TAMAL BANDYOPADHYAY’SSahara: The Untold Story, published in June this year, opens not with an endorsement but a disclaimer. The first paragraph of what looks like a preface is actually a scathing review. It claims that the book “is based on a particular notion, wrong perceptions supported by limited and skewed information. Hence, it does not reflect the true and complete picture … The book portrays Sahara in a bad light by attributing unfound facts and incidents to which we have objections.”
The “we” here is the Sahara group, which claims a net worth of $11 billion. In January 2014, Sahara filed a defamation suit against Bandyopadhyay and the book’s publisher, Jaico Books, seeking damages of two billion rupees—about $32 million. As it happens, Bandyopadhyay’s meticulous reporting included a meeting and interview with Sahara’s founder, Subrata Roy, which he quoted from extensively in the book. But Roy was clearly unhappy with the results. According to the disclaimer, the book did not give the company credit for its contributions to the poor and how “stout business ethics” helped it become one of India’s biggest conglomerates. Instead, the book focused only on certain unfortunate aspects, or “unfounded facts,” of the company’s recent history. Sahara has always made a point of, and prided itself on, its large clientele—the company has claimed 80 million customers, but the book estimates the number to be 30 million—mostly from rural India. It has cited that size as evidence of depositors’ and investors’ faith. It appears that Sahara expected praise for playing a major role in inculcating the habit of thrift among rural savers.
But the Sahara disclaimer on Bandyopadhyay’s book takes a surprising turn. While describing the book as “a perspective of the author with all its defamatory content,” it says it respects “a journalist’s freedom,” and even wishes the author success.
This is unusual in any book, particularly so in a book that has been sued for defamation. Such cases don’t usually have a happy ending. Authors and publishers either end up combating suits at great financial cost, or books like these avoid controversial topics, making the business shelves of Indian bookstores, with their corporate hagiographies and get-rich-quick stock-tips, appear anodyne. The biographies offend no one and drain success stories of all drama. Business appears dull and routine, or growing without any challenges, and businessmen seem like philanthropists who only accidentally made money. The results are as lifeless as framed portraits. I wonder who reads these books, unless they are relatives of the primary subject or employees keen to rise in a featured company.
Three recent titles buck that trend. They expose Indian business, reveal businessmen’s ambitions, examine their limitations and dissect their rivalries. There is, of course, Sahara by Bandyopadhyay, the deputy managing editor at Mint (where I am a contributing editor, as I am at this magazine). There is also The Descent of Air India which covers the tribulations of the national carrier, and is written by the company’s former executive director Jitendra Bhargava. And, finally, Gas Wars: Crony Capitalism and the Ambanis, by Paranjoy Guha Thakurta with Subir Ghosh and Jyotirmoy Chaudhuri, which investigates India’s oil and gas industry, with particular reference to the country’s largest private corporation, the Reliance Industries Limited. For their troubles, the authors of all three books have either faced threats of legal action or been sued.
Bandyopadhyay’s book was published in full, with its introductory disclaimer added on hastily. In January, Bloomsbury, the publisher of The Descent of Air India, withdrew the book and settled out of court with former civil aviation minister Praful Patel, who had sued for defamation. Bhargava then published it himself, and the book is now available for download as an e-book. Gas Wars, self-published in April, remains available in both print and electronic form even as it risks severe damages should Reliance file and win a case it has threatened against the authors.
Controversies and lawsuits can add to a book’s appeal, but this is rarely what drives serious authors to take on contentious issues. Defending oneself against prosecution costs money, which is usually something businessmen have but authors rarely do. Besides, lawsuits cannot be taken
lightly; they distract from the merits and arguments of the contentious books. More broadly, as we have discovered this year, the threat of such lawsuits has another effect—to chill publishers’ desire to take any significant risk at all.
Indian publishers face three specific risks from lawsuits: sedition charges when there are national security implications; complaints of causing offence (usually on religious grounds); and defamation suits. The government can prosecute a publisher and author for sedition, if it thinks the material is anti-national or affects the security of the state. Individuals can also object under Sections 295A and 153A of the criminal code, which permit people to seek bans on material that offends them.
