The CBI has alleged that Dasari Narayan Rao received Rs2.25 crore camouflaged as investment from one of Jindal’s firm within a year of allocating him a coal block
The Central Bureau of Investigation (CBI) has booked former minister of state for coal Dasari Narayan Rao and Congress MP and industrialist Naveen Jindal for alleged cheating, graft and criminal misconduct in its 12th FIR in the coal blocks allocation scam, causing embarrassment to the ruling Congress.
During its eight-month long probe into the scam, it is for the first time the then minister of state has been named as accused in an FIR by the CBI in which it has alleged that he received Rs2.25 crore camouflaged as investment from one of Jindal’s firm within a year of allocating him a coal block.
CBI sources said Jindal Steel & Power and Gagan Sponge Iron, also a firm of Jindal, had bagged Amarkonda Murgadangal coal block in Birbhum, Jharkhand in the year 2008 by alleged misrepresentation of facts when Rao was the minister of state for coal.
It said the misrepresentation was allegedly done on three counts—land, water supply and previous allocations.
They said JSPL allegedly claimed in application submitted in January 2007 that they had only three coal blocks with them where as actually they had at least six coal blocks.
The sources said this was done to boost their eligibility for the coal block as the government was mulling to avoid monopoly of a single company by not allocating large number of blocks to one firm.
Within a year, a block was allocated to JSPL in January 2008, CBI sources claimed, noting that shares of Rao’s firm Saubhagya Media listed at Rs28 that time were purchased by one of Jindal’s firm New Delhi Exim at whopping Rs100 per share with total investment of nearly Rs2.25 crore which is alleged to be illegal gratification.
Reacting to the development, Head of External Affairs, JSPL Manu Kapoor said, “JSPL, as a law abiding company, is governed by a strong ethical code of conduct. This is an ongoing CBI investigation into coal block allocation. At this stage of investigation, JSPL is committed to fully cooperate with CBI.
Time, economic conditions, pressure of high expectations and the tax department may have taken a toll on his image, but there was a time when NR Narayana Murthy not only walked the talk on good governance but showed how committees can function differently
In 2003, I had the privilege of being a part of the Narayana Murthy Committee on Corporate Governance set up by the Securities and Exchange Board of India (SEBI). The committee made some tough recommendations, many of which have now become a part of the ‘voluntary’ code prescribed by the ministry of corporate affairs. The recommendations agitated corporate India, notably Ratan Tata, who dashed off an angry letter to the Confederation of India Industry (CII), saying that the committee was going too far with its demand for disclosures. But it didn’t make much of a difference to the report, because the process was flawless and democratic. It is another matter that corporate lobbying succeeded in ensuring that many of the recommendations were dropped; in fact there was so much anger that SEBI, as an independent regulator, was forced to send the report to the then finance secretary for approval before putting it out on its website for discussion.
It is worth revisiting what Mr Murthy did in 2003 to ensure that a significant report was completed in just three sittings (plus an additional one to review some recommendations following Ratan Tata’s angry letter). Here are excerpts from a speech that I made at the CII’s national conference in Delhi in 2003 where I addressed unnecessary anger of corporate India about the report and outlined the process that was followed.
It is important to remember why the committee was set up in the first place. In 2003, just after the Ketan Parekh scam corporate India was exploiting the freedom granted by liberalised laws to exploit shareholders. As I said that day, the best of corporate groups (among the top 50) had short-changed investors—especially during mergers and takeovers; independence of directors had been exposed as a sham after they remained silent about rampant insider trading and illegality by companies; top corporate houses were found indulging in price manipulation and insider trading. And almost every merger/acquisition exploited the loopholes provided by Section 391 of the Companies Act (or the scheme of arrangement via the high court route) to short-change retail investors. Hence the decision to revisit good governance norms.
