Nitin Mangal, formerly of Veritas Investment Research, says, ‘I feared for my life’

Analyst Nitin Mangal was arrested and taken by police on a 2,000-mile journey after he co-wrote a negative report about an Indian conglomerate.ENLARGE
Analyst Nitin Mangal was arrested and taken by police on a 2,000-mile journey after he co-wrote a negative report about an Indian conglomerate. Photo: Junho Kim for The Wall Street Journal

Geeta Anand

Sept. 15, 2015 12:29 a.m. ET

INDORE, India—When stock analyst Nitin Mangal co-wrote a research report in August 2012 telling investors to sell shares in companies that were part of the Indiabulls Group, a big Indian real-estate and financial conglomerate, he figured the company wouldn’t like it.

He didn’t expect what happened.

More than two years after his report appeared, police arrested Mr. Mangal last November and took him on a five-day trip to two Indian cities, accompanied by an Indiabulls lawyer. The purpose of the trip, police say, was to gather evidence related to alleged defamation and other accusations tied to his research report.

Mr. Mangal says the trip was intended to intimidate him. One night, he said, he was chained to his bed. He also said he was threatened by the lawyer with physical harm if he didn’t cooperate with Indiabulls.

“I feared for my life. I didn’t know what they would do to me,” said Mr. Mangal, who eventually was brought to Gurgaon, a suburb of the Indian capital of New Delhi, where he was then jailed for 12 days, before being released on bail. He hasn’t been charged with committing a crime, though police have sought approval from a judge to file charges, and a hearing is to take place in October.


Police say they arrested Mr. Mangal as part of an investigation but didn’t intimidate or mistreat him. The Indiabulls lawyer agrees he went on the trip with them but says he didn’t threaten or intimidate Mr. Mangal.

The case of Mr. Mangal is a cautionary tale as foreign investors weigh how much to wager on the ability of the country’s new prime minister, Narendra Modi, to drive a growth spurt by cutting red tape, increasing transparency and streamlining taxes.

The Indiabulls Finance Centre in Mumbai. Wrongly criticizing Indiabulls ‘is certainly something that will get a reaction out of me,’ said Gagan Banga, managing director of Indiabulls Housing Finance Ltd. ENLARGE
The Indiabulls Finance Centre in Mumbai. Wrongly criticizing Indiabulls ‘is certainly something that will get a reaction out of me,’ said Gagan Banga, managing director of Indiabulls Housing Finance Ltd. Photo: Dhiraj Singh/Bloomberg News

In April, the Delhi High Court granted Indiabulls an injunction against Dow Jones & Co., publisher of The Wall Street Journal, restraining it from publishing an article on Mr. Mangal’s research report. The injunction came after the Journal had approached the company in April about the article and was granted on the grounds that, among other things, it was “likely to prejudice and hamper the course of investigation and judicial process.” The Journal fought the injunction, and the bar on publication was lifted Monday.

Founded as an online securities brokerage in 2000, the Indiabulls Group expanded rapidly and moved into real estate and other areas as India’s economy underwent a growth spurt from 2003 to 2008. By 2012, the group had three publicly listed companies—Indiabulls Financial Services Ltd.,  Indiabulls Real Estate Ltd. and  Indiabulls Power Ltd.

The share prices of the three declined Aug. 8, 2012, the day Veritas Investment Research Corp., which employed Mr. Mangal, released its public summary of his report—the flagship financial-services firm by 0.8%, the real-estate firm by 2.4% and the power unit by 3.2%. Each stock continued to decline in the weeks after.

Since then, the controlling shareholders have restructured the companies, combining the financial-services firm and a subsidiary into a new flagship firm,  Indiabulls Housing Finance Ltd. , and separating the power company from the group.

A bearish report

Mr. Mangal’s ordeal began with the tough 2012 stock-analysis report on the Indiabulls companies, written by him and his Toronto-based boss at Canada’s Veritas, the then-head of research, Neeraj Monga. The company had only recently started covering the Indian market.

Messrs. Mangal and Monga scrutinized the group’s accounting and wrote a report titled “Bilking India.” They concluded that Indiabulls’ controlling shareholders were “siphoning funds from public companies,” among other concerns, and recommended that investors sell.

After Veritas published its analysis, Indiabulls put out a statement saying the report was wrong and accused Veritas of “profiteering” from it. Indiabulls filed police complaints in Mumbai and Gurgaon, and police in both cities filed paperwork indicating they had opened investigations of potential defamation, extortion, conspiracy and other alleged crimes.

Indiabulls alleged Mr. Monga had sent an email to an Indiabulls shareholder saying he would withhold the report in exchange for money. Veritas denies the allegation. It provided Indian courts with the email, in which Mr. Monga tells a potential client that Veritas would delay public release of the report summary by one day if the client chose to subscribe, so it could benefit from having subscriber access before the public release. Veritas already had released its report to clients, though not the public, at the time of that exchange.

Gagan Banga, managing director of Indiabulls Housing Finance Ltd., said in an interview with the Journal in April that Mr. Mangal’s 2012 report was wrong and had damaged a company that Mr. Banga said was prospering. Wrongly criticizing Indiabulls “is certainly something that will get a reaction out of me,” he said.

