Is First Global being persecuted, or being brought to justice?
Kanchana Suggu in Bombay
After months of investigation, committees, allegations, evidences and reports, the much-publicised clash between the Government of India and First Global brokerage has still not drawn to a close.
In the interim, however, life for the First Global directors - Shankar Sharma and his wife Devina Mehra - has altered dramatically since March 13, 2001-- the day Tehelka.com made the sensational revelations.
First came the Securities and Exchange Board of India's decision to bar First Global from conducting any further business in the Indian capital markets.
Even as one of India's biggest stock broking firms began to feel the repercussions of the market watchdog's pronouncement, nine of First Global's 17 nationwide offices have had to shut shop. Staff strength round the country has been reduced by 60 to 70 per cent. Financial losses have begun to ascend.
Even as business continues to suffer, income tax raids on offices and home have become routine occurrences.
However, what happened on September 25 in Madras was, as Sharma puts it, "something draconian, straight out of a novel."
On their way to board flight Sabena SN226 (Madras-Brussels) and connecting flight to London, an immigration officer disallowed the duo from taking it. Following confiscation of passports, scrutiny of baggage, prohibition of making or receiving any phone calls and interrogation regarding Tehelka.com and their stake in the company, Sharma and Mehra were detained at the airport. Or so claim the First Global directors.
Says Sharma, "The immigration officer told us that the income tax guys have put out a circular saying we should not be allowed to travel. They had nothing in writing to show us. We have the right to travel. If you are restraining this right of a civilian, he has to be informed," he adds.
His wife Devina claims that when she headed towards the ladies toilet, she was followed by a male immigration officer. "He just walked into the toilet and started banging on the cubicle till I came out. It was crazy," she says.
"Outside, there were about 10 officials who were not even wearing their IDs. It became really scary. They could plant cocaine in your bag and say they found it there," she fumes.
Despite repeated protests, the couple says the only information given to them was that there were instructions from the finance ministry to hold them back.
Immigration authorities at Madras airport confirmed that Sharma and his wife were detained 'upon instructions from the income tax department.'
When contacted, the income tax authorities stated that the search was conducted under instructions from Bombay income tax officials.
Authorities refute First Global charges
However, G Saran, director general income tax (investigation), emphasises that the department has every legal document to show the duo could be detained.
"First of all, they chose an airline like Sabena. It was not a direct flight. Again, they did not choose their hometown to catch the flight. We consider it as using dubious means. As per our calculations, they have to pay Rs 890 million in taxes. Also, we had information that they might try to flee the country."
Sharma insists they decided to take the flight from Madras as they had to meet employees at their Madras office. Saran's version is different. "Employees at the Madras office say they had not seen Sharma and Mehra's face since the past two months. We found out that they had not even gone to meet them," says Saran.
Sharma, who frequently travels all over the world, is disturbed as 'the trip held special importance' as he had not flown to the UK, where Global has an office, in the last 6, 7 months. Scheduled to return in about 3, 4 weeks, the couple say they had their return tickets booked.
"On an average, we spend 3, 4 weeks overseas. Basically the government, which has killed our domestic business completely, wants to ensure that our overseas business suffers, too," alleges Sharma.
Sharma says First Global has no past or present tax liability on it or its directors and that it is a minimum two-year process to ascertain any future tax liability.
Deliberate harassment, claims First Global
"We are among India's highest personal and corporate tax payers. On the one hand, you say you want good taxpayers and, on the other, you treat them like petty criminals? This is the state of our country."
Says Devina: "I paid over Rs 30 million as personal tax last year. They have even raided my mother-in-law's locker and did not find a penny of undisclosed income. They have taken jewellery for which I have produced a bill and is also shown in the balance sheet."
Once Sharma and Mehra left the airport, they checked into the Trident hotel in Madras. Around 10, 15 officials, they allege, entered their room and began extensively checking it. For over three hours, the contents of Sharma's laptop were examined.
"Out there it is pure jungle raj. Look at the irony. That same evening Tehelka walked away with about 8 of 14 awards at The Brief media awards and this was what the venture capitalist was facing," he continues.
Sharma claims that one of the officials of the raiding party said 'they had been asked by Delhi to harass' us.
"The government cannot directly chase a media group. It becomes a PR boo-boo for them. So we are being targeted," alleges Mehra.
First Global is now contemplating legal action against both the government, as well as SEBI, the market regulator.
"The SEBI report is a bunch of nonsense. The analysis is wrong. The ministry of finance says 'First Global was receiving monthly reports of balance sheet, cash flow and P&L account of Tehelka, which clearly says there was a conspiracy'. But that's the format for every venture capital investment. You need to know what the hell the company is spending on," asserts Sharma.
"It says we bought shares at Rs 5,700, which is the highest price paid for a company. The amount is irrelevant. What matters is 5,700 multiplied by the number of shares outstanding. That is what gives the valuation of the company. You can buy 100 shares for Rs 5,700 or you can buy 1,000 shares for Rs 57. Both are the same."
At that time, Sharma thought that the Rs 240 million valuation for Tehelka was a bargain. Plus, it had some of the best talent in the industry. He says that he had not even heard of then Bharatiya Janata Party president Bangaru Laxman until he saw him on television on the Tehelka tapes.
"We from the investing business are more interested in Nasdaq movements than those who are in power. Delhi cannot change the direction of the market," feels Sharma.
Do they ever regret investing in Tehelka?
"Obviously," comes the unanimous reply.
Sharma explains. "It has nothing to do with Tehelka. It's to do with the environment we live in. Corruption is here to stay till we are dead, buried and cried over. Our job is to pick great investments. Why should we even have to regret it? But I do. Of course, I do. I would be lying if I said no."
One thing that the company is really happy about is the fact that Nasdaq gave them membership in late June, even after First Global's name came up in the stock market scandal.
"They said it was the most ridiculous thing they'd ever seen. They spent five hours in this very office going through all the material," says Sharma.
However, with utter conviction, Saran asserts that Sharma is not entirely above board.
"Sharma is only wearing the mask of a broker. This time, he has been caught with his pants down. Recently, we found out that he purchased fictitious cylinders from a newspaper company in Madras so as to show 100 per cent depreciation," Sharan alleged.
Today, Sharma and Mehra are busy gearing up for legal action. The truth, they believe, will only emerge sooner than later.
"I believe that in the end, Satyameva Jayate has to hold. That has been our strength. Evil cannot win," Mehra says with conviction.
"We have achieved a lot of success. I will not go anywhere till we win it back… and we are definitely going to win it back," adds Sharma.
Meanwhile, First Global and its associate concerns filed a writ in the Bombay high court, asking Sebi to provide them with complete data and with explanation of all concepts, definition of terms used, and exact allegations.
Additional reportage: Shobha Warrier in Madras