In the land of farmers, R K Syal presented a calculus of tree plantations and cash crop harvests.
The brochure said the company would develop the land for agro-forestry farms and after expiry of the plan period, trees and cash crops would be cut and money from the sale would be guaranteed by post-dated cheques.
Invest Rs 1 lakh and you would get Rs 2.22 crore in 25 years, promised Syal. To get to the investors, he hired 20 lakh agents of which six lakh were operative. These agents reeled in around 24 lakh investors. Taking into account collections from all the schemes as of December 31, 1997, the total amounted to Rs 22,900 crore.
GFIL floated nine lumpsum and recurring investment schemes, issued post-dated maturity cheques after accepting investment for 1 to 25 years. Forty per cent of the investors money was earmarked for ‘‘developing’’ the land and the rest was treated as security deposit.
In 1987, the company mobilised only Rs 16 lakh. By 1990, it touched Rs 3 crore. Between 1993 and 1997, the company took a quantum jump in investment — Rs 200 crore per year. By December 31, 1997, the company had mobilised phenomenon Rs 1,037 crore. According to the Punjab Vigilance Department, the total collections from investors touched Rs 3,000 crore.
They paid Rs 450 crore to their investors.
In a report prepared by Sebi’s executive director Vijay Ranjan and his RBI counterpart S Gurumurthy in 1998, the two officers highlighted that the company had paid nothing to investors out of its own income but out of the investment made by new ones.
In an investigation carried out by court officers appointed by the Mumbai High Court, the total amount of the farm income was Rs 58 lakh which works out to less that 0.2 per cent of the total amount (Rs 450 crore) paid to the investors.
A committee appointed by Mumbai High Court recommended in 1998 that GFIL and its subsidiaries stop collecting money and undergo an audit of its accounts and land holdings.
Sebi, RBI, IT dept, everybody has a complaint
This is what Sebi and RBI found when it went through the company’s accounts: Sixty per cent of the money was spent on business development or office maintenance and another huge chunk on subsidiary companies. There was barely anything left for development of land.
The Department of Company Affairs found that some companies had become subsidiaries of GFIL through purchase of a majority of shares. Syal had not bothered with the approval of the Central Government.
The Income Tax Department sniffed out a trail of bribes the company had paid buying real estate. The department says it has evidence that the palms of the registering authorities were greased while purchasing land at Jharmari for Chandigarh Extension 22 Project.
On an average, the IT department has estimated bribes at the rate of 1.27 per cent of the registered value of land at various other places. ‘‘The extent of evasion of taxes in the hands of this unorganised and unrelated class of persons is estimated to be approximately Rs 227 crore,’’ the IT department had observed.
Construction work worth hundreds of crores was allocated to ADS Builders Limited owned by Syal’s brother-in-law Hitesh Kumar Sinha. Crores were siphoned under the head construction of infrastructure. Sinha is also behind bars now.
A walk through the Golden Forest
There are no Golden Forest plantations. None in Kot Villa, Gurgaon and Rewari. Instead, Syal had been developing a golf course at Kot Villa as well as a hotel. No GFIL forests in Sirsa, Dehradun and Mussourie in Uttaranchal, Indora, Kasauli and Hamirpur areas in Himachal Pradesh.
The company’s claim of 3.90 lakh kher plants in Ropar and Hoshiarpur district were also untrue. Most of the assets in Himachal (worth Rs 46.25 crore on the records) were acquired illegally and the property was worth was far less.
The Punjab government is taking possession of the surplus land on the orders of Collector (agrarian) in Dera Bassi. The story is the same in Hoshiarpur district. Around 4,000 acres of GFIL under Patiala division was declared surplus two years ago and will be taken over by the government.
Some other states including Uttranchal have also initiated action against GFIL in connection with excess purchase of land.
In Himachal, the Syal family is facing charges of acquiring land on the basis of forged documents.