Kushagra Bajaj takes on Rahul

With the Bajaj separation plan floundering on the rocks of mistrust and family rivalries, Kushagra Bajaj, elder son of Shishir Bajaj, has now come on record to explain why things went wrong. As Kushagra tells it, his father decided to split from the Bajaj group because uncle Rahul Bajaj, the group patriarch, was thinking less about the whole family and more about his own sons - Rajiv and  Sanjiv. And even after agreeing to give Shishir’s family control of Bajaj Hindusthan, Rahul Bajaj has failed to deliver on several parts of what was agreed between mediators, S Gurumurthy and DS Mehta. Following are excerpts from Kushagra Bajaj’s views on what led to the split, and why it is still not complete.

On why he is going to the press now again Rahul Bajaj.

One reason why we did not wish to speak on the family settlement earlier was that we did not want to wash dirty linen in public. After all, anything spoken against Rahul Bajaj will ultimately sully the hallowed Bajaj family name. But now his (Rahul Bajaj’s) “self-centred and son-centred” behaviour is systematically destroying the altruistic legacy of his grandfather and the founder of the Bajaj group, Jamnalal Bajaj…I feel the time has come for me to distance myself from Rahul Bajaj and align myself to the legacy of my forefathers.

One why the Shishir Bajaj family decided to separate.

I think this question has been answered by Rajiv Bajaj very openly and comprehensively. To elaborate, Rahul Bajaj’s style of functioning is not conducive to the growth of entrepreneurship and the development and mentoring of leaders from the new generation who should be groomed to grow the businesses. Rahul Bajaj is “son-centric”. His sons get preference over everyone else in the family. 

Rajiv Bajaj has himself disclosed that he had put in his papers in Bajaj Auto more than once.  He has also asserted that he is making money by selling bikes, while his brother is only “balancing the books”.

In retrospect, I think my father, Shishir Bajaj, and I had correctly diagnosed the problem in the family. We had rightly decided to separate from the larger Bajaj family that was unquestioningly deferring to the dictates of Rahul Bajaj. We planned to take our share, even if it was substantially lower than what was due, and chart our own course in life.

On whose original idea was it to separate?

The idea of carving out separate companies from the group came initially from Shekhar Bajaj (Rahul’s cousin).  Shekhar Bajaj met my father because he thought that what Rahul Bajaj was doing was very unfair.  Therefore, if both (Shekhar and Shishir) got together, each of them would get a reasonable share with which they could manage businesses of their own.

However, while my father stuck his neck out for quite some time demanding separation,  Shekhar Bajaj chickened out and returned to the fold of Rahul Bajaj. So much for the theory of one brother against four (Shishir vs Rahul and three other cousins). I don’t know what had been offered to Shekhar or what he was afraid of.

On who helped make the separation plans.

DS Mehta, a chartered accountant and company secretary, a trusted family friend and almost a family member, got involved in creating the family division. Mehta conducted several meetings in Mumbai and Pune. These meetings went on for months, but he was able to hammer out an arrangement. In his settlement, it was agreed that Bajaj Hindusthan Ltd, (BHL) and Bajaj Consumer Care Ltd. (BCCL) will be given to us, the Shishir Bajaj family. Besides this, a balance compensation package was also to be given to us.

On when the settlement to separate will be finished.

Despite the passage of several years, the prospect of a family settlement appears to be even further than before.

On what then actually went wrong.

It went wrong right from the beginning. It was agreed that each side will transfer its shares to the other at the agreed price. We were to transfer all our Bajaj Auto shares, even the shares held personally, to Rahul Bajaj at a price of Rs 400 plus. He was to transfer all Bajaj Hindusthan Ltd (BHL) shares held by him and his side at Rs 67 for every Rs 10 share.  He held 10% BHL shares between Maharashtra Scooters and Bajaj Auto. Since these were public limited companies, the understanding was that these companies would get the market price from us. The difference between Rs 67 and the market price would be made good by the Rahul Bajaj side to us personally as part of our compensation.  A letter dated December 9, 2003, from Rahul Bajaj to DS Mehta confirmed this.

Despite this, Rahul Bajaj backed out from the commitment. At today’s prices, the loss to the Shishir Bajaj family is about Rs 175 crore.

On what were the tricky issues.

The family trusts became a tricky issue with regard to this balance compensation.  These family trusts were promoted with donations from family companies.  These trusts own nearly 10% of the share capital of Bajaj Auto Ltd.  If I remember correctly, these trusts were worth more than Rs 500 crore. Today, their value would be over Rs 2,000 crore.

The Shishir Bajaj family was entitled to 25% of the wealth of these trusts. In fact, Mehta insisted that we should legitimately get that 25% share. 

For more than three years, we were talking about it but could not arrive at any settlement.  Rahul Bajaj then started threatening that he would remove us from all the companies.  The first step he took was to attempt to remove my father, Shishir Bajaj, from the chairmanship of Bajaj Sevashram Ltd. This forced us to approach the Company Law Board (CLB) and seek redressal.  We could not help taking the dispute outside as we were not able to sort out the issue between ourselves privately. So, we filed a petition on March 4, 2003, before the CLB. Their lawyers gave an assurance to the CLB that a status quo will be maintained.

On what happened at the CLB.

The CLB advised us that family disputes should be settled privately and amicably.  Meanwhile, serious mediatory efforts were made by S. Gurumurthy, who was also then advising us in the matter.  I accompanied Gurumurthy to meet Rahul Bajaj. There, ultimately, Gurumurthy was able to patch together a settlement on June 4, 2003.  Following this settlement, an MoU was put together and recorded on June 8, 2003.

On what the mediators are saying now.

Gurumurthy disappeared from the scene after that. Mehta privately agrees with us, but is unable to take a public stand.

On what happened to the 10% of Bajaj Hindusthan shares.

We fought for the 10% through our solicitors persistently for a couple of months, through correspondence and otherwise. But Rahul Bajaj totally stonewalled the issue.  We finally had to take a call on whether we should go on litigating for that 10% for another 15-20 years, or give it up to start our lives afresh. The present state of the legal system does not permit anyone to pursue even his right and just cause. It was really a tough call but we decided to give it up and forget it. That was around December, 2004.

On whether Rahul Bajaj accepted the settlement after that.

Yes. After we, the Shishir Bajaj family, gave up our claim to the 10% of BHL shares held by Maharashtra Scooters and Bajaj Auto, Rahul Bajaj filed an affidavit in the CLB on March 14, 2005, through Shekhar Bajaj that he accepted the settlement on behalf of all the members of the family and on behalf of all companies. 

On other problems.

Still there were several issues of price and properties to be settled.  There were many draft documents to be finalised and executed as well. So tussles on various issues dragged on for some time.  Meanwhile, I got caught up with the upswing of the sugar cycle.  The price of the BHL share soared from Rs. 7/- to over Rs. 450/- by the time the methodology of the settlement was finalised. The price of shares for determining the compensation was fixed. 

So the increase in the BAL share price is not at all the reason why the settlement could not be concluded. We have never asked for anything more than what was to be given to us by the MoU and the decision of D S Mehta.

I must dispel this misconception once and for all. It is Rahul Bajaj who has gone back on his commitment to honour the settlement and DS Mehta’s decision.