The most prominent of such cases in modern Indian publishing have all been religiously motivated—indeed, the “offence” industry took off with the ban on Salman Rushdie’s The Satanic Verses in 1988, which followed widespread Muslim anger against it (technically, the ban prevented its import under India’s customs regulations, and did not rely on other laws). In recent months, Hindutva activists succeeded in getting Penguin India to withdraw Wendy Doniger’s The Hindus. Politicians and government officials have also used defamation laws against political opponents and the media, as Nitin Gadkari’s recent case against Arvind Kejriwal shows.
The laws themselves, and the activists who use them, have created a climate of fear among writers and publishers. Even major publishers have lately turned timid, and ceded to the bullying of unaccountable critics with sometimes implicit threats of violence. Unlike political activists, businessmen don’t usually threaten to assault editorial offices or send people to burn copies of a publication. But, like individuals, businesses can sue authors and publishers for defamation and seek punishment including financial penalties under both civil and criminal laws, as well as jail terms.
IT WAS THIS BLEAK ENTRAPMENT that the Sahara group threatened Bandyopadhyay and Jaico with when they sued them early this year, before they withdrew the case. Sahara’s story is indeed worthy of a book. Subrata Roy took over a small finance company called Sahara, and grew its chit fund business by expanding rapidly in under-banked regions of some of the least developed parts of the country. He then moved into real estate and media, and later civil aviation and power. Sahara also sponsored national sports teams and its reach expanded internationally. It owns the Plaza Hotel in New York City, and has a stake in a Formula One team. It sponsors the Indian men’s hockey team, as it once did the national cricket team. Roy hangs out with cricketers, movie stars and politicians. He also indulges in whimsical patriotic stunts; he once gathered the largest number of people ever to simultaneously sing the country’s national anthem.
Bandyopadhyay credits Sahara’s rise to three factors—a network of more than half a million agents who penetrated the rural, unbanked countryside, coaxing the poor to save by making periodic deposits into their accounts; a glitzy public image built upon excellent relations with India’s nomenklatura, including politicians, film stars and cricketers; and an intricate knowledge of Indian financial regulations, the better to stay one step ahead of regulators. This led the company to rename investment schemes, invent new terms to stay within the letter of the law, and discover loopholes in the rules that no one had anticipated before them.
Sahara’s dispute with the Securities and Exchange Board of India, which regulates the country’s stock markets, goes back to November 2010, when the regulator stopped Sahara’s real estate and housing companies from raising funds through optional fully convertible debentures—debt instruments that upon maturity give holders the choice of becoming shareholders of the issuing company. Sahara challenged the SEBI ruling, and
secured a stay from the Allahabad High Court. SEBI went to the Supreme Court, which directed Sahara to provide details about the investors. SEBI also cautioned investors, asking them to be wary of buying those debentures. Sahara then also went to the Supreme Court after the high court vacated the stay. In June 2011, SEBI ordered the Sahara companies to refund Rs 24,000 crore to investors in these debentures. Sahara accused SEBI of defaming it. The case went to the Securities Appellate Tribunal, which ruled in favour of SEBI. Sahara then challenged the SAT order in the Supreme Court.
But the apex court upheld the ruling, and in December 2012 directed Sahara to pay back the money by February 2013. When the company did not, SEBI ordered banks to freeze its accounts, and the SAT refused to provide interim relief. In April, the Supreme Court criticised Sahara and Roy for not responding to a contempt plea filed by SEBI. The regulator then raised the ante further, seeking magisterial intervention to issue summons to Roy and three Sahara directors. In October, the Supreme Court barred Roy from travelling abroad without its permission unless Sahara cooperated with SEBI. In February 2014, the Supreme Court refused Roy’s request to be excused from contempt proceedings because his mother was ill. Roy tried other legal means to avoid arrest, but surrendered in late February. He is now in custody.
