Anubhav Plantations

Anubhav Group

Former type	Publicly owned
Industry	Teak plantations, Time share, Agrotech
Genre	Teak plantation Deposit mobilising company
Fate	Allegations that this consortium of companies is a fraudulent Ponzi scheme
Founded	1992
Founder	C.Natesan
Defunct	December 1998
Headquarters	Chennai, Tamil Nadu, India
Area served	India
Key people	C.Natesan, Chairman and MD S. Shreenivas Rao, Director
Services	Teak shares, Time share units
Number of employees	1,800+
Divisions	Anubhav Agrotech Anubhav Green Farms & Resorts Anubhav Plantations Anubhav Royal Orchards Exports

Also see Saradha group Scam

Also known as the Anubhav Teak Plantations Scam

Anubhav plantations (1992-1998) was an Indian Chennai based plantation company.^[1] It sold shares in teak plantations on guaranteed interests and later diversified to other schemes through four principal companies: Anubhav Agrotech, Anubhav Green Farms & Resorts, Anubhav Plantations, and Anubhav Royal Orchards Exports.^[2]

The company suddenly closed down in 1998, when the company could not pay its depositors any longer, leaving its thousands of investors in the lurch and unpaid. Its chairman Natesan went underground and the other directors claimed ignorance and innocence.^[3] It was subsequently revealed to have scammed its depositors by defrauding them of nearly Rs. 400 crore through Ponzi schemes. Investigations revealed that the company was a scam based on fraud as teak being an agriculture based commodity could not promise sure returns.^[4] The Anubhav case is often termed by the Indian media as "The Great Plantation Scam of the 1990s".^[5]

History

The Anubhav group of companies was founded by C.Natesan, a commerce graduate from Chennai's Vivekananda College and a chartered accountancy course dropout. Natesan started his career in 1983 by launching a consultancy firm called "Yours Faithfully Consultancy". In 1984, he started a construction company with three partners. Three years later in 1987, he closed this venture and set up the Anubhav Foundation which became the mother company of his future enterprises.^[6]

Formation

In 1991, as part of its post liberisation process, the Indian government allowed firms within India to be formed as financial entities. Investing in agricultural commodities, so far only permitted to NABARD was opened up to private investment. In this environment, Anubhav Plantations Ltd. (Anubhav) was floated by Natesan as a listed public limited company in 1992. Over the next six years, the Anubhav umbrella expanded to include various other companies including Anubhav Homes Ltd., Anubhav Resorts Ltd., Anubhav Finance & Investments, Anubhav Communications & Advertising (Pvt.) Ltd., Anubhav Royal Orchards & Exports, Anubhav Hire Purchase Ltd., Anubhav Green Farms & Resorts (Pvt.) Ltd., Anubhav Agro, Anubhav Security Bureau, Anubhav Interiors and Anubhav Health Club. Under these companies, the Anubhav group owned and operated 254 finance firms, including 95 firms of Anubhav finance investments, 169 firms of Anubhav dhan varsha and a firm each of Anubhav Agro and housing developers. Further the plantation companies themselves had several companies under them. For example, Anubhav plantation had six companies operating under it including Anubhav Good Earth Unit II, Anubhav Teak Deposit and Anubhav India Limited.^[7]

By 1998, Anubhav group had become a Rs 250 crore (Rs. 250,00,00,000 or Rs. 2.5 Billion) company which, apart from its teak-plantation schemes, was involved in other enterprises including finance, real estate and timeshare - a popular enterprise in the just liberalized India of the 1990s. These companies were well structured and backed by a nationwide infrastructure of 91 offices and over 1,800 employees. This included an aggressive highly effective and young sales force.^[8]

Modus Operandi

Anubhav investors were offered Teak certificates / teak shares for investing anything upwards of Rs. 1000. These investments were marketed under different confusing and complicated schemes that started to give returns each year of Rs. 1000 and bumper returns after 20 years to the tune of Rs. 50,000. While NABARD stated that only Rs. 20-30 was actually required to plant a teak tree, plantation firms such as Anubhav justified their charging nearly ten times this amount by including costs for security de-weeding and fertilisers. Further, Anubhav inflated the expected yield of timber by nearly twenty times the standard that had been generally observed by previous studies NABARD. In return, a teak plant would be planted on their behalf, which could be sold 20 years later. During these 20 years, the certificate would yield around 20% interest for the depositor, giving returns of around Rs. 50,000 after 20 years. This was nearly triple that offered by bank deposits.^[2] The company claimed that it owned team plantations spread over 1000 acres of land, and floated attractive advertisements and plush offices, thus encouraging confidence among people.^[9]

