WHEN GLOBAL law firm Linklaters Singapore Pte approached Appleby in 2013 to appoint two nominee directors on two Mauritius-based companies of Jindal Stainless Group — Jargo Investments and Vavasa Investments — the offshore service provider decided against going ahead with the appointments.
Reason: the compliance manager of Appleby raised a red flag that since the beneficial owner (Abhyuday Jindal) was of Indian nationality and investments were being made in India, there is the risk of ‘round tripping’.
“We need to be careful on any potential round tripping issue (it appears that the beneficial owner is from India and investments have been made in India), as such we might need to ensure that the company has the necessary approval from the revenue authorities in India,” the compliance manager wrote.
The proposed appointment request was in relation to a loan of $35 mn being provided by Credit Suisse AG Singapore to the two Jindal Group Companies.
Appleby documents show that it identified its employees Malcolm Moller and Gilbert Noel to serve on the board of two Mauritian companies — Jargo Investments Limited and Vavasa Investments Limited — for the term of the facility agreement that Credit Suisse AG Singapore was providing these two companies for four years.
The shareholding pattern of various Jindal Group companies filed with Bombay Stock Exchange show that in 2013, Jargo and Vavasa were part of the promoter group entities of JSPL, JSW Steel, Jindal Stainless Ltd and Jindal Saw Ltd, among others.
EXPLAINED: Why the Paradise Papers matter
According to the Facility Agreement available, the two companies in Mauritius were acting as borrowers for Jindal Stainless Global Ltd, a company incorporated in Bahamas (Ultimate Beneficiary being Abhyuday Jindal, son of Ratan Jindal) and were borrowing $35 million from Credit Suisse AG Singapore Branch under the facility.
The document states that the money was to be utilised towards refinancing of existing loans of “any member of the group”.
Natasha Hardowar-Bissessur, compliance manager at Appleby, further alerted about a WorldCheck finding on one of the investee companies in October 2012 and pointed out that a charge sheet was filed by the CBI for alleged involvement in an illegal mining scam.
World-Check is a tool used by banks and other entities to do a screening or due diligence on individuals and companies that they deal with as it lists out high risk individuals and companies.
While the four Jindal brothers — sons of O P Jindal — took over management responsibilities of different businesses after their father’s demise in a helicopter crash in 2005, they continued to have cross-holding in their brother’s company. It was only in 2015 that the four brothers — Prithviraj, Sajjan, Ratan and Naveen — initiated a plan to unwind the cross-holdings in their companies. The Jindal Stainless Group’s turnover for FY17 was Rs 16,500 crore.
Response from Jindal Stainless:
Jargo Investments and Vavasa Investments were part of the promoter group of Jindal Stainless Limited. However, they do not currently hold any shares of Jindal Stainless Limited and have not held shares of Jindal Stainless Limited since September 2014.
Based on enquiries made by us, Jargo Investments and Vavasa Investments did not raise funds for or on behalf of Jindal Stainless Limited and raised funds for their own purposes. There is therefore no question of round-tripping.
Jargo Investments and Vavasa Investments have always had directors on their board and have at all time complied with Mauritian law requirements. Appleby’s representatives were appointed to the board of Jargo Investments and Vavasa Investments from March 2013 to January 2017.
Jargo Investments and Vavasa Investments have made necessary disclosure in accordance with the applicable laws.
Jargo Investements and Vavasa Investments did not raise funds for on behalf of Jindal Stainless Limited and raised funds for their own purposes, which had nothing to do with Jindal Stainless Limited. Based on enquiries made by us, Jargo Investments and Vavasa Investments have not made any investments in India with the funds they have raised. Incidentally, Mr Abhyuday Jindal was a non- resident at the time Jargo Investments and Vavasa Investments raised funds.