A further question arose—were all the depositors Sahara claimed to have genuine? (According to an Indian Express report in May 2013, an investor named Kalawati appeared 5,984 times in Sahara’s list of investors). Early in his book, Bandyopadhyay describes the surreal appearance, in September 2012, of some 127 trucks bearing over 30,000 metal trunks of haphazardly organised documents at SEBI headquarters in Mumbai’s Bandra-Kurla Complex, which officials would later sift to establish the authenticity of the company’s depositors. Bandyopadhyay writes: “Assuming that each of Sahara’s 30 million investors—that’s equal to the population of Malaysia—had just one A4 size document each to account for their investments in Sahara’s debentures, the papers stacked up in a pile would be 3,800 metres tall, or 52 times the height of the Qutub Minar.”
When the Supreme Court remanded Roy to custody in late February 2014, it said every order of the courts and the Securities Appellate Tribunal was “consistently and systematically disobeyed.” It also criticised Sahara’s “calculated psychological offensives and mind games” against the court. In February, Sahara had taken out emotionally-charged advertisements in various newspapers, seeking public sympathy for Roy for being made to appear before the courts even as his mother lay ill. Roy has consistently said he has done nothing wrong, and his investors do seem to trust him. Unlike in past scandals involving other chit funds, and despite negative stories in some newspapers, depositors aren’t leaving Sahara in droves, nor have there been protests against the company by its customers.
Sahara’s dispute with Bandyopadhyay and Jaico Books was settled when it withdrew the lawsuit and the author and publisher agreed to publish Sahara’s disclaimer. Sahara’s bigger troubles with SEBI may have influenced the company’s decision to move on. Sahara’s case against Bandyopadhyay and Jaico was a civil matter, and had it been heard would probably have taken several years to resolve.
Indian defamation laws are strict and can restrict freedom of expression, but because of the time such cases take, their threat to writers is often largely theoretical. But when the defamation case is filed under criminal rather than civil law, the case can move swiftly through its early stages. Criminal defamation cases fall under Sections 499 and 500 of the penal code, which describe the crime and stipulate penalties of fines or up to two years of imprisonment, or both. These laws go back to colonial times; the United Kingdom has reformed its laws in recent years, removing seditious libel and criminal defamation in 2009 and reforming civil defamation laws in 2013, yet in India they still apply. In one recent criminal case, involving a story in the Hindustan Times, a lower court in Mumbai found the newspaper’s former editor Vir Sanghvi and several staff, including the journalist
who wrote the piece, guilty of defaming a narcotics bureau officer in 2001. The sentence has been stayed, and is under appeal.
In such instances the threat to writers and publishers is real. In February 2009, the economist Ajay Shah, a former adviser to Indian finance ministers such as Yashwant Sinha, Jaswant Singh, and P Chidambaram, wrote in the Financial Express: “When regulation is weak, this encourages the players who have strengths in fixing the regulatory system to their own advantage. The firms that have risen to prominence in such areas in India tend to be those who were unable to compete in global markets under fair competition.” Over this, Jignesh Shah (no relation), the promoter of two independent exchanges—the Multi-Commodity Exchange, or MCX, and its stock exchange counterpart the MCX-SX—sued for criminal defamation in a Mumbai court. MCX and MCX-SX also filed two other cases against Ajay Shah, who had criticised the exchanges for their lack of transparency: one in Kolhapur over a statement on a television show, and one in Surat over a blog post about Reliance Communications, which was not explicitly about MCX. A higher court quashed the Kolhapur case, and the Ahmedabad court quashed the Surat case. But the Mumbai case is still pending, even though Jignesh Shah was arrested in May and is under investigation for charges of fraud.
The eventual settlement in the Sahara case removed the threat of bankruptcy or a jail term for the author under defamation laws. It cannot, however, be assumed that other companies or individuals filing defamation cases will follow suit or respect an author’s right to free speech even when they fundamentally disagree with a work’s premises or conclusions. Businesses want to protect their reputations, and executives have a fiduciary responsibility not to let their firms’ market value decline. And an investigative book with unflattering revelations, after all, could well do just that. However, the settlement offers a model for compromise which allows an author his or her freedom, lets the company have its say, and lets the reader—and the market—draw their own conclusions.
