How to Bankroll a Fraud

The court order has put paid to Thawani's attempt to sell his company at a potential valuation of Rs 2,500 crore, a premium on its current worth.

BCCI officials claim Modi inserted a contentious clause to help Nimbus promoter promoter Harish Thawani.


The Board of Control for Cricket in India (BCCI) has attached 89 per cent shares of Nimbus Communications Public Limited in TV channels Neo Sports and Neo Cricket- valued at Rs 890 crore - in lieu of dues from its promoter Harish Thawani following the Bombay High Court order of January 27.

The court order came after BCCI alleged Thawani, 51, had concocted a massive scam to defraud Indian cricket's apex body of Rs 2,000 crore. In collusion with Thawani, claimed BCCI, was a consortium of three public sector banks-the Union Bank of India (lead banker), Indian Bank and Punjab National Bank (PNB)-which broke all norms of banking by refusing to encash a guarantee of Rs 1,600 crore when BCCI cancelled Nimbus's broadcast contract in December 2011. The board also claimed Nimbus used the broadcast contract with it as collateral for the guarantees.

At the centre of the alleged scam is a clause inserted at the behest of Thawani and former IPL commissioner Lalit Modi in the bank guarantee agreement. It stipulates that the banks will not encash the guarantee in the event of Nimbus's contract being cancelled by BCCI. The clause was in violation of all banking norms.

The guarantee, it is learnt, was cleared by the boards of the banks. Then as now, Union Bank of India was headed by M.V. Nair and PNB by K.R. Kamath. At the time of the guarantee, Indian Bank had M.S. Sundara Rajan in charge. He was succeeded by current Chairman T.M. Bhasin in April 2010. While lead banker Union Bank of India agreed on a guarantee of Rs 800 crore, PNB signed on for Rs 700 crore and Indian Bank for Rs 500 crore.

Says BCCI legal head P. Raghu Raman, "This is a scam. The non-payment clause was inserted to save Thawani and the banks from enchasing the guarantee because there was no collateral." The board claims Thawani, while negotiating the guarantee with the banks in 2009, colluded with Modi, then a top BCCI official, to insert the controversial clause.

Modi, who had proposed a BCCI cricket channel with Thawani in 2009, confirmed his involvement in shaping the bank guarantee with Nimbus. The former IPL commissioner, currently facing over 42 cases of financial irregularity, wrote on his website in December: "I inserted the clause that termination of contract will turn the bank guarantee null and void."

BCCI officials claim Modi inserted the clause to help Thawani, who had huge cash problems and would not have been able to get the rights without insider help. This is tantamount to, say BCCI officials, a collusive fraud. The board's operations head Ratnakar Shetty says Thawani and Modi violated BCCI guidelines and turned the deal into collateral with the banks. "This is a serious offence. BCCI rules prevent anyone from using a contract as collateral," he says.


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Thawani and Modi are not the only ones being held responsible for the scam. Although BCCI isn't pointing a finger directly at them, the three public sector banks are equally culpable. RBI guidelines clearly stipulate that banks must insist on total collateral cover for the amount sanctioned as a guarantee.

Alpana Killawala, official spokesperson for RBI, confirms that the bank is probing the case but says it is not the RBI's policy to comment on individual cases. A senior RBI official says the banks have to reply by mid-February as to why they sanctioned the guarantee to Nimbus when the collateral offered by the company only included estimates of revenue from domestic matches and international licensing. "Match revenue is an intangible asset and if a company has no cricket, then what is it you will seek from the channel?" asks the official.

PNB CMD Kamath said he would not comment. Indian Bank's Bhasin and Union Bank of India's Nair did not respond to mails and telephone calls from India Today over one and a half months.

The BCCI is hopeful of recovering its dues following the high court order. The court, in addition to permitting BCCI to attach Nimbus's shares, has also asked Nimbus to deposit in the court Rs 305 crore, its earnings from the India-England and India-West Indies series, telecast after the BCCI complained that Thawani had sold advertisements worth that amount during the two series. Even after attaching Nimbus's shares in Neo Sports and Neo Cricket, BCCI still stands to lose close to Rs 700 crore, the difference between the Rs 1,600 crore it wanted to encash as bank guarantee and the value of the attached shares.

The court order has put paid to Thawani's attempt to sell his company at a potential valuation of Rs 2,500 crore, a premium on its current worth. According to the order, the Mumbai-based Nimbus, which owns 85 per cent of Neo Cricket and Neo Sports, must now inform BCCI if it gets an investor. This, in effect, means if Thawani gets an investor, he will have to first clear BCCI's dues.

Earlier, Nimbus had appointed investment banks Barclays Capital and Avendus to help in the sell-off. It has been in the red for close to six years. The company ended March 31, 2010, with a loss of Rs 142 crore. Nimbus sources admit that as of March 2011, the losses were Rs 498 crore. The broadcaster has seen viewership fall in the series against England and West Indies. Neo Cricket was forced to give a discount of almost 60 per cent on its rate of Rs 4.5 lakh for a 10-second slot, claim media buyers.

The court order is not the only trouble Thawani is facing. One Alliance, a joint venture between Multi Screen Media (MSM) and Discovery, has ended its distribution contract with Neo Sports and Neo Cricket. MSM had agreed to pay a minimum of Rs 270 crore for a three-year distribution contract.

Thawani has a controversial business history. In 2007, he opted for a settlement after Doordarshan claimed he owed it Rs 40 crore for cricket telecast. In 1994, Superhit Muqabla, a show produced by him, was pulled off by Doordarshan following charges of violation of rules and overcharging.


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