20-yr jail, fine: No ‘Subhiksha’ for IIT-IIM alumnus

CHENNAI: A unicorn in the business world in the 1990s and a high flyer by the 2000s, IIT (Madras) -IIM (Ahmedabad) educated R Subramanian, widely known for his supermarket chain ‘Subhiksha’ — which was the country’s largest grocery and pharmacy retailer at one point in time — has been sentenced to 20 years of jail by a special court in Chennai.

The court, which found him guilty of defrauding the common public who invested in his financial services company, further slapped a fine of Rs 190 crore on Subramanian and other accused, of which Rs 180 crore will go to the depositors as compensation.

It was his IIT-IIM pedigree and the profile of the independent directors who had retired from top positions in institutions like LIC, and the Indian Bank which induced the common public to invest in schemes floated by Subramanian’s firm, Viswapriya (India) Ltd, which he began in 1991.

Subramanian and the directors of his firm were arrested by the Economic Offences Wing (EOW) of Tamil Nadu Police in the fag end of September 2015 after police started receiving complaints against Viswapriya.

The prosecution’s case was that the accused collected deposits from the public under various schemes assuring returns with interest at the rate of 10-12% per annum and cheated the depositors. “The accused created shell companies and misappropriated public money and portrayed the bogus companies as genuine,” the prosecution stated.

The court noted that Subramanian has admitted that Viswapriya India Ltd devised two schemes -- ‘Prime Invest’ and ‘Asset-Backed Securities Bond’ -- and collected around Rs 125 crore.

The prosecution pointed out that the NBFC (Non-banking financial company) licence for Viswapriya was cancelled by the Reserve Bank of India in 2005.

Still, the company continued to collect deposits from the public under the cover of various schemes. By 2013, the company began to default on the payments after which complaints started pouring in.

Police seized 76 PAN cards following searches and proved that he had further floated several shell companies to which the money was diverted.

EOW submitted witness statements from 98 persons (depositors) and more than 2,300 documented exhibits to prove the case. The witnesses deposed before the court that they invested in the schemes because of pamphlets, newspaper ads and door-to-door canvassing by the agents of Subramanian’s company.

After perusing the submissions from both sides, G Karunanidhi, a Special Judge under the Tamil Nadu Protection of Interests of Depositors in Financial Establishments (TNPID) Act held the accused guilty.

Pointing out that Subramanian targeted and cheated retired persons and floated more than 80 companies from one room, the special judge held that he deserved severe punishment to serve the ends of justice. “In this case, more than 180 depositors died. Nobody has seen the money which was earned in their lifetime. Most of the victims are aged. The accused have not come forward to deposit even a single pie,” Special Judge G Karunanidhi noted.

Storied entrepreneur who turned lawyer to hoodwink system

From flaunting his IIT-IIM pedigree to dazzling investors and the media with his entrepreneurial skills, R Subramanian had showcased many a performance over the years. But his last dance, which was on display after the focus of the Economic Offences Wing (EOW) turned on him and his fiefdom in 2015, was markedly different.

He spent the next eight years as a lawyer, arguing his own case before the special court, and even updated his LinkedIn profile to add ‘corporate lawyer’ to his bio. However, as it turned out, it was not a marketable vocation for the storied businessman who now faces 20-year jail term.

Like the shell companies he managed from a single room, Subramanian conducted the case through his juniors for the other accused.

Censuring him for dragging the trial, the special court noted that these tactics were employed to delay the return of the defaulted amount to the depositors. “In spite of admitting of a liability of Rs 137 crore to depositors, he filed petition after petition before courts. It was his habit that, if he filed one set of petitions before this court for one company, after disposal of that petition, he filed another set of petitions with same print by changing the accused name to another company. So he has conducted the case by filing vakalat of his juniors for the purpose of filing petition after petition to delay the case and also repayment,” said Special Judge G Karunanidhi.

As directed by the Supreme Court and Madras High Court, the trial court had held hearing every day. But appearing for his company, Subramanian chose to not cross-examine the prosecution witness despite being given ample opportunities. Instead, he continued filing recall petitions to examine witnesses, which were dismissed.

Seeing through his game, the court noted, “The reason for belated filing is to delay the trial for few years since the witnesses come from different parts of the State and are aged.”

Despite several witnesses providing receipts for their investment, Subramanian argued that those investments were put in debentures and not deposits. Debenture is a debt instrument that is not backed by any collateral, but only by the issuer’s creditworthiness and reputation.

This devil in fine print was not known to the general public. S Lalitha, one of the prosecution witnesses, deposed during cross examination that she was not aware that she invested the amount in a debenture and did not know the difference between fixed deposit and debenture.

He then faulted the police for not producing debenture certificates and filed several petitions to produce debenture holder register. But the main investigating officer, inspector Lavakumar, said he did not seize any such register.

“This court offered fair trial to all accused in all stages. It is settled law that fair trial to be offered not only to the accused and also to be given to victims and society. Therefore, knowing his liability, he delayed the case at all levels from the beginning, by filing hundreds of petitions and memos.” The court also expressed disgust that the properties he offered to compensate the depositors were in litigation and did not offer any other litigation-free properties for sale.

“Though he admitted that he defaulted more than Rs 137 crore to the depositors of all schemes, he has not voluntarily deposited any amount for disbursement to the depositors for the past 10 years. Even after seeing the poor and innocent depositors in the witness box, he is not willing to deposit any amount. Many witnesses were crying while giving evidence in the witness box,” the judge noted.

As he dragged on the case in the last decade, 186 depositors died waiting for their money and justice. Most of the remaining are senior citizens, who are in living hell because of one person’s greed, undergoing a mental agony at this age which cannot be compensated in any form, the court noted.

Vocalist gets 10-yr jail; Indian Bank ex-CMD acquitted

CHENNAI: Besides R Subramanian’s wife, S Srividya, and more than five independent directors, all of whom face jail term in the cheating case, there were prominent persons who served as directors in his’s ventures.

Of them, two persons, a former chairman of Life Insurance Corporation (LIC) and a retired member of Income Tax Appellate Tribunal, died during the course of trial and charges against them were abated.

TS Raghavan, a former CMD of Indian Bank who was included as an accused, submitted that he was an independent, non-executive director in Viswapriya (India) limited and had a minimal role. “He had no involvement in floating, promoting or creating the accused companies. He had no involvement in creating these schemes and making decisions with regard to financial transactions,” his counsel had argued.

Noting that there was no incriminating evidence against him, the court acquitted him.

R Ganesh, a Carnatic vocalist who had served as a director in one of the companies Subramanian floated, contended that during the entire tenure, he was mostly performing at music concerts in India and abroad, and recordings in Doordarshan, All India Radio, private channels and also for music production companies.

“Due to his scant presence in the company, he never performed any managerial or decision-making functions. Some investors of the company have been listeners of Carnatic music and bhajans and so they were aware of him only through concert circuits. As a result of his public appearances, some people may be familiar with him but he may not have any personal or one-to-one interaction with any of them,” his counsel submitted.

However, the court held that the prosecution proved the charges against Ganesh and sentenced him to 10 years imprisonment and slapped a fine of Rs 8.9 crore on him.

Another independent director, Mohana Ramasamy, was also acquitted.