Breaking news

By Sucheta Dalal

After hanging on for nearly five months, S. Ramanathan, the controversial CEO of SHCIL Services Limited (SSL), finally quit the organisation this morning (Friday), just ahead of the company’s board meeting in the afternoon.

Dinesh Shah, who was appointed as an additional director of SSL on 21^st June 2007, has taken over as the new CEO, replacing Ramanathan. He holds a Masters’ degree in Business Administration from the University of Scranton Pennsylvania and has been Sr. Vice-President at Stock Holding Corporation of India Limited (SHCIL).

Meanwhile, we learn that Ramesh Razdan will be taking over as Chairman and Managing Director (CMD) of SHCIL and will not merely be a Whole Time Director in charge of management. He is expected to assume charge on Monday, 10^th September 2007.

R.K. Bansal moves back to IDBI Bank as the Chief Financial Officer. Bansal has successfully completed the task of regaining control over SSL (where SHCIL’s shareholding was dubiously diluted to 24%) and hands the baton to Mr. Razdan to continue the clean up and reorganisation.

Razdan will have to be a long-term player and ensure that SHCIL not only regains its reputation but also punishes those responsible for the most brazen financial scam one has seen in decades. Already, the laxity of SHCIL’s institutional shareholders (mostly Indian public sector banks and financial institutions) is Rs 2.5 crore, the amount of capital infused in SSL to regain control and dilute the holding of three private entities who together held 76% of the shares.

At the recent AGM of SSL, the resolutions seeking reappointment of these shareholders was defeated giving SHCIL full control over the board. The government institutions (IFCI, LIC, GIC, IDBI, UTI and ICICI) who hold over 83% of SHCIL’s shares, should not be allowed to forget that the laxity of their nominee directors allowed two employees – former CMD R. Jayaraman Iyer and S. Ramanathan to steal an entire company and also allowed it to enter competing businesses while still using the infrastructure of the parent organisation.

While one has heard of corrupt officials stealing or siphoning hundreds of crores of rupees from public sector undertakings – we know of no other example where an entire company itself was successfully purloined. If SHCIL has regained control over SSL today, it is not due to the actions or alertness of its management, but because of relentless media exposure, with the help of some internal whistle-blowers.

The new shareholding pattern of SSL after the preferential allotment to SHCIL is as follows.

• SHCIL’s shareholding increases from 24% to 78.28%.

• That of E-Ventures Capital Pte Ltd, the mysterious Singapore-based company whose role has yet to be investigated, drops from 33% to 9.43%.

• The holding of Mrs Padma Subramaniam and V. Subramaniam (the latter a consultant to the Iyer-Ramnathan duo) drops from 10% to 2.86%.

• The holding of Vivek Vaishnav, Nilesh Vaishnav and Gopika Vaishnav  -- three mysterious shareholders from Ahmedabad has dropped from 33% to 9.4%.

• Other than these, L. Vishwanathan, R. Jayarmana Iyer, S.Ramanathan hold two shares each while Shashikant Nayak holds one share.

The changed shareholding continues to leave several questions unanswered. The annual report of SSL suggests that the company is keen on paying S. Ramanathan a remuneration that “may exceed the limits prescribed in Schedule XIII based on the financial results of the company”. The AGM notice says that the excess amount will require shareholder approval. While Mr. Ramanathan has indeed quit the organisation today, doesn’t this smack of an attempt to accommodate him? Maybe the Serious Frauds Investigation Office (SFIO) will ask the SHCIL management a few tough questions.

In fact, no investigation agency has seriously questioned SHCIL employees so far and there is no action against Jayaraman Iyer or Ramanathan. The role of senior SHCIL employees who colluded with the scamsters has also not been investigated – after all, such a serious fraud cannot be committed by two individuals without the active abetment of other officials.

For instance, why wasn’t something as simple as the transfer of SSL shares held by seven individual at the time of its original constitution in 1995 (in the name of National Depository Company of India Ltd) to the institutional name (SHCIL) not done? Who ensured that the issue remains buried? What was the role of then Company Secretary, Chief Financial Officer and the auditors in this lapse, which undermined the organisation?

And more importantly, why is the government silent about the inaction of the capital market regulator in the entire SHCIL imbroglio?