The recent political storm over Vijay Mallya is unlikely to abate soon. But going after Mr Mallya alone would be a classic case of missing the wood for the trees.
One striking element continues to elude everyone’s attention. Could Mr Mallya or anyone else allegedly pull off such a heist without the connivance of the famous ABC: auditors, bankers, consultants (co-conspirators).
Funds diversion of Rs2,100 crore during 2010 and 2013 from United Spirits Ltd (USL), the flagship company of UB group owned by Mr Mallya, was detected as far back as in 2014 by a forensic team of PricewaterhouseCoopers (PwC), UK.
Interestingly, PwC were the auditors of USL till 2010-11. Thereafter the audit was done for some time by Walker, Chandiok & Co, a member firm of Grant Thornton and then by BSR Raut & Co who finally raised some red flags.
Apparently, the alleged diversion Rs2,100 crore was not was not significant enough to catch the attention of the ministry of corporate affairs (MCA). In an earlier article
, I had reported that MCA has launched prosecution against partners of PwC in nine companies. Surprisingly, the name of USL does not appear in the list, although that of Religare, a recent entrant to this not so illustrious club, does. (Read: Was the Minister given Incomplete Information Relating to PwC?
MCA alone is not the indulgent one. The Institute of Chartered Accountants (ICAI) will beat it hands down any day.
Dr Kirit Somaiya, member of Parliament (MP), wrote a letter on 21 March 2016 insisting that ICAI, MCA, Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), Enforcement Directorate (ED), Central Bureau of Investigation (CBI) and bankers should initiate strong action against PwC who were acting as facilitators to the promoters and scamsters in various scams such as Global Trust Bank (GTB) scam, Satyam scam, Vijay Mallya, Kingfisher Airlines and UB scam.
Displaying admirable alacrity, the president of the ICAI, replied on the very same day to the MP saying that they are seized of the matter in the USL case. ICAI’s bluff
to the MP was exposed by an RTI query by this author. Three months later, ICAI did not even know the names of the auditors of USL, let alone investigate their role. ICAI’s response also exposed that Joint Parliamentary Committee (JPC)’s recommendations for action against PwC in the GTB scam had been pending for implementation for the last fourteen years.
GTB, and USL are not the only cases languishing with ICAI whose top management is deemed to be public servants within the meaning of section 21 of the Indian Penal Code (IPC). Only last year, prime minister Narendra Modi had lambasted its poor track record; there has been action in only 25 cases over the past decade, and 1,400 cases are pending.
Giving tough competition to ICAI is CBI. Recent media reports suggest that it is only now that CBI has started looking at the role of some senior finance ministry officials in the decade-old scam.
Bankers, on their part, have been guilty of little due diligence: inflated cost of capital equipment through over invoicing is hardly checked, poor monitoring of loans post disbursal, ever-greening of loans to avoid recognition of losses and extension of loans to well-connected promoters, despite a history of defaults.
These views have been endorsed by no less than Raghuram Rajan, former governor of RBI, who did not mince words on the role of the bankers while recently presenting his views on the non-performing assets (NPAs) problem to the estimates committee of Parliament under the chairmanship of Murli Manohar Joshi.
Importantly, bankers should not be allowed to go scot-free even if there was political interference. Excuse of political pressure, even if established, is an extremely dangerous theory to propagate. Every junior, irrespective of the field, would then get away citing directions from his superiors.
Shouldn’t deterrent and time-bound action be taken against all those who connived in the fraud? The harsh reality is that, despite the obvious staring in our face, hardly anything will change on the ground. As Mr Rajan also lamented, the system has been singularly ineffective in bringing even a single high profile fraudster to book. As a result, fraud is not discouraged.
The only practical solution therefore lies in daily chanting of the mantra called GSTC—God save this country!
(Sarvesh Mathur is a senior financial professional, who has earlier worked as CFO of Tata Telecom Ltd and PricewaterhouseCoopers.