The V.G. Siddhartha (VGS) suicide has cast a pall of gloom over Indian business and in the main the breeding ground of entrepreneurship - Bangalore.
More so because Siddhartha was besieged by creditors of all hues. And he was desperately trying to pare his debt by hawking his stake in Mindtree, Tanglin Developments (Blackstone along with southern developer Salarpuria Sattva, was as recently as May 2019 planning to buy Siddhartha's real estate venture Tanglin Developments, which owns a technology park in Bengaluru, for about Rs 2,800 crore) and even Coffee Day Enterprises through an ongoing dialogue with Coca Cola and ITC for close to $1.4 billion.
Days after his death, there is no clarity on whether a harassed VGS threw in the towel because of creditor or Income Tax pressure. His suicide note hinted at both. But, why did he take this extreme step after all he was successful in paying off some of his creditors? Or was his political connection and friendship with Congress play maker D.K. Shivakumar (DKS) responsible for his untimely death?
D.K. Shivakumar, Congress strongman in Karnataka said in a tweet that he had received a call from VGS to meet on July 28, but the meeting never happened because he went missing thereafter. D.K. Shivakumar's connection with V.G. Siddhartha is certainly not tenuous. Both were Gowdas. And the events as they unfolded are a matter of sequence.
The Income Tax probe against Siddhartha came after the probe against Shivakumar in August-September 2017. During the overarching probe against DKS initiated on 02.08.2017, the residence of N. Chandrashekar Sukapuri, DKS's financial assistant was also searched.
From the said premise information pertaining to financial transactions of DKS's daughter with Caf� Coffee Day Ltd. and M/s. Soul Space was allegedly obtained. When Chandrashekar was confronted by IT sleuths, it was ostensibly learnt that Rs 20 crore had been transferred to DKS in a roundabout and concealed fashion by CCD. This is where the hunt began.
D.K. Shivakumar, who declared assets over Rs 700 crore is considered one of the richest politicians in Karnataka. He came under the I-T scanner after his properties were raided in August 2017 when 44 Gujarat Congress MLAs were flown down to stay at a resort near Bengaluru to ensure Ahmed Patel was re-elected to the Rajya Sabha. Shivakumar was Congress' centrifuge to ensure none of the MLAs was poached by the BJP ahead of the Rajya Sabha election.
In its press note on Tuesday, the IT department had said that the raids against V.G. Siddhartha was a follow-up action to raids in the properties belonging to a "prominent Karnataka politician", nobody other than the all powerful DKS. Shivakumar's brother and Congress MP D.K. Suresh also told a media outlet that the I-T department moved with great alacrity to attach Siddhartha's shares in MindTree, in which he held 20.3 per cent stake.
"Rules specify that attachment of assets is not to be done at the preliminary stage. In Siddhartha's case, the assessment is yet to be done and tax demand is yet to be determined, but I-T officials rushed to attach his assets at a time when he wanted to sell them to repay debts," said D.K. Suresh.
Incidentally, this is the genesis of VGS's problems. Shivakumar was picked up from a luxury resort in Bengaluru where he was staying with 43 lawmakers flown in from Gujarat by the Congress to check a rash of defections ahead of Rajya Sabha election. From that day onwards, he had been questioned. Shivakumar was also at the centre of the operation that saw Congress -JD(S) roil BJP plans to form the government after the Karnataka assembly elections last year.
On his death, Karnataka Congress said in a tweet, "VG Siddhartha case is very unfortunate. Result of harassment by IT officials & decline of India's entrepreneurial position turning virulent by the day, with Tax Terror & collapse of economy." It added, "Companies which flourished under UPA have been shut down with many people being jobless."
In his suicide note, VGS wrote: "There was a lot of harassment from the previous DG Income Tax in the form of attaching our shares on two separate occasions to block our Mindtree deal and then taken possession of our Coffee Day shares, although the revised returns have been filed by us. This was very unfair and has led to a serious liquidity crunch."
