It was exactly eight in the morning of November 19 when the Ambassadors carrying the Central Bureau of Investigation (CBI) team braked in front of the building called Sea Wind in Mumbai's posh Cuffe Parade. A few minutes later, the CBI men went further than any government agency had gone in the 35 years since Reliance Industries came into public focus. They entered Dhirubhai Ambani's top-floor apartment with a search and seizure warrant.
Simultaneously, CBI teams were barging into Reliance offices both in Mumbai and Delhi, and into the houses of top executives of the Rs 13,000-crore company. They stayed for more than eight hours, scouring every nook and cranny of the premises with a fine toothcomb. It was no ordinary raid. Indeed, strangely enough, for a company that has always matched the meteoric speed of its business growth with a penchant for lurching from controversy to scandal, this was only the third time that the company had been raided in three decades.
But more importantly, this time, the CBI was looking for evidence of no commercial crime, but violations of the Official Secrets Act, a draconian law framed in 1923 which gives the investigating agency sweeping powers to accuse, arrest and keep suspects in custody for any length of time with almost no legal recourse available to the accused. The raiders' aim: to see if the Ambanis and Reliance were in possession of any classified policy documents of the government.
Initially, Reliance denied that there was any raid on. But as the news spread like wildfire through India's media and business community, and the rumour mill began grinding, the company decided to admit the facts. The next morning, Reliance spokespersons announced that the search-and-seizures had turned up nothing incriminating. Not everyone agreed. CBI sources told Outlook that the raiders did recover some documents that revealed what went on behind the scenes before Indian Oil Corporation signed the deal of the decade with Reliance Petroleum, virtually guaranteeing the company's profits for years to come. These papers, claimed the sources, were classified Petroleum Ministry documents that come under the ambit of the Official Secrets Act.
The trail that led the government to the Ambanis started with the arrest in Delhi of now-infamous Dawood Ibrahim henchman Romesh Sharma. When the Delhi Police discovered evidence linking Sharma with Reliance Industries' president in Delhi, V. Balasubramaniam, on October 28, they raided the residence and office of the top executive, the man known in the corridors of power as "Balu", and reputed to be Dhirubhai Ambani's chief fixer in the capital. Though Balu's home yielded nothing, when the searchers opened his office drawer, they found something they didn't like. The search and seizure report of the Delhi police lists three "incriminating documents", on the basis of which Balu was booked under the Official Secrets Act:
- Photostats of the 17-page Cabinet Secretariat document No 72/1998 relating to a September 14 meeting of the Core Group on Economic Matters on The Challenge of Economic Sanctions to India.
- Photostats of the nine-page minutes of the 37th meeting of the Core Group of Secretaries on Disinvestments, held on September 21. The police also found that these documents had been faxed to a Mumbai number in the Reliance head office, and another unlisted number, again in Mumbai.
- Photostat of a letter written by Petroleum Secretary T.S. Vijay Raghavan to Revenue Secretary Javed Choudhry containing tentative proposals on restructuring customs duties on petroleum product imports leading up to the full opening up of the oil sector in 2002. This document had also been faxed to a number in the Reliance head office.
The possession of the first two documents may not result in any obvious commercial gains for the Ambani empire, but the third would surely have been something that Reliance, whose primary business is petroproducts, could use to plan ahead, far ahead of their rivals.
Reliance has weathered many storms in the last three decades, but this could well turn out to be the worst that has struck its ship. Though the moment Balu's name cropped up in the police reports, Reliance categorically stated that Balu's proximity to Romesh Sharma was purely in his personal capacity and had nothing to do with his employer, the discovery of these documents has dragged the company into the picture. And Reliance has been plunged into a situation where it seems to have no defence at all. The company can hardly claim that Balu acquired these documents in his personal capacity. Besides, Balu faxed them to the Reliance head office, proof of which is with the investigators.
It is a fairly open secret that Reliance has over the years cultivated a network of government officials who have given advance information to the company on upcoming policy changes. The company has always been suspected of acquiring government documents to plan its business strategies, and there have been enough allegations that the company got hold of Budget proposals days before the finance minister stood up in Parliament to read his Budget speech. Now, the seizures from Balu's office provide incontrovertible proof that Reliance was indulging in legally punishable activities. And if the government can prove that the seized documents come under the Official Secrets Act, then the Ambani empire is in deep trouble. It will require every ounce of Dhirubhai's political clout to get him out of this one.