Some of the matters discussed in the Veritas report weren’t new. The Indian arm of U.S. securities company Jefferies LLC in 2011 rated Indiabulls Real Estate as “underperform,” citing “poor disclosures and transparency” and “large unexplained investments in unrelated entities.”

Some of the issues highlighted in Veritas’s criticisms were “plainly obvious,” said Saurabh Mukherjea, head of institutional equities at the Mumbai-based Ambit Group, in an interview. “The problem is that Veritas went out with guns blazing,” which isn’t done in India, he said, because you could “end up in a police station late at night and never see the light of day.”

Instead of putting his controversial opinions in writing, Mr. Mukherjea said he generally tells his clients verbally “where the skeletons lie.”

Police in the Indian financial capital of Mumbai questioned Mr. Mangal over several weeks in December 2012 and early 2013, though he wasn’t detained overnight. Mumbai officials, who took the lead in the investigation, concluded there was no evidence to support criminal charges against Mr. Mangal, a senior police official familiar with the investigation said.

Two thousand miles

Things went quiet for Mr. Mangal for about 18 months, he said. Then, in August 2014, Veritas and Mr. Monga filed a lawsuit in Canada against Indiabulls, alleging defamation and loss of business. Indiabulls’ public accusations and police complaints had forced Veritas to close its India operation, Veritas said. That suit is pending.

After that, Mr. Mangal says, he became the target of intimidation by Indiabulls and police, who he believes were acting at the direction of the company.

Police and Indiabulls deny trying to intimidate Mr. Mangal and say police acted independently. In an emailed response to questions, the company said, “Indiabulls did not push for Mr. Nitin Mangal to be arrested or driven around India with police.”

On Nov. 18, 2014, Mr. Mangal says, a group of police officers showed up at his home in the central Indian city of Indore, where he had moved from Mumbai when police began investigating him two years earlier. The officers said they wanted to question him, he says. (Mr. Mangal wasn’t home at the time, but his family described the visit to him.)

A week later, on Nov. 25, Mr. Mangal turned himself in to a magistrate 500 miles away in Gurgaon, the New Delhi suburb where one complaint against him had been filed by police and Indiabulls. After a night in a holding cell, Mr. Mangal said, he was put into a white Toyota minivan.

With him were four Gurgaon police officers and Ajay Grewal, an attorney for Indiabulls. Mr. Mangal says he didn’t know Mr. Grewal was a lawyer and so didn’t think of asking to bring his own attorney.

Over the next five days, the group made a 2,000-mile journey to Indore, Mumbai, then back to Gurgaon. The Journal interviewed Mr. Mangal, as well as Mr. Grewal and two of the four Gurgaon police officers who made the trip.

Nitin Mangal, right, at his lawyers’ office. Mr. Mangal said he was chained to a hotel bed during one night of a trip with police investigating his case. ENLARGE
Nitin Mangal, right, at his lawyers’ office. Mr. Mangal said he was chained to a hotel bed during one night of a trip with police investigating his case. Photo: Junho Kim for The Wall Street Journal

‘I feared for my life. I didn’t know what they would do to me.’

—Former Veritas analyst Nitin Mangal

Mr. Mangal told the Journal, “I was basically in the custody of Indiabulls.” During the journey, Mr. Mangal told the Journal, police and Mr. Grewal talked to him at length about the power and influence of Indiabulls. Mr. Mangal says the goal appeared to be to persuade him to cooperate with Indiabulls.

Mr. Grewal and the police say such conversations didn’t take place. Mr. Mangal decided to be accommodating and congenial, helping the group with directions on the routes, which he frequently drove, hoping cozying up would reduce the likelihood they would harm him, he says.

Police say the trip was part of an effort to gather evidence. Krishan Kumar, a Gurgaon police officer on the trip, said police took Mr. Mangal with them so he could to help them find his office, among other reasons. Mr. Kumar said police chained Mr. Mangal to his hotel-room bed one night so he couldn’t escape.

Mr. Kumar also said the police weren’t acting at the direction of Indiabulls. They brought Mr. Grewal along because he had some work of his own he needed to do, Mr. Kumar said, and police can bring along anyone they want.

Mr. Grewal said he went to help police speak English at hotels, but at least on the days a reporter visited and called the hotels, the receptionists spoke Hindi and not English.

Indiabulls, in an email, said Mr. Grewal went along to assist police in gathering evidence.

Officers on investigative trips can take along complainants to observe but not to interfere or pay police expenses, said Navdeep Singh Virk, the police commissioner in Gurgaon, which has jurisdiction over 24 local stations, including the one investigating Mr. Mangal.

Chained to a bed

Mr. Mangal said Mr. Grewal gave directions to the driver and appeared to be in charge, paying for lodging. The bills for two rooms at the Indore hotel where the group stayed were reviewed by the Journal. Both were in Mr. Grewal’s name, though they didn’t state who paid the bills.