CII’s main objection to Narayana Murthy Committee’s recommendation was that independent directors should step down from the board after three terms of three years each. (Something that Mr Murthy himself has forgotten with respect to his two key independent directors Omkar Goswami and Deepak Satwalekar). At the conference itself, we saw JJ Irani, otherwise a highly regarded Tata director making absurd statements like “directors began to make the best contribution only after they have been on the board for 20 odd years”. This was at a time when the most countries (Bill Clinton in the US, Tony Blair in UK and Valdamir Putin were ruling the world’s most powerful countries in their ’40s or ’50s).
A senior Tata director R Gopalakrishnan was on the committee. Why did he or the CII and FICCI representatives on the committee not protest? Well, because as the committee chairman Mr Murthy had put in place a process that was democratic and flawless. Here is how he completed the work in just three sittings.
* Mr Murthy wrote to every member, including four investor representatives asking for a two-page note on the key governance issues that needed to be addressed. His own office collated the submissions (some industry representatives, used to long-drawn deliberations did not bother to participate) into 75 key issues. This eliminated the usual round of opinions and speeches that usually happen on day one of any new committee meeting.
Each committee member was then asked to rate each of the 75 issues on a scale of 1 to 10, on the following parameters:
Importance: is the issue important enough?
Fairness: Does the report enhance fairness?
Accountability: Will it make companies more accountable?
Transparency: Will it increase transparency?
Ease of implementation: Is it easy to implement?
Verifiability: Is the recommendation verifiable?
Enforceability: Is it enforceable?
The submissions were again processed by Infosys – or rather Sumant Chidambi of Progeon—and aggregated. Only those issues that scored more than 50 marks were taken up for discussion at the second meeting. These were issues that received high ratings from a majority of members.
The result? All extreme views were eliminated leaving a smaller set of issues that the committee deliberated. Even here, every point was decided by a vote. For instance, the debate on the term of independent directors started with a demand that independent directors must change every three to five years. Finally, the majority decision by vote settled for three terms of three years, to be applied prospectively.
SEBI itself was pushing its own agenda for introducing good governance ratings—which probably was its reason for setting up the committee. But that too was outvoted.
Muthy’s commonsensical and businesslike approach was never followed before or after that committee, as far as I know. In fact, the endless talkfests at most committee meetings ensure that only those with the hidden agenda succeed while the rest keep talking.
Sadly, pretty soon after that Mr Murthy forgot the report and accepted the NDTV directorship, even though he knew he couldn’t attend a single meeting in the first year.
(See: Corporate Governance: Convenience Rules with Infy Too)
A close above 5,885 on the Nifty tomorrow can reverse the downtrend
The weak rupee and a sell-off in metal stocks following CBI action saw the market declining over 1.5% today. A close above 5,885 on the Nifty tomorrow can reverse the downtrend. The National Stock Exchange (NSE) recorded a volume of 66.40 crore shares and advance-decline ratio of 301:1063.
The Indian market opened lower on worries as the rupee hit a new all-time low. Unsupportive cues from the Asian markets also weighed on investor sentiment. Meanwhile, US markets closed flat in overnight trade even as ratings agency Standard & Poor’s revised US’ sovereign credit outlook to stable from negative.
The Nifty opened 29 points lower at 5,549 and the Sensex resumed trade at 19,382, down 59 points from its previous close. The benchmarks hit their intraday high in initial trade itself on support from IT and technology stocks as the declining rupee brightened their prospects.
The gains were short-lived as the market soon continued its southbound journey on selling in metal, healthcare, realty and power sectors. The rupee the rupee on Tuesday fell by a whopping 74 paise to hit a new all-time low of 58.90 in the late morning trade on persistent dollar demand from importers and banks as well as heavy capital outflows amid weak local equities.
The market continued its decline and touched its low in noon trade on selling pressure from metal, realty, consumer durables, power and banking stocks. The Nifty fell to 5,780 and the Sensex declined to 19,121 at their respective lows.
The benchmarks made a feeble recovery attempt after touching their lows but selling pressure kept the market range-bound in the negative terrain.
The impact of the weakness in the rupee was seen on the consumer durables sector which was the lop today while the metal sector declined after the CBI filed fresh cases against Navin Jindal and his company Jindal Steel & Power and former minister of state for coal Dasari Rao in the coal block allocation scam.
