was going to be 65, we should start discussing who should succeed me as managing director. Then suddenly the question of this deposit with Singapore Airlines came up, and they said bring this deposit back into India immediately, by June 30. So I said look I have kept this money abroad because the rupee may be devalued. Today you may get Rs 34 to a dollar, tomorrow you could possibly get Rs 41. I thought it was odd—this 'bring the money back by June 30'. It was then that I felt there was something wrong here. Since then, the RBI has condoned our keeping this money abroad.
Anyway, after that, I had several meetings with Mr Tata. In one of the meetings, Mr Palkhivala joined us. And he said, we'd like you to step down, there are many allegations about money being siphoned off, Cox & Kings etc.
And you are saying that these allegations are all wrong?
The Tatas know that I did nothing wrong, I—or any of my family members—have not amassed any personal wealth.
So why did they want you out?
I don't know. Maybe they didn't like the way I cut across bureaucracy and got things done.
What sort of a person was J.R.D. Tata to work with?
We used to meet every Monday morning, for an hour. Every week, till September '93, when he went abroad, and then he fell ill there and... . He gave us that feeling: we were not working for money. The man was so appreciative. But he would never tell you, he would tell others. That was his way of motivating people. And so humble. He knew I was a late riser, so he would keep all our meetings after 11 am. These little gestures...
And Mr Ratan Tata?
I think he is very focused at the moment. After the economic reforms began, he has been making sure that no outsider can come in and take the companies away. And he is absolutely correct in this. He is concentrating on sunrise industries, thinking 20-25 years ahead; hi-tech, automobiles, small car, consumer-oriented industries, hotels and leisure. The old guard is going; new, young, bright, clever people will come in, which is good for the business. New directors will be younger. I'm sure the number of Tata Sons directors above the age of 75 will be reduced.
Did Ratan Tata give you less freedom to operate than JRD did?
Not at all, he gave me full freedom. It was only in the last three months or so that I found that certain proposals I brought before the board were being postponed for some reason or the other.
So what do you plan to do now?
There are many proposals, but I haven't given them much thought till now. (While we were talking to Kerkar, a medium-sized industrialist arrived to ask him to be chairman of his new company). Fortunately, I am in excellent health, so I'll be doing something: something interesting and fulfilling. I want to forget this episode. The Taj can be one of the top 10 companies in the country, in sales, profits, all the ratios. Last December, Euromoney magazine named the Taj as one of the four Indian companies that are ready for the 21st century, along with Hindustan Lever, HDFC and Larsen & Toubro. So all I want to remember is that I have created something beautiful.