Behind downfall of Vadodara businessman, his ‘extravagance, not taking along local leaders’

Nearly a week after the special CBI court in Ahmedabad refused anticipatory bail to Amit Bhatnagar, his brother Sumit and their father Suresh N. Bhatnagar, citing how “scamsters of big economic offences were fleeing the country and justice”, the trio were caught from a hotel in Udaipur where they had checked in as “Vermas”. The trio are under investigation by the CBI and the Enforcement Directorate in the Rs 2,654 crore bank fraud in collusion with unidentified bank officials, the FIR for which was lodged on March 26. The Bhatnagars are in CBI custody till April 27.

Also read | Bhatnagars checked in as ‘Vermas’ at Udaipur hotel to evade arrest

Suresh Bhatnagar and his two sons were sent to CBI custody till April 27. (Express Photo/Javed Raja)

The Bhatnagars established the firm in 1970 as a partnership firm and converted it into a private limited company on August 26, 1992, with the name Diamond Cables Limited, which changed to its current name in October 2007. The company deals with conductors, cables, transmission towers, and sells its product under the brand name DICABS and DIATRON.

For most industry leaders in Vadodara, the fall of DPIL was “imminent”. An industrialist from the city, who is Bhatnagar’s close associate, said, “He saw Gautam Adani (of Adani Group) as his icon and kept on acquiring smaller companies in the power sector in Vadodara and seeking business loans to generate the capital. His hobnobbing with top leaders of the state were an attempt to build a brand of his own, which have helped him get the bank loans. Ultimately, we can say that his lack of planning and the internal political rivalry between those who were supporting him and those who weren’t, did him in.”

Businessmen in Vadodara say that the downfall of DPIL began after Bhatnagar succeeded his father in 2010, taking over the company’s day-to-day functioning. The company, which reported a steady growth in consolidated sales and profits during the fiscals till 2011-12, reported a loss for the first time in 2015, pegged at Rs 116 crore on a net sales of Rs 2,422 crore and the southward trend continued reporting losses worth Rs 808 crore in 2016-17 on net sales of Rs1,153 crore. The industrialist adds, “These losses reported by DPIL were not just because of the business failure but also because Bhatnagar had a penchant for extravaganza. Apart from getting in all the funds for the extravagant cultural events that Vadodara witnessed between 2014-2017, he also diverted a lot of the energy of his management and his liquid resources to the events. He thought he was building his brand, but it was undoing his primary business. His family often visited international festivals, including the Cannes Film Festival, in order to be seen on the social circuit. He also ventured into real estate but failed. It forced him to resort to unethical practices to recover losses that he could not explain.”

The CBI FIR states that DPIL allegedly submitted false stock statements to banks and, in connivance with bank officials, acquired additional credit facilities with inflated and exaggerated figures of sales estimates. In 2016, Bhatnagar had tried to revive a sinking DPIL through an application to the SEBI, seeking exemption for his two other companies – Diamond Projects Limited and Diamond Power Transmission Private Limited – in order to infuse life into DPIL by way of acquisition through unsecured loans aggregating to Rs 66.14 crore as part of the Restructuring Scheme approved by Joint Lenders Forum (JLF). A SEBI order of March 2016 exempted the two acquiring companies from the SEBI Regulation (Substantial Acquisition of Shares and Takeovers) that prohibits shareholders of any company having the right to exercise twenty-five per cent or more of the voting rights from acquiring additional shares or voting rights in any company amounting to more than five per cent of the voting rights in a given financial year.

Bhatnagar had made out a case about the company in dire straits and wrote to SEBI. “The promoters are pouring in their personal funds in the form of loan to the company for its betterment and revival. The acquisition of the shares upon conversion is not upon the volition of the acquirer/ promoters but upon happening of an event which is beyond their control. In case the company is not given the financial assistance by bankers and the financial institutions, then there is scope that the company may go into closure and it will leave many workers jobless,” the SEBI order had said, quoting Bhatnagar’s application. The client list of DPIL had included Power Grid, Gujarat Urja Vikas Nigam Ltd, Ashoka, Bilcon, Tamil Nadu Electricity Board, L&T, IOCL and so on.

The SEBI order, sourced from its website, described DPIL as “a public limited company with paid up capital of Rs 54 crore, comprising 21,083 shareholders with a total net worth of Rs 843.64 crore”.