The market finally closed near the lows of the day with the Nifty declining 89 points (1.52%) to 5,789 and the Sensex settling at 19,143, a drop of 298 points (1.53%).
Among the broader indices, the BSE Mid-cap index declined 1.60% and the BSE Small-cap index dropped 1.82%.
All sectoral indices closed in the red today. The main losers were BSE Consumer Durables (down 6.36%); BSE Metal (down 4.13%); BSE Realty (down 3.68%); BSE Bankex (down 2.24%) and BSE Power (down 2.07%).
Out of the 30 stocks on the Sensex, five settled higher. The gainers were Cipla (up 1.90%); Bajaj Auto (up 0.83%); Wipro (up 0.69%); Coal India (up 0.39%) and Hindustan Unilever (up 0.30%). The major losers were Jindal Steel & Power (down 15.18%); Hindalco Industries (down 5.97%); Tata Power (down 5.87%); ONGC (down 3.91%) and ICICI Bank (down 3.75%).
The top two A Group gainers on the BSE were—Satyam Computer Services (up 4.17%) and Tech Mahindra (up 2.91%).
The top two A Group losers on the BSE were—JSPL (down 15.18%) and JSW Energy (down 11.16%).
The top two B Group gainers on the BSE were—Saboo Sodium Chloro (up 20%) and Best & Crompton Engineering (up 19.73%).
The top two B Group losers on the BSE were—Capital First (down 19.52%) and MVL (down 19.51%).
Of the 50 stocks on the Nifty, 11 ended in the in the green. The main gainers were Ambuja Cement Company (up 1.85%); Cipla (up 1.84%); Bajaj Auto (up 1.01%); GAIL India (up 0.61%) and Ranbaxy Laboratories (up 0.57%).The major losers were JSPL (down 15.25%); Hindalco Ind (down 6.31%); Tata Power (down 6.10%); DLF (down 4.23%) and ONGC (down 4.02%).
Markets in Asia settled in the negative as the Bank of Japan declined from making any announcement to ease the recent market volatility. A sell-off in other markets in the region led to the overall decline.
The Shanghai Composite declined 1.39%; the Hang Seng fell 1.20%; the Jakarta Composite tanked 3.50%; the KLSE Composite fell 0.46%; the Nikkei 225 dropped 1.45%; the Straits Times declined 0.94%; the Seoul Composite lost 0.62% and the Taiwan Weighted settled 0.54% lower.
At the time of writing, the key European markets were down between 1.51% and 1.54% as the German constitutional court started a two-day hearing into the legality of the ECB's bond-buying program. At the same time, the US stock futures were in the red, indicating a lower opening for US stock later in the day.
Back home, institutional investors were net sellers in the equities segment on Monday. While FIIs pulled out Rs114 crore, DIIs withdrew Rs69.75 crore from stocks.
Adani Group-owned Adani Ports and Special Economic Zone (APSEZ) has raised Rs1000 crore through institutional placements, thereby reducing the promoter shareholding in the company from 77% earlier to 75% now, confirming to SEBI norms on promoter holding. The stock declined 1.86% to Rs148 on the NSE.
JK Paper, a JK Singhania Group company, is set to commission its Rs1,700-crore expansion project in Rayagada, Odisha by August as it gears up to consolidate its speciality paper business. The expansion project, which adds a capacity of 1.65 lakh tonnes of paper a year, and pulping capacity of 2.15 lakh tonnes, will enable the company to augment Rs800-Rs850 crore in revenues in a full year of operation. The stock fell 0.69% to close at Rs28.80 on the NSE.
IL&FS Engineering Services has bagged a Rs266.50-crore construction order from Rapid Metro Rail-Gurgaon (Phase II) project. The contract involves construction of single and double track elevated viaduct for the metro project in Gurgaon from its special purpose vehicle formed for its implementation and is expected to be completed in 24 months. The stock declined 1.71% to settle at Rs31.70 on the NSE.