Jitendra Bhargava, the author of The Descent of Air India, was not as lucky as Bandyopadhyay. Bhargava began his career as a public relations executive in India’s public sector, and came to civil aviation after a stint in the coal industry. He rose to be Air India’s executive director, a position he left in January 2010. As a state-owned airline, Air India had little choice but to obey the commands of politicians, bureaucrats and ministers, and comply with instructions that may not have been in its best commercial interest.
From inside the industry, Bhargava saw Indian Airlines, the state-owned domestic carrier, reduced to a shadow of its former self after Indian aviation was opened to private investment. The bigger domestic carriers, such as Jet Airways and the once high-flying Kingfisher, soon started lobbying to fly to lucrative international destinations. This posed a significant challenge to Air India, which, unlike its new private competitors, was hobbled by politicians and bureaucrats breathing down its neck. In the financial year 2013, the company’s post-tax losses rose to Rs 5,000 crore on revenues of only Rs 17,750 crore. At Rs 2,020 crore, its operating losses were, however, lower than previous years. Since then, the carrier’s prospects have worsened further, according to analysts, because of major new partnerships between Indian and international private investors in the Indian market—notably the alliances between Jet and Etihad Airlines, and between Tata group and Singapore Airlines. (Air India, for its part, recently joined the Star Alliance, one of the world’s three major aviation associations).
In Bloomsbury, Bhargava found a publisher he could trust with this story. His central argument is that the airline has suffered because of government interference. In interviews, Bhargava has blamed Praful Patel, the civil aviation minister from 2004 to 2011, for the airline’s current mess—bilateral agreements gone wrong, profitable routes given away to other carriers, aircraft bought at high prices and sold at a loss. The Descent of Air India highlights numerous questionable commitments and costly decisions. In one example, Bhargava describes Patel offering free tickets for five years to the Indian cricket team and their families when India won the Twenty-20 World Cup in 2007. Bhargava says the airline also
took out advertisements congratulating the team, which cost it R35 million rupees. Six players who were employed by Air India got out-of-turn promotions.
Patel, a smooth-talking politician from the Nationalist Congress Party, was clearly upset about this portrayal; in November 2013, he filed a criminal defamation case against Bhargava and Bloomsbury for what he called “totally baseless allegations” against him. “I exercised my legal right to defend my reputation. Why should I use any other means?” he said to a reporter from the newspaper DNA.
In January this year Bloomsbury settled the matter out of court, withdrawing the book and agreeing to destroy all remaining copies. It also published an apology to Patel, saying: “If the contents of the book have caused any embarrassment to Mr Patel, we sincerely regret the same as it was never our intention to discredit him in any manner.” Bhargava claimed that the decision was arbitrary. In a Facebook post, he wrote: “This decision of Bloomsbury was unilateral, and without discussing with me, as an author. Their stand thus naturally came to me as a surprise.” Bhargava is now selling The Descent of Air India as an e-book, priced at Rs 299, and so risking another lawsuit.
THE THIRD BOOK TO FACE A LEGAL THREAT from corporate India in recent months is Gas Wars: Crony Capitalism and the Ambanis. In this case, the challenge against Guha Thakurta, and his co-authors Chaudhuri and Ghosh, is very different from those against either Bhargava or Bandyopadhyay. The book posits that the squabbling Ambani brothers, Mukesh and Anil, have treated a national resource—natural gas—as their private asset, and that the government has done little to protect the national interest. This is a serious charge, and one that the Ambani brothers deny. The authors build their case using publicly available documents and information. What the Ambani brothers strongly dispute is the writers’ analysis. In their statements, they have termed the book “false,” “slanderous,” and “libellous.” The authors have responded: “As the book is based on information in the public domain that is available to everybody, it is surprising that the lawyers for Reliance Industries Limited”—headed by Mukesh—“and RNRL/ADAG”—Reliance Natural Resources and the Anil Dhirubhai Ambani Group, both headed by Anil—“have chosen to serve us notices but not those who prepared these reports over the last few years.” (This is a nice rhetorical retort, but complainants can choose who they want to sue.)
