The goings-on at the Stock Holding Corporation of India Ltd (SHCIL), which I have reported over the past three months (in The Indian Express) are scandalous enough to have triggered a series of corrective measures by the government. However, there is also a clearly discernible attempt to contain the damage, even if it means protecting those individuals who participated in the fraud.
SHCIL is India’s largest depository company, 83% of its equity owned by leading banks and financial institutions. R Jayaraman Iyer, CMD until April 15, was sent on mandatory leave after our reportage on his dubious activities. This included the clandestine sale of 76% of the shares of SHCIL Services Ltd (SSL), a 100% subsidiary, to private and foreign entities. The purpose: to exploit a government e-stamping contract bagged by SHCIL for the benefit of private entities and individuals who may be acting as fronts from RJ Iyer and his co-conspirator S Ramanathan (CEO of SSL). The core of the scam was to divert part of the funds paid for the e-stamping technology to Unitec Value Solutions Pte, a Singapore-based company, acquired by SSL.
I reported this in mid-February. The government finally sprang into action in April to restore SSL to SHCIL, which was clueless about SSL being stolen from under its nose. The government ordered an investigation under Sec 247 (i) of the Companies Act to find out who really owned SSL. On April 14, Iyer was removed as chairman of SHCIL and SSL and KPMG’s fraud detection arm was appointed to investigate. SHCIL also filed a petition before the Company Law Board (CLB) seeking an investigation into SSL, which was posted for hearing in September. Consequently, the finance ministry’s department of economic affairs moved again to request the CLB for orders under Sec 250 (2) to freeze SSL’s shareholding and block all voting rights or transfer of shares. This order, passed on May 17, 2007, has put SHCIL back into the driver’s seat at SSL by restoring status quo ante. SSL has the right to appeal and the matter will come up for hearing in August.
Government power is protecting several individuals at SHCIL who actively colluded in the brazen theft of an entire company |
The finance ministry appears to be working overtime, with support from the ministry of company affairs, to shield SHCIL. But government power is also protecting several individuals at SHCIL who actively colluded in the brazen theft of an entire company from what KP Krishnan, joint secretary at the finance ministry, says is a government-controlled organisation. Not only have SHCIL’s shareholders failed in their fiduciary responsibilities, there seems to a cover up of the active support for Iyer by one independent director and a former bank chairman, both due to give up their directorships at the forthcoming extraordinary general meeting. There is also the inaction of the capital market regulator, and of other officials who colluded with Iyer and Ramanathan to cover up their involvement. Why has the Central Vigilance Commission’s month-old recommendation to hand over the case to the CBI been ignored?
http://www.financialexpress.com/columnists/full_column.php?content_id=166744