Abnubhav was not the first group to do this. The first attempt to promote private investment in teak plantations occurred in 1991, when a Hyderabad based company Sanghi Plantations, introduced a scheme offering investors teak trees at a nominal cost of Rs 1,261 with what later turned out to be an unrealistic return of Rs 50,000 after 20 years.^[10] Teak plantations typically take 50–60 years before giving returns, are extremely susceptible to weather and have rarely given dependable returns in India.^[11] However, in the light of general ignorance on the part of most lay people, Anubhav entered this foray of marketing lucrative teak plantation schemes along with companies such as the Parasrampuria group, DSJ group and the Cochin based "Sterling Tree Magnum", all of whom promised similar high yet unrealistic returns.^[12] During the early 1990s, Teak plantations mushroomed in southern India with 40 such companies were registered in Madras and eight in Bangalore from January to September 1992. Most of these companies did not have adequate crop insurance and none of them were able to live up to their promises. All of them had skewed capital structures. After the 1998 scam and subsequent investigations, CRISIL subsequently reported that on an average, these teak plantation companies had a promoter's contribution of just Rs. 35 Lakhs for every investor's share of Rs. 300 crores.^[13]

Meanwhile, in interviews and announcements in news papers, Natesan unveiled future plans to forward-integrate from teak into furniture and to import machinery to make it. This led to a further increase in small investors. However, his growth strategy was focused mainly on mobilizing funds from investors rather than actually investing in plantations, plants, land and factories. The group had already raised vast sums of money to the tune of more than 400 Crore rupees from the public in the form of fixed deposits, so called "teak units", and a combination of fixed deposits and teak units. Natesan was extremely secretive about the financial performance of his group and this was never revealed to investors who were happy as long as they received regular interest payments.^[4][14] Subsequent examinations of the company's accounts revealed that it was posting far higher incomes than its real profits. For example: In 1996-97, the company posted a net profit of Rs. 38.69 lakhs while its plantation income amounted to Rs. 35.32 crores.^[15] A total of nearly 3500 teak plantation based companies were set up in the 1990s in India, all promising interests to the tune of 21-24% when bank deposits gave an interest of 5-7%.^[2]

During its height in the mid 90s, the Anubhav group was often described by the media as an example of a successful company (thus becoming a role model for about 530 other teak and agro based companies listed by SEBI that arose during that time and also subsequently defaulted, including Ballarshah teak plantations).^[15] The media also portrayed a larger than life image of Natesan himself. An ambitious man, Natesan's ostentatious lifestyle, his cars, and his plush office in Chennai's up market Royapettah area were frequently cited by the media as examples of his lavish tastes. Natesan had also associated his company with the World Wildlife Fund (WWF) thus garnering a positive image for his company.^[16]

Scam of 1998

In January 1998, cheques issued by Anubhav to its investors began to bounce. Some investors reported that other than the first two payments, all the cheques had bounced. Most of these investors were middle class and retired Indian working class people, who had invested their savings in Anubhav. Their amounts varied between Rs. 15,000 to Rs. 50,000 per person.^[17] They included Indians from commercial large cities such as Mumbai as well as smaller cities and towns such as Pune, Shimla, Trichy and Sangli. In 1998, the company started to default on payments to its investors. On 2 December 1998, a letter was sent to all the investors of Anubhav group to come to the Woodlands hotel in Chennai to receive their long due payments. When some of the investors landed at Anubhav's offices in Royapettah, they were met with locked doors. The company had closed down, with Natesan absconding.^[4][14]

Some of these small investors were themselves on the brink of bankruptcy, having invested their life savings in the Anubhav group and its schemes. The letter that they had received had actually been sent by an advocate from a law firm that was following up the Anubhav group in response to court cases that had been filed against it. The letter invited them to come and check all the records and the balance sheet of the company. The event was covered by newspapers who reported that "...investors could be seen everywhere - sitting on the pavements, standing around the building, walking up and down the roads - all of them tense and worried."^[18]

Many depositors, who went to the group's offices in Chennai and other cities to collect their deposit amount after maturity, found the doors locked and lodged complaints with the police. Later, thousands of investors demonstrated in front of the company's headquarters in Chennai, however by then, the main accused, Natesan had already gone underground.^[9]

Aftermath

The Anubhav group of companies was eventually found to have duped investors and depositors of over Rs 400 crore. As details about the 'Great Plantation Scam of the 1990s' began to be unveiled in the media, and it turned out to be a Ponzi scheme, Natesan's modus operandi shocked those who had held the Anubhav group in high regard.^[18]

A government enquiry was subsequently launched into the Anubhav group. It's investigations revealed that the company had defrauded its investors through various plantation schemes, paying initial interests to old investors by simply chanelling them from new investments by new investors.^[4] A liquidator M.Ravindran was appointed by the Madras High Court to try and repay its depositors at least in part.^[15] A number of investors formed their own city based support and action groups to send in their claims, once such group being "The Pune Anubhav Investors' Action Committee (PAIAC)" formed by the 750 odd depositors of Pune who had deposited Rs. 6 crore.^[18]