Another contemporary industrialist feels that Bhatnagar rubbed off a lot of people the wrong way during his brief rise between 2014-16. He says, “From what we know of Amit, he started off as a person who was very popular among the bureaucrats in the early 2000s. That is because as a company dealing with the power industry, he was looking to make business inroads into the Gujarat Urja Vikas Nigam (GUVNL). And when he did, his political network also grew. However, it was due to his association with Tejal Amin of Jyoti Ltd. that really brought him into the limelight.”

A veteran industrialist says, “Tejalben and Amit came together during the inception years of Vadodara Marathon (an independent, non-profit company that organises annual marathons in Vadodara). Tejalben, belonging to the illustrious Amin family of Vadodara, introduced him to a lot of politicians. Eventually, when Jyoti Ltd. faced financial crisis in 2014, Amit, instead of standing by Tejalben, proposed a business deal. It resulted in their fallout. And Amit went on to establish himself as the sole icon of Vadodara’s cultural events.”

However, sources say the two were drawing apart much before this when Amin insisted that the expenditures for the marathon be routed through her to check the “extravagant” spendings, say sources close to Amin.

In January 2015, Bhatnagar was the chairman of the Vadfest Committee – the elite cultural festival supported by the Gujarat government’s department of Tourism – which saw performances from Yanni, AR Rahman and others. While the then Cabinet Minister for Tourism Saurabh Patel, who was also an MLA from Akota constituency in Vadodara, was seen by the side of Bhatnagar, other BJP MLAs from the city and district, decided to “stay away” from Vadfest, feeling “snubbed” that they were neither consulted nor invited to any of the prestigious events of the festival.

For Bhatnagar, the event, however, cemented his place as a “close aide” of Patel, earning him the wrath of other BJP leaders. Vadfest followed the Vibrant Global Gujarat Summit of the same year, where Bhatnagar is said to have networked with the help of Patel. However, within a span of two months in March, Bhatnagar faced his first arrest by the Central Excise Department on charges of evasion of duty tax of about Rs 40 crore that attract a maximum punishment of up to 7 years imprisonment. Although Bhatnagar sought bail and gave an undertaking about paying up the evaded duty, sources in the excise department say that the company did not issue the cheque towards the clearance of the outstanding taxes. His bail application in the case had described his company as an “established business in the country” as well as “a partner in several contracts of Gujarat Government’s Vibrant programme.

In 2016, Bhatnagar returned to the social scene with SWITCH Expo in Vadodara which was backed by the Union Ministry of Power and the then Union Minister of Power Piyush Goyal took keen interest in organising the event that saw delegations from various countries. The event was jointly promoted by Gujarat government’s department of energy and petrochemicals and the Federation of Gujarat Industries (FGI).

In 2015, Bhatnagar lost out on plump contracts for 12 Rural Electrification projects issued by the Assam Power Distribution Company Limited (APDCL) after his company failed to furnish an unconditional and irrevocable Bank Guarantee equal to 10 per cent of the total contract price towards Contract Performance Guarantee within 28 days from the date of issue of the Letter of Award. DPIL, challenging the termination by APDCL, had alleged that a discrepancy in the Letter of Intention and the final Letter of Award regarding the cost of the project caused the delay in the execution of the bank guarantee. While the Gauhati High Court upheld the APDCL’s termination of Bhatnagar’s work order in 10 projects, he was allowed to carry on only two in Jaleswar, Lakhipur, Kharmuya and Balijana Development Block and in Krishnai, Matia, Kushdhowa and Dudhnoi Development Blocks of Goalpara district in Assam. In February 2017, DPIL also lost out on an appeal before the Securities Appellate Tribunal in Mumbai challenging the National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE) for shifting of the trading entities of DPIL from the rolling segment to the trade-for-trade segment with a price band of 5 per cent or lower.

An industrialist says, “The mistake that Amit made while he was on his rise is that he did not take local leaders along. He always made it clear that he was on direct dialling terms with Gandhinagar and needed to please no local leader. Within the business community, we had a very strong indication of Amit’s downfall the moment things went wrong for Saurabh Patel in the party. He did not have any other leader to fall back on for support. We do believe that the letter of complaint sent to the PMO seeking investigation in his case is from within the party.”