This is not the first time the Ambani family has publicly taken on an author. Back in 1998, the Ambanis threatened lawsuits if Hamish McDonald’s biography of Dhirubhai Ambani, The Polyester Prince, were released in India. While pirated copies of the Australian edition were sold on footpaths and at traffic signals in India (I bought mine in Mumbai a few years ago), the official edition remained unavailable for several years. A revised version, presumably acceptable to the Ambanis, was finally published in 2010. As that case proved, any legal threat from either of the Ambani brothers cannot be taken lightly, for they have deep pockets and are known for their combative spirit.
Gas Wars transforms the arcane issue of the pricing of natural gas into a fascinating saga of political and economic intrigue. It argues that the feud between Mukesh and Anil turned bitter over a dispute on pricing. It also shows how a 2011 report of the Comptroller and Auditor General of India identified problems with the production-sharing contract between Reliance and the ministry of petroleum and natural gas. The book details the environmental threats posed by large petroleum projects on the scale run by Reliance companies, and ends with an analysis of the risks India faces from business groups and politicians that get too close to one another.
The authors dive deep into the larger controversy of how India prices its national assets. Their abundant use of public material (with an eye on potential legal trouble), hampers the book’s pace and sometimes means they repeat information. But the book raises critical issues. In 2005,
Mukesh’s Reliance Industries contracted to sell gas from the Krishna-Godavari Basin off the Andhra Pradesh coast to Anil’s Reliance Natural Resources for $2.34 per million British Thermal Units, or mmbtu—a standard unit in the industry. Anil was to use this as feedstock for a planned power plant in Dadri, Uttar Pradesh. However, a ministerial committee headed by Pranab Mukherjee, who is now India’s president, allowed the price for a unit of gas to officially be raised to $4.20 per mmbtu. This was great for Mukesh but terrible for Anil, who objected, saying Mukesh was going back on the fixed contract. Mukesh’s defence was that circumstances had changed. The government intervened, and the union minister Murli Deora, who was close to the late Ambani patriarch, Dhirubhai, said the price was not a private matter to be decided between two businesses or brothers. The government, he declared, had to play a role. But by increasing the price, it appeared to be benefiting one brother over the other.
The authors point to a flaw in the production-sharing contract between the company and the government that allowed Reliance to “gold-plate” the contract. Gold-plating a contract describes a situation where a company makes capital expenditure beyond what is necessary for the project because the contract ensures the company a fixed percentage of capital invested as returns; thus the additional—and possibly superfluous—investment guarantees higher profits for the company. (In the mid 1990s, when as a correspondent based in Singapore, I travelled to India to report on the Enron controversy for Asia, Inc. magazine, I had interviewed the economist Kirit Parekh who had raised similar concerns over a contract India had signed with the American companies Enron and Bechtel for a gas-fed power plant that was to be built in Dabhol, Maharashtra).
In 2010, the Supreme Court ruled that the earlier agreement between the brothers was not binding, because as private persons they had no claim on national resources. Anil protested, saying that the government’s intervention would benefit Mukesh, and not necessarily the state. Mukesh’s response was simply that selling gas at $2.34 per mmbtu no longer made economic sense. In 2013, the petroleum ministry revised the price again, to $8.4 per mmbtu, but as the new price would have come into effect during elections, the Election Commission put a stop to the hike, and left the issue to the incoming Narendra Modi administration.
While Gas Wars is critical of Reliance, it is not inherently anti-business. It takes a moral view against profiteering at the expense of the nation, which is what the authors suggest the government’s contracts with Reliance apparently permit. The authors want the gains from any price hike to accrue to the Indian state, and not to a private company. Their underlying assumption is that the state would make good use of the revenue to meet developmental objectives, but its truth is debatable given India’s poor record of public spending. There certainly needs to be a reasonable discussion about how the terms of production-sharing contracts should be renegotiated if relevant international prices suddenly change, but any absolute position—that all gains must accrue to the state, or to private companies—would be counterproductive, given the past economic history of India. The debate needs to be open-ended, public and transparent. However, prevailing defamation laws and the litigious propensity among billionaires has stymied the necessary discussion.