Natesan, the chairman and managing director of the Anubhav Group of Companies was subsequently caught by the police and placed in judicial custody, while the filing of the final chargesheet in his criminal case (No. 20501 of 1999) was delayed. The Madras high court meanwhile issued a non-bailable warrant against S. Shreenivas Rao, one of the directors of the Anubhav Group of Companies. Rao had earlier moved court requesting that the non-bailable warrant issued by additional chief metropolitan magistrate in Chennai be recalled as he was director of Anubhav Agrotech and had nothing to do with Anubhav Plantations Ltd.^[18]

In its proceedings, the high court observed that Anubhav Agrotech Ltd. was one among the Anubhav Group, which, in January 1999, became Anubhav Agro Developers. The court observed that there was proof that Anubhav plantation funds were diverted.^[2]

Anubhav group (The Anubhav Teak plantation Scam or simply The Teak Plantations Scams of 1990s) is often included in the list of scams that occurred in post liberalized India in the 1990s and referred to as the "The Great Plantation Scam of the 1990s". However, plantation related frauds continue to occur in the country, due to unsuspecting people lured by promises of high interests, a more recent case being that of Timber World resorts and plantations ltd. that was launched by a catering college gradate Ashwani Sud from Delhi that turned out to be a similar scam in 2009.^[19] Similarly, in 2012, hundreds of Gujaratis lost their money in a similar tree plantation scam floated by the Ellisbridge (Ahmedabad) based company "Golden Trees Plantation Ltd."^[20]

While the first ot be unearthed, the Anubhav scam was not the largest agro based scam in India. As per the SEBI, in the subsequent Pearls Agrotech scam (PACL - Pearls Agrotech Corporation Limited), PACL collected Rs 49,100 crore from 5.85 crore customers over 15 years by offering ambiguous investments linked to agricultural land and its development over a certain period of time.^[9]

After seven years of judicial custody, Natesan was released on bail in 2007. Of the 107,12,33,696 rupees invested by small investors, the company refunded Rs. 100,44,64,461 to 31,431 depositors. About Rs. 7 crore has still not been refunded to 2,044 depositors.^[21]

References

1. Aiyar, VS (2 November 1998). "Now a Green Scam". India Today.
2. Balooni, Kulbhushan (IIM Kozhikode). "Teak investment programmes: an Indian perspective". www.fao.org. FAO Forestry department. Retrieved 26 October 2016.
3. "Case Study - Anubhav scam (Teak plantations scam)". www.icmrindia.org. ICMR India. Retrieved 26 October 2016.
4. "Case Study - Anubhav Plantations". www.icmrindia.org. ICMR India. Retrieved 26 October 2016.
5. Muthukrishnan, Daya (20 July 2010). "Planting the dream - Anubhav plantations scam". More Wealth Advisors. Retrieved 26 October 2016.
6. Balooni, K (1 August 2000). Commercial agroforestry - a misnomer. (1 ed.). Kozhikode, India: IIM - Indian Institute of Management.
7. "Anubhav group investors can file claims for lost money". One India. 9 October 2007.
8. Kakkar, R.M.R (19 July 1994). "Government may slap blanket ban on plantation schemes". Telegraph.
9. "From Anubhav to Saradha - lessons to be learnt". www.xaam.in. Indian Express. Retrieved 26 October 2016.
10. Srinivasan, A (3 March 1993). "Money now grows on teak". Statesman.
11. Chaturvedi, A.N. (1 June 1995). "The viability of commercial teak plantation projects". Indian Forester. 121 (6): 550–552.
12. Debabrata, K.C. (1 July 1999). Teak: ecology, silviculture, management and profitability. Dehradun, India: International Book Distributors.
13. Prasad, RR. "Teak plantations in India". www.panamaforestry.com. Press Trust of India. Retrieved 26 October 2016.
14. "ICMR Complete Detailed Case Study - Anubhav Plantations". www.icmrindia.org. IBS Centre for Management Research. Retrieved 26 October 2016.
15. "Press release by SEBI - 31 October 2003. Status of Collective Investment Schemes (CIS) and List of defaulters". www.watchoutinvestors.com. SEBI - Securities and Exchange Board of India.
16. Jain, A (24 August 1998). "Finance company officials disappear after fraud". Hindustan Times.
17. Krishnan, Muthu (26 October 2010). "Letters from Investors - 5 August 2010 to 5 March 2016". More Wealth Advisors. Retrieved 26 October 2016.
18. "Cheers for plantation scheme investors". Times of india. 18 February 2003. Retrieved 26 October 2016.
19. Ghosh, Dwaipayan (20 August 2009). "Tree plantation scheme unearthed, kingpin held". Times of India. TNN. Retrieved 26 October 2016.
20. Shastri, Parth (31 August 2012). "Hundreds lost money in tree plantation scam in state". Times of India - Ahmedabad edition. TNN.
21. Brarapatre, Ashish; Kapoor, Aditya; Kothari, Bhavik; Gupta, Ankur. "Planting a dream - Anubhav plantations scheme". Slide Share.