On December 11, 1956, the Union authorities underneath Jawaharlal Nehru arrange a Fee of Inquiry on the administration of the Dalmia-Jain (DJ) Group of firms.
Amongst its phrases of reference was to look into “any irregularities, frauds or breaches of belief or motion in disregard of trustworthy industrial practices or contravention of any regulation” in respect of those firms and “the character and extent of the private features made” by the promoters together with “the losses suffered by the investing public”.
The set off for appointing the Fee — initially headed by Bombay Excessive Courtroom’s Justice S R Tendolkar and later by former Supreme Courtroom Choose Justice Vivian Bose — was a speech by the Prime Minister’s son-in-law, Feroze Gandhi, in Parliament on December 6, 1955 that uncovered the monetary manipulations by India’s then third largest enterprise home after Tata and Birla.
The Lok Sabha member from Rae Bareli had wound up his almost two-hour-long marathon by suggesting that the federal government represent “a Fee of Inquiry with full judicial powers to research your complete Dalmia-Jain affairs from 1945-46 or at any time when it started updated”. The Fee – it additionally had N R Mody, chartered accountant with the audit agency A F Ferguson & Co, and S C Chaudhuri, Commissioner of Earnings Tax, as members – submitted its 815-page report on June 15, 1962.
Examine that with the current time, the place the Narendra Modi authorities is avoiding even a debate in each Homes, overlook conceding to the Opposition’s demand for a Joint Parliamentary Committee probe, on the allegations in opposition to the Adani Group.
It’s not the contrasts alone, but in addition the parallels, which can be putting. Gandhi’s speech did to the DJ Group what the US investor-activist agency Hindenburg Analysis’s January 24, 2023 report did to Adani, accusing it of inventory value rigging and accounting fraud.
The DJ Group had pursuits in cement, banking (Bharat Financial institution and Punjab Nationwide Financial institution), insurance coverage (Bharat Insurance coverage), publishing (Bennett, Coleman), sugar, paper, chemical compounds, textile and jute mills, aviation, motor automobiles, mild railways, collieries, electrical energy distribution, biscuit-making and dairy.
That made it a horizontally diversified conglomerate very similar to Adani, which has companies from ports, airports, coal mining and buying and selling, thermal energy, electrical energy transmission and distribution, renewable power, photo voltaic photovoltaic manufacturing and pure fuel provide, to cement, edible oils, highway and rail growth, knowledge centres, grain dealing with and fruit advertising and marketing.
Adani is in the present day India’s No. 3 enterprise home (after Tata and Reliance), simply because the DJ Group as soon as was. Each had upstart founders: Ramkrishna Dalmia’s first enterprise was a sugar manufacturing facility at Bihta (Bihar) in 1933, whereas Gautam Adani’s Mundra Port at Gujarat took off solely in 1998.
The similarities finish there.
The Vivian Bose Fee confirmed how the funds of the DJ Group’s public restricted firms, banks and insurance coverage companies had been utilized by the promoters’ proprietary considerations for speculative acquisitions and even private functions. The businesses through which the general public had invested their monies had been typically compelled to lend with out safety at low rates of interest. After being squeezed dry, even “the husks had been discarded”. The Fee documented many cases of firms taken into voluntary liquidation, and their account books and information destroyed to go away no traces of fraud dedicated.
There isn’t proof, thus far, of such brazen fund diversion or embezzlement vis-à-vis the Adani Group. No less than eight out of its 11 listed firms appear to be profit-making. Hindenburg’s prices had been primarily concerning the conglomerate pumping up its firm inventory costs, pledging these as collateral to tackle an excessive amount of debt relative to free money flows, and parking shares with offshore shell entities to hide precise promoter possession.
Within the DJ Group case, not solely was Feroze Gandhi allowed to talk, the Finance Minister, C D Deshmukh, helpfully butted in by noting Dalmia’s “extraordinary capability” to intermix the funds of his numerous industrial, banking and insurance coverage considerations. The DJ Group challenged the Tendolkar/Bose panel’s appointment underneath the Commissions of Inquiry Act, 1952, which, it claimed, dealt solely with issues of public significance, versus the conduct of particular person individuals or firms. The courts, nevertheless, upheld the federal government’s place that the “grave penalties…ensued to the investing public” from the “gross irregularities” within the administration of the DJ Group firms had been issues of “particular public significance”.
The federal government, then, didn’t really feel the necessity to defend Dalmia, who needed to endure the ignominy of a two-year jail sentence in addition to dissolution of his enterprise empire. The group’s most prized belongings went to his son-in-law, Shanti Prasad Jain, and brother, Jaidayal. Gandhi’s speech was the precursor to the nationalisation of India’s life insurance coverage business, by way of an ordinance promulgated on January 19, 1956. It was additionally a time when India underneath Nehru had launched into a method of deliberate financial growth – through which the general public sector, not non-public corporates, occupied the “commanding heights”.
Lower to the current, the place the federal government and the primary ruling occasion have, at greatest, sought to deflect and distance themselves from the Adani Group. That is regardless of the most recent prices – pertaining to a “bribery scheme” of over $250 million funds to officers in India for securing photo voltaic power provide contracts – coming from the US Division of Justice and the Securities and Change Fee, and never from some dealer with quick positions in Adani shares.
The Modi authorities’s obvious reluctance to behave in opposition to Adani may very well be as a result of it views, greater than earlier administrations, huge enterprise as a companion in nation-building and likewise serving the nation’s overseas coverage and geostrategic pursuits.
However to what extent the present developments will influence the Adani Group’s personal inventory valuations and talent to lift credit score for funding its bold funding plans, each home and abroad, stays to be seen. Enterprise historical past is suffering from examples of over-leverage and over-diversification exacting a heavy value.