Income tax raids were conducted at over twenty locations in Mumbai, Bengaluru, Chennai and Chikmagalur. The Tax Department declared that the group's officials had admitted to "concealed income" exceeding Rs 650 crore. I-T department said CCD founder admitted to personal unaccounted income of Rs 362 crore during probe but Enforcement Directorate, which was also probing the entrepreneur, said the investigation against him "was not very serious and detailed." The truth obviously lies in between.
The Income Tax Dept rebuttal, however, said: "It is based on the unearthing of a credible evidence of financial transactions done by CCD in a concealed manner. A person holding citizenship of Singapore was also covered in the search action. He was found with unaccounted cash of Rs 1.2 crore and admitted that the cash belongs to V.G. Siddhartha."
The Income Tax Department, Bangalore alluded to a Singapore citizen in its rejoinder after Siddhartha went missing. It now emerges that the alleged person in this transaction is Rajnish Gopinath, a Singapore citizen who was found with unaccounted cash to the tune of Rs 1.2 crore in his residence during the simultaneous raid on him along with DKS. The cash reportedly was stated by Gopinath to belong to V.G. Siddhartha. It is more damaging to note that numerous messages and calls have been found in his mobile CDR which indicate his active involvement in hawala transactions.
Now comes the twist. Investigation has found that Rajnish Gopinath (whose brother Monish Gopinath was employed as Director Finance with CCD) was found to be involved in various hawala transactions, including many on behalf of CCD through Deekshith (employee of CCD and a very close confidante of V.G. Siddhartha), Ravi and Rafi (employee of Sharma Transport � known hawala operator and closely linked to DKS). During the course of the search, Deekshith reportedly admitted to these hawala transactions.
The Income Tax Department case is predicated on the following: they have claimed that CCD was involved in tax evasion and money laundering, thrown into stark relief by a CCD group company named Devadarshini Info Technologies Pvt. Ltd. (DITPL) which claimed a loss from business to the extent of Rs 15,27,51,620 during the assessment year 2013-14 and debited expenses to the P&L A/c to the tune of Rs 21,62,10,770 incl. purchases of Rs 13,79,30,946.
The DITPL's main object is to manufacture computers and computer peripherals, with no employees on its payrolls, however, it indulged in apparent bogus trading of timber and logs (from another CCD Group company incorporated in Guyana (Vaitarna Holding Private Inc., foreign subsidiary of M/s Vaitarna Timber Trading (P) Ltd.) to illegally transfer funds out of India without any formal agreement. It further made advances that are greater than the sale consideration by three times.
The IT Dept Bangalore has been ceaselessly and doggedly pursuing Siddhartha, more so it tried to impede the sale of his Mindtree shares to L&T Infotech twice and Siddhartha himself has stated in his suicide note that the DG IT was terrorising and harassing him.
Against this IT claim that a Cypriot Company by the name of Arduino Holdings Ltd had lent funds to CDEL in the form of Cumulative Convertible Debenture (CCD) in 2010. Cyprus is a tax haven. CDEL is the only company in India which has received funds from this Cyprus-based company. It was alleged that numerous evasion techniques have been used in the conversion of the above stated CCD into equity shares by CDEL.
IT Dept also reckons that during its investigation, it found that many employees and directors of the CCD Group companies were being given loans through KR Pradeep's Lakshmi Vilas Bank which, in turn, were diverted to group companies. The loans were being given rampantly without assessing the credit worthiness of the individuals relying on bogus purchase guarantee letters by CCD group. Some of these loans, it is felt by IT Dept, were being used to prop up the shares of CCD.
What makes the whole thing even more curious is that while VGS was on a selling spree to extricate himself from the mountain of debt, why was Income Tax Department harassing him? As mentioned earlier, in May, he was on the verge of doing a second distress sale - Global Village, is a 4-million-sq ft tenanted office space located on a 120-acre campus. It counts Accenture and Mphasis as among its tenants, besides having the headquarters of Mindtree.
Did his friendship with DKS cost him his life in the end? His problems with the IT department and ED started with raids in 2017. Following tax raids on DKS, the agencies claimed to have unearthed undisclosed transactions between the two. In fact, political gossip in the state was rife that his father-in-law S.M. Krishna joined the BJP as a precautionary shield against his son-in-law from further prosecution.