Appleby records investigated by The Indian Express show that through intricate and multiple layers, for five years since 2006, Ishwari Prasad Khaitan, promoter of Loop Telecom, managed two offshore family trusts of his brothers-in-law Sashi and Ravi Ruia of the Essar Group.
These two trusts in Cayman Islands owned Essar Global Limited, the holding company of Essar Group, and a bunch of other offshore companies.
Incidentally, in a case related to the 2G scam, countering CBI’s allegation that Loop was Essar’s “alter ego”, both Khaitan and the Ruias claimed that Loop promoters Ishwari Prasad Khaitan and wife Kiran Khaitan had independent sources of finance and were not in collusion with promoters of the Essar Group for acquiring 2G spectrum licences between 2006 and 2008.
Appleby records show the Khaitan-Ruias link during 2006-2011 when Khaitan owned four companies that managed the Ruia trusts.
“In line with a family arrangement made in 2005,” according to Appleby records, the Ruias set up two trusts in Cayman Islands in July 2006 to “settle a substantial part of the assets and interest of the family. equally into two parallel trust structures — one for the SNR branch The Virgo Trust and the other for the RNR branch The Triton Trust.”
SNR refers to Sashikant (Sashi) Nandkishore Ruia and RNR to Ravikant (Ravi) Nandkishore Ruia. The Triton and Virgo trusts held 100 per cent share in two Cayman Islands companies — Copper Canyon Holdings Limited and Kettle River Holdings Limited, respectively — which together owned Essar Global Limited, the group’s holding company set up in Cayman Islands in September 2005 and renamed Essar Global Fund Limited (EGFL) in March 2013.
According to Essar Group, EGFL is an investment fund managed by Essar Capital Limited and controls assets diversified across the core sectors of energy, metals and mining, infrastructure and services. The aggregated revenues of the Fund’s portfolio companies total $27 billion.
Four Cayman Islands companies with the same address served as Enforcer and Protector of the two trusts — Grand Escalada Investments Ltd and Astra Star Investments Ltd for The Virgo Trust; and, Grand Richmond Investments Ltd and Grand Pinnacle Investments Ltd for The Triton Trust.
While the two branches of the Ruia family held nominal shares — again through layered ownership — in the Enforcer and Protector companies of their respective family trust, it was Khaitan who owned all four controlling companies — first directly and then through two trusts in British Virgin Islands, Global Trade and Amber Trade.
Khaitan held 98 per cent share in each of the four controlling companies — Grand Escalada, Astra Star, Grand Richmond and Grand Pinnacle — when these were set up in April 2006. He transferred those shares to Appleby Trust (Cayman) Ltd, the trustee of Global Trade and Amber Trade Trusts, soon after the two BVI trusts were set up in May 2007.
Besides being co-settlor of Global Trade and Amber Trade trusts, Khaitan also owned Grand Delmore Investments Limited, a Cayman Islands company set up in January 2006, which became the sole beneficiary of the two BVI trusts.
A month after the two Khaitan-owned BVI trusts were put in place, Telecom Holdings (Cayman) Limited was set up in June 2007 under the ownership of the Ruia family trusts Triton and Virgo through Copper Canyon Holdings Limited and Kettle River Holdings Limited. In March 2008, all shares of Telecom Holdings were mortgaged to Standard Chartered Bank to secure an unspecified loan.
This intricately layered structure of ownership and control, according to an Appleby declaration to Standard Chartered Bank (Switzerland), was in place at least until October 2011.
In December 2011, the CBI chargesheeted Essar vice-chairman Ravi Ruia, directors Anshuman Ruia, Vikas Saraf, and Loop Telecom promoters I P Khaitan and Kiran Khaitan in a case related to the 2G scam.
Records show that on December 20, 2012, the Ruias set up a new trust, Iris, with all eight members from the two family branches and a “charitable & CSR” company, Cypresses Foundation Limited, as its beneficiaries. All shares held by Virgo and Triton trusts in at least five BVI, Cayman Islands and UAE companies were transferred to The Iris Trust. Appleby Trust (Cayman) Ltd that served as the trustee of Khaitan’s Global Trade and Amber Trade trusts became the trustee of The Iris Trust.
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The urgency to give shape to the new structure was evident in an internal Appleby email of December 11, 2012: “Cypresses Foundation Limited is to be a company limited by guarantee with charitable objects to be formed today on an express basis, for which Appleby Trust will provide directors and will act as A Shareholder. The B Shareholder will be Essar Global Limited.”
John S Riches, a London-based wealth planner and “a confidante” of the Ruias, was chosen as Appointer of The Iris Trust and R&H Enforcer Limited, a Cayman Islands company, took charge as Enforcer.
While setting up The Iris Trust, the Ruias overhauled the two original trusts. Riches was also appointed Appointer in Virgo while London-based lawyer Peter Leach took the responsibility in Triton.
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Appleby was instructed to liquidate the four companies that served as Protectors and Enforcers for Virgo and Triton, as well as their controlling trusts, Global Trade and Amber Trade owned by Khaitan, at the end of the financial year in March 2013.
In an email, an Essar spokesperson said: “The Virgo and Triton Trusts (‘Trusts’) were settled under the STAR laws of the Cayman Islands in 2006. The Trusts are discretionary trusts, and the beneficiaries of the Trusts include companies whose 100% shareholders are the family members of Mr Sashikant Ruia and Mr Ravikant Ruia. 100% equity stake in Essar Global Limited (now renamed as Essar Global Fund Limited) is indirectly held by the Trusts.
“The existence and structure of Trusts has previously been disclosed to the relevant regulatory authorities, as required. The prospectus of Essar Energy Limited (‘EEL’) filed with the UK authorities, which is available in public domain confirms such disclosure to the UK authorities. The Trusts have also been disclosed to the Reserve Bank of India.
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“Further, the beneficiary companies of the Trusts, owned by Ruia family members, have also been fully disclosed by such family members in their respective income tax filings on an annual basis in accordance with the income tax provisions.. The Trusts have not made any substantive distributions to any beneficiary till date.
“The administration, control and management of the Trusts has been with the trustees of the Trusts, which are globally recognised independent and professional institutions of high pedigree. The Trusts, being discretionary trusts established under STAR laws, are by their very nature such that they are controlled by the trustees and not by the beneficiaries,” the spokesperson said.
In an email, Nalin Khaitan, Vice Chairman, Khaitan Holdings, said: “Please note that no one from Khaitan Holdings is beneficiary of these Trusts nor do we control these Trusts.”