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Chidambaram, a magnet to controversy
Paranjoy Guha Thakurta
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September 08, 2005

Way back in 1968, a 23-year-old Chettiar from Sivaganga district, Tamil Nadu, decided to forsake his inheritance in his family's textile business because objections had been raised to his plans of marrying a woman who did not belong to his wealthy community.

Many years later, husband and wife had become prominent lawyers; the former, a well-known politician as well. At the pinnacle of his power, a decision she took embarrassed him no end.

No prizes for guessing the identity of the two.

Union Finance Minister Palaniappan Chidambaram is usually in the news for the right reasons.

However, since August 26, he has been in the eye of a political storm because his Chennai-based wife Nalini chose to represent the Income Tax Department as a lawyer while her husband occupied the most spacious office on the first floor of North Block in New Delhi.

Chidambaram has attracted controversy many times in the past. As an idealistic youth, he had returned from the United States after earning his Master's degree in Business Administration from Harvard as a firm believer in the virtues of socialism. He went on to become a gung-ho economic liberaliser.

Not surprisingly, he is a darling of a substantial section of the media -- especially foreign journalists and the English media in India -- which is quite enamoured of this savvy and charming minister who can switch from his spotless white mundu-kurta to a dark suit before you can say 'PC.'

Chidambaram was the architect of the 'dream budget' of February 1997, the second out of the four Budgets he has presented so far. He reportedly rewrote the country's foreign trade policy at one go during a non-stop eight-hour session in Udyog Bhavan in July 1991 when he held independent charge of the ministry of commerce in the P V Narasimha Rao government.

His critics, however, see a different side of his personality. They describe him as arrogant, as a person who conveys an impression that he knows it all, an adamant person who is unwilling to listen to points of view that don't agree with his own and, worse, a turncoat Socialist who used to translate Indira Gandhi's speeches to Tamil during the mid-1970s and supported her imposition of the Emergency.

Chidambaram's supporters, on the other hand, point out that he is articulate, sharp-as-nails and a workaholic who brooks no nonsense from anyone -- not well-heeled industrialists or file-pushing babus or, for that matter, jhola-carrying Communists who he described as his 'conscience keepers' before he presented the first Budget of the United Progressive Alliance government in July 2004.

This is hardly the first time the finance minister has hogged headlines for reasons that have nothing to do with the state of the Indian economy.

Remember July 1992? Chidambaram had put in his papers as minister of state for commerce after it became known that he and Nalini had invested in shares of the scam-tainted Fairgrowth Financial Services Ltd that had been promoted by maverick ex-banker Bilgi Ratnakar who had been involved in the share market scandal involving broker Harshad Mehta.

Though nobody had asked for Chidambaram's head at that time, he chose to offer to quit his ministerial position. Everybody and his brother were taken aback when Narasimha Rao accepted his resignation with alacrity.

Chidambaram is supposed to have been upset that the acceptance of his resignation implied that the prime minister tacitly presumed his culpability in the scam, a view he vehemently denied.

It was alleged by Janata Party President Subramanian Swamy that Chidambaram had invested in 10,000 Fairgrowth shares in 1991 out of the promoter's quota at their face value (Rs 10) when the market price of the shares was much higher, thus augmenting his wealth by over Rs 540,000.

More than five years later, in January 1998, the Delhi high court dismissed Swamy's petition seeking a Central Bureau of Investigation inquiry against Chidambaram for his role in the affair.

Interestingly, the lawyer who argued on Chidambaram's behalf in the Fairgrowth case was another prominent lawyer-cum-politician, then and now on the other side of the political divide. Bharatiya Janata Party leader Arun Jaitley!

Narasimha Rao asked Chidambaram to return to his old job in the Council of Ministers in 1995 at a time when the former prime minister was being criticised (by Sonia Gandhi, among others) for not expediting official investigations into Rajiv Gandhi's assassination.

Weeks before the 1996 general election after Chidambaram had expended considerable time and effort in drafting the Congress party's pre-election manifesto, he quit the party after Rao decided to arrive at an electoral understanding with AIADMK supremo J Jayalalithaa, Chidambaram's adversary in Tamil Nadu.

He then joined hands with G K Moopanar to set up the Tamil Maanila Congress that went on to become a part of the United Front, which was supported by the Left. His most controversial decision as finance minister in the United Front government was the amnesty scheme for holders of black money -- the Comptroller and Auditor General of India later flayed the scheme in no uncertain terms, particularly for discouraging honest taxpayers.

After winning Lok Sabha elections five times in a row (1984, 1989, 1991, 1996 and 1998), Chidambaram lost from the economically backward Sivaganga constituency in 1999. Moopanar had died and by early-2001, fissures had surfaced within the TMC and in March that year, Chidambaram and his supporters were 'suspended' from the party.