IN MAY 2014, the World Bank issued a study revealing that, in terms of purchasing power parity (a theoretical construct that seeks to value the purchasing powers of two countries without the distortions that fluctuating exchange rates can bring), by 2011 the Indian economy had grown to a total worth of $5.75 trillion, making it the world’s third largest. After the recent Lok Sabha elections, India’s total market capitalisation—the value of all shares traded publicly—rose to $1.5 trillion.
Nearly 25 years after its liberalisation, the Indian economy is more mature than ever. Many investors’ retirement plans are tied to the fluctuations of this gigantic machine. Publicly listed companies employ hundreds of thousands of people, and millions depend on their products and services. The scrutiny and examination of these companies is a legitimate subject for newspapers, magazines and investigative journalists. Sahara claims to
have got millions of Indians to save money, and used those deposits to build a large real estate portfolio. But how true is that story? Bhargava was an executive at Air India for several decades, and blames the airline’s decline on political interference. How accurate is his analysis? Guha Thakurta, Ghosh and Chaudhuri are concerned about the price one company pays another for a natural resource that belongs to the nation. But how are the prices set, and who benefits?
It is in the public interest to scrutinise how these companies are run. Whether Reliance is squatting on gas reserves and refusing to increase production unless the government agrees to a particular price; whether Sahara’s millions of depositors are real people or phantoms legitimising someone’s parallel income; and whether the national carrier’s efforts to grow are stymied by vested interests cannot be the concerns of only the institutions under scrutiny. By attempting to force such books out of the public domain, businesses and politicians perpetuate the impression that they have something to hide. And, to further warp the debate, they may even provide the halo of martyrdom to authors whose books would otherwise not have been widely noticed.
At stake here is not only freedom of expression, but also readers’ and investors’ right to know, and the principle of the free flow of market-sensitive information. Companies have the legal obligation to protect shareholder value (which would suffer if a book makes damaging claims against the company) but the more important question is that of whose interests are actually served by these lawsuits—shareholders’ or company promoters’?
If these three books have a weakness, it is one that runs through much of business journalism in India, where writers and editors assume that their readers are already familiar with many arcane aspects of business. Dumping data often replaces analysis in business journalism, and all sense of narrative is lost. To be fair, all these books’ authors appear aware of this pitfall, and consciously try to avoid it.
Collectively, these books point out how business and politics have come together and how that can distort the market in modern India. Such closeness mocks the ideas of competitiveness, free enterprise and a level playing field that liberalisation was meant to promote. Public scrutiny of business is not only desirable; it is essential. When businesses use defamation laws against their critics, it silences future debate. It can also make markets less transparent, as investors are denied an accurate picture of the present state of big business in India. Sunlight, we should remember, is the best disinfectant.
If the claims made against these companies are lies, it should be easy for them to state as much and expose shoddy journalism. If companies use defamation laws to silence writers, what is there to prevent them from also suing stockbroking firms and market analysts with unflattering views? Some have already tried: the firm Satyam Computers tried to blacklist analysts who were asking inconvenient questions about its “large” cash balances before its meltdown in 2008.
Markets thrive on information, not secrecy. By threatening journalists and writers, companies tilt the playing field heavily to their advantage. Courts that see such lawsuits purely in terms of a businessman’s reputation, and not the wider public interest, do a huge disservice to the markets, and to society at large. The time for India to overhaul its laws on defamation is now, and not just because of religious hotheads threatening to burn books they don’t like.
In an ideal world, more writers should want to write more detailed books that dramatise and humanise business so that society better
understands how business decisions affect people’s lives. What prevents such writing is not only businessmen’s reclusiveness or the complexity of their relationships with politicians, but the ever present threat of billion-rupee lawsuits. Changing that will require companies, the government and the judiciary to better understand the public interest. Without a sword hanging over their heads, writers will write more clearly, let information flow more freely, make markets more efficient and deliver well-paced yarns that draw into the conversation on the national economy even those who switch channels as soon as the graphs with stock prices appear on the nightly news.
Correction: The print version of this article incorrectly stated that Reliance had filed a case against the authors and publishers of Gas Wars: Crony Capitalism and the Ambanis. Thus far, Reliance has only threatened to file a case. The Caravan regrets the error.