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)