But whatever the Ambanis' strategic response to the raids—and there will surely be one—as things stand, the search-and-seizures have raised a number of puzzling questions. For instance, have the raids been instigated by more than just the Balu connection? Why did the Reliance raids come a full 21 days after the documents were found in Balu's drawer? Indeed, even the identity of the ministry which ordered the raids seems unclear.
Reliance itself claims that this is part of a corporate war. It is not naming who these business enemies are, but the usual suspect's name has cropped up: Nusli Wadia, chief of Bombay Dyeing, who has been fighting a no-holds-barred war with Reliance for more than two decades now. Wadia apparently was in touch with his friends in the BJP in the days preceding the raids. Wadia's friend, industrialist-politician Jayant Malhoutra, though, scoffs at this. "Nusli Wadia's sales are today less than Reliance's profits, so where's the rivalry?" he says. "They are blaming business rivals to mislead the people. Actually there's a slip somewhere in what they call 'managing the environment'."
But, say market sources, Wadia has not been alone in his Ambani-hatred for the past few years. His close friend Ratan Tata reportedly still suspects the Ambanis of having engineered the leak of tapes of embarrassing phone conversations between Wadia and Tata, and Wadia and industrialist Keshub Mahindra last year, relating to Tata Tea's connections with the ULFA in Assam."Today there's no difference between Wadia and Tata. They're one and the same," says a top Mumbai stockbroker.
There's another business family name that is being whispered in the corporate world as being behind the raids: the London-based Hindujas. As the Ambanis have pursued their single-minded agenda of backward-integrating their business, from textiles to polyester fibres to the petrochemicals that go into making the fibres, and finally to petroleum refining and even oil exploration, they have been moving closer to a little-known moneyspinning business of the Hindujas: exporting crude oil and petroproducts to India. The recent deal between Indian Oil and Reliance that commits India's largest oil corporation to buying a large part of the production from Reliance's enormous upcoming refinery may not have been music to the Hindujas' ears.
But a top aide of the prime minister has a different view. He insists that the decision to raid was more CBI director Trinath Mishra's than anyone else's. According to him, both Vajpayee and home minister L.K. Advani, when informed by Mishra of his plan a couple of days before the raiders moved in, made it clear that this was not what they wanted. Neither, apparently, was in favour of humiliating Dhirubhai by raiding his house and made this clear to Mishra, while telling him that he should do what he "felt was right". This is the (unofficial) official line and this is the logic backing it:
The situation after the December Supreme Court order on the appointment of the CBI director has made it dangerous for any government to mess with him. It is also being pointed out that R.C. Sharma, Mishra's predecessor, was not granted an extension by the court, making it very clear who has the authority over the CBI. There is a definite attempt by those close to Vajpayee to paint Mishra as the man who acted on his own.
The raise-doubts-about-Mishra's-intentions strategy includes floating the story that "though his integrity is without doubt", there could be other reasons. The main being the fact that Mishra is only an acting director of the CBI and that the Central Vigilance Commission, which is now in place, will appoint the director for a fixed term after a few months—the innuendo is that he did it to ensure that it would be far too controversial not to confirm him after he has very publicly taken on as big a fish as Reliance.
Like every theory on the raids, this too has enough debunkers. "No bureaucrat would ever take this sort of action on his own against a man as powerful as Dhirubhai," says a Mumbai-based Reliance official. "Searching Dhirubhai's home, entering his bedroom, is unthinkable. No CBI director would do this. This is a political act." But whose? Consider this: the CBI comes under the prime minister's office, but investigations relating to the Official Secrets Act are the Home Ministry's responsibility. So who okayed the raids?
The Ambanis are seen to be close to Vajpayee and Pramod Mahajan, and, though traditionally close to the Congress, the group has not done anything to upset the BJP. The only black mark against it in the BJP's book is Reliance's alleged funding of BJP rebel Shankersinh Vaghela's election campaign in 1995 and 1997. After Vaghela made it to the Gujarat chief minister's office, he reportedly pushed through the group's 27-million-tonne refinery project at breakneck speed. Vaghela supporters touting this Ambani support angered Advani, who has traditionally been anyway seen as cold to the Reliance charm.
