Laxmi Vilas Palace Hotel case revives questions on ‘privatisation for a pittance’

Jodhpur CBI court’s order directing CBI to file a charge sheet for corruption and cheating in the sale of the PSU hotel in 2002 raises several unanswered questions

Hotel Laxmi Vilas Palace, Udaipur
Hotel Laxmi Vilas Palace, Udaipur
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Faraz Ahmad

Even as Udaipur District Collector is busy preparing the inventory of Laxmi Vilas Palace Hotel following an order by a CBI court in Jodhpur, there seem to be much more to the case than meets the eyes. The court order now threatens to reopen a can of worms.

The CBI court, it is worth recalling, had in August, 2019 asked Central Bureau of Investigation (CBI) to re-initiate an inquiry into the disinvestment of the hotel in 2002. The central agency, which had filed an FIR in August, 2014 within months of the Modi Government taking over, had filed a closure report and indicated that there was no ground or evidence to prosecute anyone. It filed a second closure report on similar lines after the court order of August, 2019.

This provoked the CBI judge Pooran Sharma to turn down the closure reports and order the hotel to be attached and handed over to the Union Government. It ordered a charge sheet to be filed against the then Disinvestment Minister Arun Shourie, disinvestment Secretary Pradeep Baijal, Ashish Guha, the managing director of financial advisory firm M/s Izard India, Limited and asset valuer Kanti Karamsey & Co besides the owners of Bharat Hotels Ltd., to whom the Government sold the hotel at a throwaway price of Rs 7.52 Crore in 2002. The Group owns several five-star hotels in different parts of the country including the Meridien at Janpath in Delhi.

The court noted that CBI in its report had conceded that the hotel was sold at a pittance and was grossly undervalued. It also noted that the land and the property together was valued at Rs 150 crore and the market value was even higher. The court felt that having conceded undervaluation of the property and causing loss to the exchequer, the CBI should have filed a charge sheet and prosecuted those who were responsible.

The questions which remain unanswered at this point are the following:

1. Since the CBI filed two closure reports and claimed there was no evidence for prosecution, it is safe to assume that the Modi Government is reluctant to reopen the case. Since Arun Shourie is today a critic of the Government and the Prime Minister and went to court against the Rafale deal, why would the Government be reluctant to reopen the case?

2. The CBI court’s unusual order (generally CBI courts are only too happy to accept CBI’s closure reports) paradoxically suggests that Arun Shourie, who fell out with Narendra Modi, is being put in his place for political reasons.

3. Can this order act as a precedent to re-open several other questionable disinvestments undertaken during the period by the NDA Government under Vajpayee?

4. Could the CBI have filed the FIR in August, 2014 without a nod from the PMO, although Shourie was not named in the FIR then?

5. Why was the CBI reluctant to pursue the case despite admitting that the hotel valued at Rs 150 Crore was sold for Rs 7.52 Crore ?

6. Will Bharat Hotels Ltd. appeal against the order of attachment and obtain a stay from the High Court?

CBI judge Pooran Kumar Sharma ordered the CBI to register a criminal case against Shourie, Baijal and three others maintaining that prima facie it found proof of criminal conspiracy and cheating by the accused. “Prima facie it had been proved that Shourie and Baijal “abused their posts to collectively and independently” to cause a loss of Rs 244 crore to the Government. Judge Sharma therefore ordered summoning all the accused via arrest warrants.

Shourie has pointed out that none of the decisions were taken solely by him or even by any of the officers implicated here. Instead each of these had the stamp of approval of the Cabinet Committee on Disinvestment. Chaired then by the then Prime Minister Atal Behari Vajpayee and comprising of the then Finance Minister as well.

All those who have worked with Shourie find it hard to believe that Shourie was involved in any corrupt deal. As Disinvestment minister several of his decisions were however questionable. His first disinvestment was of the Bharat Aluminium Corporation Limited (BALCO which he disinvested to the Sterlite company owned by Vedanta industrialist Anil Agarwal for a paltry five crores and something. So was the case when he disinvested Centaur Hotels of Mumbai but nobody ever questioned his personal integrity in financial matters.

The received wisdom in political circles in Delhi is that the CBI court’s order reflects the hand of the PMO and late union minister Arun Jaitley, during whose tenure in the cabinet the initial FIR was filed in August, 2014.

Once upon a time both Arun Shourie and Arun Jaitley were quite inseparable. They were on first name terms. Both joined as ministers of State in the NDA-I government and both were later elevated as full- fledged cabinet ministers soon enough. Before Shourie got the charge of Disinvestment portfolio, Jaitley as Commerce minister was delegated the responsibility to disinvest the PSUs. The disinvestment of PSUs was in fact started by Arun Jaitley when he sold off the Modern Food Industries Limited (MFIL) for a pittance at Rs. 1.5 crore in 2000.

The two fell out around 2009 when Jaitley, who was in Advani camp became the Leader of Opposition in the Rajya Sabha while Shourie bitterly blamed Advani for the BJP defeat of 2009. Since then Shourie and Jaitley were perceived as belonging to rival factions within the BJP. But in the runup to the 2014 general elections, Shourie had enthusiastically supported him along with Jaitley. But soon Shourie began to criticize Modi and his policies. Eventually he led the corruption charge against the Rafale deal and went to the Supreme Court.

But then if Modi wants to settle scores with Shourie, why would the CBI file two closure reports in the case and not take the name of Shourie even once? It makes no sense.

There must be some other explanation although chances are that the case will fizzle out, never to be heard again. But will the case of the mysterious case remain buried?

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