Paradise Papers: I P Khaitan managed Ruia family trusts, says report

Appleby data show that Khaitan managed two offshore family trusts of his brothers-in-law Sashi and Ravi Ruia of the Essar Group

From Vijay Mallya to Amitabh Bachchan, the Paradise Papers data leak allegedly reveals offshore dealings of 714 Indian individuals and entities. In fact, India ranks 19th in terms of the number of names mentioned in the leaked documents, and one of them is Ishwari Prasad Khaitan, promoter of Loop Telecom. 

Records from Bermuda's Appleby, one of the two firms from where the leaked data originated, show that Khaitan managed two offshore family trusts of his brothers-in-law Sashi and Ravi Ruia of the Essar Group, the Indian Express reported on Wednesday. According to the report, an investigation of the data revealed that Khaitan managed these trusts, set up in July 2006, through multiple layers and for a period of five years since 2006. 

Further, according to the national daily, these two Cayman Island trusts – one for the Sashi Ruia branch, The Virgo Trust, and the other for the Ravi Ruia branch, The Triton Trust, as named in the Appleby records – owned Essar Group's holding company Essar Global Limited and other offshore companies. The report also highlights how in the course of a 2G scam-related case, the CBI had alleged that Khaitan's Loop was Essar's "alter ego". Back then, the report adds, Khaitan and the Ruias had countered the allegation and claimed that Loop's promoters – Khaitan and wife Kiran – were not involved with Essar Group's promoters in acquiring 2G spectrum licences between 2006 and 2008. They had also claimed that the Khaitans had their own independent sources of finance. 

However, according to the national daily, Appleby records reveal how between 2006-2011, Khaitan owned four firms that managed the Ruias' trusts. According to the report, four Cayman Islands companies, which shared the same address, acted as the enforcer and protector of the two trusts — Grand Escalada Investments Ltd and Astra Star Investments Ltd for The Virgo Trust and Grand Richmond Investments Ltd and Grand Pinnacle Investments Ltd for The Triton Trust. 

The national daily reported that Khaitan owned these four companies. According to the report, at first, he did so directly and, subsequently, via two British Virgin Islands trusts — Global Trade and Amber Trade.

The leaked data, obtained by German newspaper Süddeutsche Zeitung, as was the case with the Panama Papers, and investigated by the International Consortium of Investigative Journalists (ICIJ), originates from two firms – Bermuda's Appleby and Singapore's Asiaciti – as well as from 19 tax havens across the world.

The papers, according to the report, also reveal that Appleby's Indian clients included firms that are under the Central Bureau of Investigation (CBI) and the Enforcement Directorate's (ED) scanner in relation to various cases. Firms involved in the Sun-TV-Aircel-Maxis case, Essar-Loop 2G case, SNC-Lavalin Kerala hydroelectric scandal (which involved the now-acquitted Kerala Chief Minister Pinarayi Vijayan), and the Rajasthan ambulance scam under the CBI. 

Prominent Indian corporates in the Appleby database include GMR Group, Jindal Steel, Apollo Tyres, Havells, Hindujas, Emaar MGF, Videocon, the Hiranandani Group and D S Construction. 

Essar's response:

In an email to the Indian Express, an Essar spokesperson said: "The Virgo and Triton Trusts (‘Trusts’) were settled under the STAR laws of the Cayman Islands in 2006. The Trusts are discretionary trusts, and the beneficiaries of the Trusts include companies whose 100% shareholders are the family members of Mr Sashikant Ruia and Mr Ravikant Ruia. 100% equity stake in Essar Global Limited (now renamed as Essar Global Fund Limited) is indirectly held by the Trusts.

The existence and structure of Trusts has previously been disclosed to the relevant regulatory authorities, as required. The prospectus of Essar Energy Limited (‘EEL’) filed with the UK authorities, which is available in public domain confirms such disclosure to the UK authorities. The Trusts have also been disclosed to the Reserve Bank of India.

Further, the beneficiary companies of the Trusts, owned by Ruia family members, have also been fully disclosed by such family members in their respective income tax filings on an annual basis in accordance with the income tax provisions.. The Trusts have not made any substantive distributions to any beneficiary till date.

The administration, control and management of the Trusts has been with the trustees of the Trusts, which are globally recognised independent and professional institutions of high pedigree. The Trusts, being discretionary trusts established under STAR laws, are by their very nature such that they are controlled by the trustees and not by the beneficiaries." 

In a separate email to the national daily, Khaitan Holdings Vice-Chairman Nalin Khaitan said: "Please note that no one from Khaitan Holdings is beneficiary of these Trusts nor do we control these Trusts."