Why Adani's kin Jatin Mehta gave up Indian citizenship for a tax haven
According to a report in The Indian Express, Winsome Diamonds promoter Jatin Mehta and his wife Sonia gave up Indian citizenship to become citizens of St. Kitts and Nevis in 2013-14.
Located in the Carribean, St. Kitts and Nevis is known to be a tax haven.
Indian banks are said to have classified Winsome Diamonds as the second highest defaulter in the country. According to the report, Mehta owes Rs 4,680 crore to a consortium of banks headed by Standard Chartered and another Rs 2121.82 crore to a set of banks headed by Punjab National Bank.
Having accumulated defaults of over Rs 6,700 crore, Winsome and allied companies give Vijay Mallya's Kingfisher Airlines stiff competition for the tag of India's largest non-performing asset.
And as India does not have an extradition treaty with St. Kitts and Nevis,.it will be next to impossible for Indian authorities to bring him to book.
What the report doesn't mention is that Mehta is a relative of industrialist Gautam Adani, considered close to Prime Minister Narendra Modi.
Mehta's son Suraj is married to Krupa, the daughter of Gautam Adani's brother Vinod Shantilal Adani.
Winsome was incorporated in 1985 as Su-Raj Diamond India Ltd, apparently named after Mehta's son, who is now Vinod Adani's son-in-law.
Both Mehta and Vinod Adani are said to be based in Dubai. Incidentally, Vinod Adani's name figured in the Panama Papers for having offshore accounts in tax havens. More on that later.
The making of India's second largest NPA
A 2014 report in the Times of India gives extensive details of how Winsome defaulted on repaying its loans. Here's what the report says:
Starting March 2013, Winsome started having problems repaying its loans. The banks sent a notice to it as a willful defaulter on 15 October, 2013. The loans were subsequently declared as NPA.
Mehta's explanation was that his buyers in UAE had defaulted on payments According to Winsome, 80% of its exports went to just 6 companies based in Sharjah, UAE. These firms have a common ownership.
Winsome has 13 distributors in the Middle East, of which 12 are controlled by the same person - one Haitham Sulaiman Abu Obaida.
Raising questions about Winsome's distribution network, the report stated that 10 of its distributors were incorporated only in 2012. Five were incorporated on the same day - 25 June, 2012.
The report says that the group used to export gold jewellery and coins to entities in the Middle East owned by Jatin Mehta and family.
The TOI report also claims that that 4 shipping companies engaged by Winsome for transporting gold may not have carried the amount of gold that the company claims to have sent out of India.
It also hints that some of the money raised from the banks was also diverted to real estate investments in Mumbai and Dubai.
Who is Vinod Shantilal Adani?
Mehta and Adani formed a matrimonial alliance in January 2012 when Suraj married Krupa. The marriage was tipped to be a game-changer as it brought together a group like Adani, with a strong record of gold trading with Winsome, one of the largest gold and diamond trading companies in the country.
According to the database prepared by the International Consortium of Investigative Journalists (ICIJ), two companies connected to Vinod Adani had offshore accounts in the British Virgin Islands - Jineshwar Holdings Ltd and Parshwa Holdings Ltd. Vinod Adani has been listed as a shareholder in Jineshwar Holdings and as the director (from 2005 to 2008) in Parshwa Holdings. Both the companies are listed under the same address - NR Doshi & Co 608, Above Bank Melli Iran Khalid Bin Waleed Street Dubai United Arab Emirates.
ICIJ has listed NR Doshi & Co., a Dubai based business and tax advisory firm, as the intermediary for both the companies. According to the database, the same company and address is the intermediary for 186 entities, including the 2 connected to Vinod Adani.
Vinod Adani isn't known to be very active in the management of the Adani group. But according to an Economic Timesreport, he was a key part of the group's gold trading activities The report states that he used to head Adani Exports which traded in about Rs 2430 crore of gold in 2008, making a profit of Rs 179 crore.
Vinod Adani's name came up in a controversy when a report in Fairfax media, one of Australia's leading media groups, stated that he, and not Gautam Adani, owned the lease for Abbott Point Port. Abbott Point port is a critical part of Adani's massive Carmichael Coal Mine project in Australia.
Adani and Jatin Mehta are considered business success stories not just for Gujarat, but the entire country. Both proudly claim to have withstood the 2008 economic crisis. But these success stories need to be questioned, with Mehta, now a citizen of a tax haven, having accumulated defaults to the tune of Rs 6,700 crore and Vinod Adani allegedly having offshore accounts.