Opposition politicians allege that the Reliance raids are just part of the BJP strategy for the upcoming assembly elections in four states. On the backfoot in Delhi and Rajasthan, the BJP may be using the raids to prove to the electorate that it is firmly committed to rooting out cor ruption, no matter how powerful the culprit. This, too, sounds flimsy since raiding vegetable hoarders would have been a far more effective and easier decision than insulting the Ambanis.
Reliance insiders also allege that this is just a ploy to divert public attention from the many politically sensitive skeletons that could be tumbling out of the Romesh Sharma investigations. "If you pursue all the trails from Romesh Sharma, you would end up with an amount of dirt that no government would like to handle," says a source. "So make a hue and cry about Reliance, and the people are forced to look in the wrong direction, while you quietly hush up the potentially embarrassing stuff."
But was the government serious about the raids? Why were 21 clear days allowed to elapse between the recovery of the Balu documents and the raids on the Ambanis? It is clear that Reliance was forewarned. The Ambani-owned daily Observer of Business and Politics had been carrying stories for days that the government was considering raiding Reliance offices. At least three days before the raids, Mumbai business circles were buzzing with rumours. In fact, Reliance offices were inundated with calls from journalists asking whether the raids had begun. So if there were incriminating documents to be recovered by the CBI from Reliance offices, the company had more than enough time to get rid of them. Yet, the ferocity of the raids—specifically, the search of Dhirubhai's home—surprised even Reliance.
The only explanation seems to be that the order to raid must have been given in full earnest, but Reliance has enough bureaucrats friendly with the company to delay the raids and leak the information. In fact, one story doing the rounds in Mumbai business circles is that the initial proposal extended even to arresting Dhirubhai and his two sons, Mukesh and Anil. This was overruled at the last moment by the prime minister's office. It is, however, clear that Reliance's traditional clout over the Central government—whoever runs that government—has eroded since the BJP-led coalition came to power.
What happens now? Will the government pursue the investigations to their logical conclusion? But does not this also involve ferreting out bureaucrats who have been feeding sensitive and classified information to Reliance? How deep does Reliance's influence go in the corridors of the ministries? A full investigation will open up a Pandora's box which could have far-reaching—indeed difficult-to-imagine—consequences.
This is in fact the Ambanis' best hope. Says an industrialist friendly with the family: "Under the law, both the bribe-giver and the bribe-taker are equally culpable. If the government is serious, let it also find out who in the government leaked the documents to Balu."
There is also doubt about whether the Delhi police had got its investigative procedures right when it raided Balu's office. A widely accepted interpretation of the Official Secrets Act is that the incriminating documents should be "secret" on the day of recovery. The authority which decides whether a document is top secret when it is seized is the Cabinet secretary whose office then issues a certificate to this effect to the investigating agency for use in a court of law.This, it seems, was not done when the documents were seized from Balu's office. Official sources admit that a letter to the effect that these documents were "secret" was obtained by the CBI only a couple of days before the November 19 action from the Cabinet secretary, nearly three weeks after the first raid.
Another allegation is that independent witnesses, though taken along for the raid as is the requirement, were not taken into the room where the documents were found. Could these foul-ups, if they did happen, weaken the case against Balu and therefore Reliance on a technicality?
Meanwhile, industrialists are already whispering of the possibility of the government launching a raid raj, since Advani has been talking rather aggressively about cracking down on corruption in all the election rallies he has addressed. A flurry of raids, however, seems unlikely, since this will be the kiss of death for an economy that is already floundering.
But in the offices of Reliance, dismay is giving way to resolve. The company is even reconciled to the fact that a few top people could be arrested in the coming weeks. Strategies are being hammered out, and favours are being called in. One thing, though, is clear. The Ambanis, who have never been known for the quality of forgiveness nor forgetfulness where past slights are concerned, are not going to go down without fighting. For beneath the calm managerial stances, the family feels that its patriarch has been insulted, humiliated. Government men entered his home. That, the family feels, crossed every line that the Ambanis have believed to be sacrosanct. It was a declaration of war.