Mr. Grewal denied paying for any of the officers’ expenses. Indiabulls said it didn’t pay the costs related to Mr. Mangal’s arrest and transportation, adding that “it is wrong to state that the rooms for the police officers were booked in Mr. Grewal’s name or paid by Mr. Grewal.” Mr. Kumar said police paid for all of their own bills.

For most of the trip, Mr. Mangal said, Mr. Grewal and the police were cordial to him, sharing hotel rooms with him and dining with him. But at a dinner in Mumbai, Mr. Grewal threatened him, Mr. Mangal said. He said Mr. Grewal told him that people who don’t cooperate with powerful companies like Indiabulls can be physically harmed. Mr. Grewal denied making such statements.

It was later this evening, Mr. Mangal said, that he was chained to his bed.

When, five days after starting the journey, they returned to the police station in Gurgaon, Mr. Mangal says another Indiabulls lawyer, Ashok Sehrawat, told him that he could make the police investigations go away if Mr. Mangal would sign an affidavit before a judge saying the Veritas report was wrong.

Analyst Nitin Mangal displays his accountant’s ID and the wrapper for Indian cigarettes that he says were used as currency in jail. ENLARGE
Analyst Nitin Mangal displays his accountant’s ID and the wrapper for Indian cigarettes that he says were used as currency in jail. Photo: Junho Kim for The Wall Street Journal

Mr. Mangal also said Mr. Sehrawat told him Indiabulls would give him a job. He said he interpreted that as a de facto offer of payment in return for signing the affidavit.

Indiabulls, in its emailed response, said the assertion was “completely false” that anyone from the company offered Mr. Mangal a job or wanted him to sign an affidavit.

Asked about the affidavit, Mr. Grewal said he couldn’t discuss the topic before talking to his bosses. Mr. Kumar told the Journal that Indiabulls couldn’t induce police to drop its investigation of Mr. Mangal.

Mr. Mangal says he declined to sign the affidavit. That day, Dec. 1, a judge sent him to jail after a lawyer for Indiabulls argued he shouldn’t be released on bail because his report had caused a drop in the company’s share price two years earlier and because of the “seriousness and gravity” of the accusations.

A roadside meeting

On Dec. 12, as Mr. Mangal was being released from jail, his uncle—who was picking him up with Mr. Mangal’s lawyer—says he received a phone call from Mr. Sehrawat, the Indiabulls lawyer. Indiabulls officials had the uncle’s number because Mr. Grewal had gotten it from Mr. Mangal during the five-day police odyssey. Mr. Mangal, his uncle and his lawyer say Mr. Sehrawat asked to meet them on a Gurgaon roadside.

There, a black Mercedes pulled up carrying Mr. Sehrawat and Anil Malhan, an Indiabulls executive director, according to Mr. Mangal and his lawyer. Mr. Grewal arrived in a separate car.

Mr. Malhan reiterated Mr. Sehrawat’s earlier offer: Indiabulls would get the police investigations of Mr. Mangal dropped if he would sign the affidavit, according to Mr. Mangal and his lawyer.

Mr. Mangal said he responded that he was too tired to discuss anything. Mr. Malhan declined to comment. Mr. Sehrawat didn’t return phone calls in April. Mr. Grewal said he couldn’t hear the conversation.

Mr. Mangal said he was later visited four times by Indiabulls officials seeking his signature on the affidavit, and that he declined each time. Indiabulls doesn’t dispute that several meetings occurred, but denies the officials intimidated Mr. Mangal, made promises about the police investigation or asked Mr. Mangal to sign an affidavit.

The allegations are “completely false,” the company said. “No Indiabulls officer including Mr. Sehrawat owns or controls any black Mercedes.”

Mr. Mangal said the affidavit Indiabulls asked him to sign incorrectly said he had objected to the contents of the Veritas report and that the Canadian company had published it despite those objections. He says the affidavit also contradicted his Indian court statements from 2012 and 2013 saying the report was accurate.

Nitin Mangal points out a hotel room in which the group he traveled with stayed. ENLARGE
Nitin Mangal points out a hotel room in which the group he traveled with stayed. Photo: Junho Kim for The Wall Street Journal

Mr. Mangal says Mr. Malhan, one of the Indiabulls executives, threatened him during one of these meetings, saying, “We got you out of jail. We can put you back.” One of Mr. Mangal’s lawyers, Abhijeet Dube, who was present for that meeting, also said Mr. Malhan made the statement.

Mr. Malhan declined to comment in April, referring questions to Indiabulls. Indiabulls said the meetings took place but denied any threat was made. “Indiabulls has no such power to get anybody arrested,” the company said.

On Jan. 9, 2015, Gurgaon police sought approval from a judge to file charges in court, including extortion, criminal intimidation and defamation, carrying a maximum imprisonment of seven years.

Mr. Mangal is due in court Oct. 26.

—Debiprasad Nayak, Rajesh Roy, Vibhuti Agarwal and  Preetika Rana contributed this article.

A Negative Stock Report About Indiabulls Led to an Analyst’s Arrest and a 2,000-Mile Odyssey