High Mark to sell 250 million records to another credit bureau?

Moneylife Digital Team 13 May 2013

High Mark Credit Information Services' promoter Prof Dr Pandya is negotiating with another credit bureau for an asset sale including about 250 million records collected from members. This is a gross violation of CIRC Act, alleges a former employee in a complaint to the regulator

Troubled and cash-strapped High Mark Credit Information Services Pvt Ltd, (High Mark Credit Bureau), one of the four credit information companies (CICs) in India licensed by the Reserve Bank of India (RBI), is negotiating with other credit bureaus to do an asset sale including 250 million records collected from member institutions, says a complaint. A former employee of High Mark has filed this complaint to the finance minister, RBI governor D Subbarao, secretaries from the finance ministry and financial services alleging gross violations in the proposed asset sale of the credit bureau.

Following the exit of several of its top managers and the failure of its rights issue last year, the credit bureau is under severe financial stress. Earlier, its promoter Prof Dr Anil Pandya, who lives in the US, tried to rope in a foreign rating agency to put in additional capital. However, it did not materialise.

This time Prof Dr Pandya is negotiating with an Indian credit bureau for the asset sale to circumvent any regulatory permissions. “If this (asset sale) goes through, then all the proceeds from asset sale would remain at Prof Dr Pandya's discretion, while the shareholders would get nothing until the company is liquidated. In short, after the asset sale, High Mark would have a license and cash but no business,” the complaint says.

The ex-employee pointed out that due to mis-management or absence of any management, High Mark, is at a stage where its existence is at stake. “This in turn jeopardizes the valuable records of various financial institutions including public sector banks, cooperative banks, micro finance institutions, etc. This also is a gross violation of the Credit Information Companies Regulations Act, 2005 (CICRA), as the data is collected after signing individual agreements with member institutions. The asset sale is being designed in such a way so that it would not require any approval from the RBI,” the former employee said.

Moneylife sent a mail to Prof Dr Pandya and would incorporate his reply as and when we receive it.

High Mark is the only bureau started by individuals. Prof Dr Pandya, whom the board designated as the executive chairman, started the business with nominal capital. While Prof Dr Pandya continued to be a tenured full Professor at the College of Business, Northeastern Illinois University in Chicago, and an Adjunct Professor at Northwestern University Kellogg Graduate School of Management, he was also appointed as executive chairman at High Mark.

While High Mark never appointed Prof Dr Pandya on a whole-time basis, he was able to continue teaching in the US as well work with the credit bureau on a part-time basis. As per the Credit Information Companies Regulations Act, 2005 (CICRA), when a credit bureau appoints a chairman on a part-time basis, it then must have a managing director or full-time director to look after the management and affairs of the bureau.

According to our sources, High Mark violated CICRA as well as Companies Act, while appointing Prof Dr Pandya as its executive chairman. The issue was first raised by Siddharth Das, former chief operating officer (COO) of High Mark, before the company’s board. But the board apparently ignored it. Subsequently, Das sent a legal notice raising this issue. Ajay Kohli, former chief executive of High Mark, tried to bring this to the attention of the board. This too was ignored.

Earlier, High Mark was negotiating with Italy-based CRIF credit bureau for a bailout. We learned that CRIF executives had already met senior executives to assure them of support and continuity after takeover. However, there is no news on this front.

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