Chidambaram formed the Congress Jananayaga Peravai (Democratic Forum). He contested and won the 14th Lok Sabha elections from Sivaganga and was sworn in as finance minister for the second time on May 23, 2004. His party merged with the Congress nearly six months later in November.

During the period he was not holding a position in government, he had resumed his legal practice and had even become a newspaper columnist. Yet, till as late as January 2004, he appeared pretty disillusioned with the Congress.

This is what he had written: 'During the last 12 years, (the) government, entrepreneurs and the middle class have arrived at a compact. It is an urban and middle-class driven strategy of so-called 'growth.' The disquieting aspect is there is an unspoken consensus on this strategy. Would the Congress have done anything different if it was in (the) BJP's position and heading a coalition on the eve of parliamentary elections? I doubt it.'

As a lawyer, Chidambaram held a brief for an array of influential clients like the Enron Corporation.

Soon after the Manmohan Singh government came to power, a group of ministers was set up to revive the ill-fated Dabhol Power Company promoted by Enron and others.

Given the controversial circumstances under which this project had been granted a sovereign counter-guarantee by the government of India, it was crucial that the finance ministry get involved in its revival plan.

Chidambaram 'recused' himself from participating in these official proceedings because of potential conflict of interest. This was because he had provided advice to Enron on crucial legal clauses relating to arbitration proceedings when he was not a minister.

As finance minister, some of Chidambaram's decisions have raised the hackles of the Left parties on whom the Mamohan Singh government is dependent for its survival in power.

His reported reluctance to increase the interest rate on deposits with the Employees Provident Fund Organisation -- an issue on which he was over-ruled by Prime Minister Manmohan Singh -- is one instance when the Communists were miffed with him.

Another example of Chidambaram antagonising the Left was when he chose to push through his decision to increase the cap on foreign direct investment in telecom companies from 49 per cent to 74 per cent. The same day the Cabinet took this decision, the government also agreed to a hike in the interest rate on EPF deposits.

The recent controversy surrounding his wife's appearance as a lawyer for the Central Board of Direct Taxes was entirely avoidable and has surely caused him much embarrassment. As the Board itself stated on August 26, in January 2004, Pushya Sitaraman, a senior standing counsel for the Income Tax Department in Chennai briefed Chidambaram (then practicing as a senior advocate) about a tax case involving 43 textile mills.

The case was not taken up till May last year by which time Chidambaram had become finance minister. In July 2004, due to the 'non-availability' of Chidambaram, Sitaraman 'persuaded' Nalini Chidambaram to take up the case 'in view of her long experience and familiarity with the subject.'

The CBDT claimed that since proposals for engaging lawyers are not put up before the finance minister for approval, in this case as well, 'the file was not put up before the FM.'

'In retrospect, not informing the FM was a lapse on the part of the Board,' the CBDT statement admitted, adding: 'This is the sole occasion on which Nalini Chidambaram was engaged as a special counsel by the Income Tax Department. The Board regrets any embarrassment caused to the FM.'

Nalini Chidambaram too said she took a decision to appear for the Income Tax Department without informing her husband.

On August 30, Chidambaram told the Rajya Sabha: 'I believe that none of my respected colleagues in the House would seriously think that had the matter been brought to my notice, I would have allowed it to proceed an inch further.  Let me make it clear, categorically and respectfully, that had the matter been brought to my notice at any time earlier, I would have ensured that the proposal to engage Nalini Chidambaram was nipped in the bud and not proceeded any further.'

The finance minister pointed out that when the CBDT had engaged his services as a lawyer in January 2004 in the same case, the file had not been put up to then finance minister Jaswant Singh.

The finance minister pointed out that his wife had appeared on a matter that involved a 'pure question of law,' namely, whether expenditure on replacement of machinery should be accounted as revenue expenditure or capital expenditure.

He added that the Supreme Court had ruled on the matter way back in 1967. Yet, the CBDT decided to 're-agitate' the matter. The Board lost the case before the Commissioner of Income Tax (Appeals), then before the Income Tax Appellate Tribunal and again before the Madras high court. Still, the Board had yet again gone in for appeal before the Supreme Court.

Those who are politically opposed to Chidambaram are not satisfied with his explanation. Bharatiya Janata Party leader Sushma Swaraj smirked that husband and wife did not seem to be on talking terms.

Commenting on Nalini Chidambaram's decision to return the Rs 100,000 that she had received as fees from the Income Tax Department, AIADMK MP N Jothi recounted a Tamil saying to the effect that what is a mouthful for an elephant is enough to feed a hundred ants.

Unlike 1992 in the Fairgrowth episode, this time round, Chidambaram has not offered to put in his papers. And Narasimha Rao's finance minister who is the current prime minister is unlikely to oblige Chidambaram even if he does. As for the Communists who are not exactly Chidambaram's ardent admirers, their silence is deafening.

Paranjoy Guha Thakurta is Director, School of Convergence. He is a journalist and commentator with over 28 years of experience in various media -- print, radio, Internet, television and documentary cinema.

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