Was the Minister given Incomplete Information Relating to PwC?
Recently the Punjab and Haryana High Court has issued a notice to a retired state information commissioner who allegedly sat over a judgement for more than three years. The matter pertained to an appeal seeking information under the Right to Information Act (RTI Act) from Chaudhary Devi Lal University at Sirsa.
 
This is not a one-off case. Information sought under the RTI Act is invariably delayed on one pretext or the other, often, in blatant violation of the RTI Act. 
 
Sometimes, a denial could expose something far more critical: that the information provided even to the highest functionaries in the government is not thoroughly scrutinised.
 
Proceedings in the Lok Sabha
 
Poonam Mahajan and Tej Pratap Singh Yadav, members of Parliament (MP) had in 2017, raised certain questions in the Lok Sabha. One specific query of the MPs was “whether the Government has taken cognizance of several instances of violations by auditors PricewaterhouseCoopers (PwC) and its partner firms over the last ten years that pose serious threats to public interest and national security.”
 
Arjun Meghwal, minister of state, ministry of corporate affairs (MCA), answered the question in the Lok Sabha on 11 August 2017 and stated “Prosecutions under the provisions of the Companies Act, 1956, have been filed against the partners of PricewaterhouseCoopers (PwC) in nine companies.”
 
The minister did not name the nine companies. An RTI query, dated 17 April  2018 by this author sought, from the central public information officer (CPIO), MCA, details of the companies involved, names of the partners involved, amount of violations, Sections of Companies Act, 1956, and any other laws that were violated.
 
Expectedly, no reply was received even after the expiry of 30 days, the maximum time allowed for disposal of request under Section 7 of the RTI Act. Two e-mails, dated 30th May and 5 June 2018, sent to the under secretary, MCA, to expedite the information, failed to elicit any response.
 
The applicant (author) then filed the first appeal, on 14 June 2018, under the RTI Act. The reply dated 12 July 2018 was even more callous:
 
It directed the applicant (author) to make applications to different registrars of companies who had filed the prosecutions against PwC.
 
Section 6(3) of the RTI Act, 2005, has in such cases put the onus on the public authority to transfer, under intimation to the applicant, the application or appropriate part of it to the concerned public authority within a period of five days from the date of receipt of the application.  
 
Besides being in blatant violation of this provision, the response of the CPIO raised a more fundamental question.
 
Was the Minister Fed Insufficient Information?
 
The above-mentioned responses suggest, rather alarmingly, that the MCA and, therefore, the CPIO did not have complete, correct and relevant details when the minister gave the reply in the Lok Sabha. That too in respect of the information originating from their own ministry! This could have far-reaching consequences. It is also highly unlikely that the minister would have taken the information at face value. Searching questions must have been asked by him. 
 
This, therefore, exposes one of the worst kept secrets: Information is available, but is not provided, in blatant violation of the RTI Act. 
 
Famous Nine, Should Have Been Ten At Least
 
While complete information is still to be received, further prodding has revealed the names of the nine companies with respect to which prosecution has been launched against the partners of PricewaterhouseCoopers (PwC). These are:
 
Graphite India, Karam Chand Thapar & Bros, Kesoram Industries Ltd,  Usha Martin Ltd, Tractors and Farm Equipment Ltd, Satyam Computer Services Ltd, Global Trust Bank, Xerox India Ltd and Religare Finvest Ltd.
 
Surprisingly DSQ Software, one the first companies to be investigated by the serious frauds investigation office (SFIO) does not figure in this list!  Lovelock & Lewes, network firm of PwC, was the auditor of DSQ Software.  
 
SFIO had found DSQ guilty of manipulating share prices and falsification of accounts. The Securities Exchange Board of India (SEBI) had barred DSQ and its promoters for seven years.  Did the MCA not find enough grounds to launch prosecution against PwC in this case, despite SEBI’s and SFIO’s findings? Is this yet another case where MCA does not take SFIO seriously?
 
RTI Act in Danger
 
Multiple attempts are being made to weaken the RTI Act. The least that can be done is to ruthlessly enforce the existing provisions. The order of the Punjab & Haryana High Court referred to above has come as a shot in the arm. Delinquent officers must be taken to task and heavy monetary penalties should be imposed on them.
 
Getting information under the RTI Act is just the beginning of a meaningful exercise. Unnecessary delays can derail the whole objective.
 
(Sarvesh Mathur is a senior financial professional, who has earlier worked as CFO of Tata Telecom Ltd and PricewaterhouseCoopers.
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COMMENTS

A. Pereira

7 months ago

RTI was the result of extreme hard work by activists in the first decade of this Millennium. It was perhaps reluctantly agreed to be passed as law by the then Manmohan Singh govt. As we are seeing in the later law of Lokpal, which MMS govt reluctantly passed, and the current Modi govt is showing no will to implement it (appointment of the Lokpal is pending for all these years, despite all the drama enacted by all political parties, including the congress and the BJP, in parliament, with some ministers even shedding crocodile tears for Anna Hazare). All these political parties (barring one in power in the smallest state but most important UT) have no desire to expose their sins to the public, so until the public do not wake up, the loot will continue. Till then, for the common man, once in the hot oil, once into the fire. Switching between the same parties does not solve any problems as both elements prove being two faces of the same coin.

REPLY

Manoj Kapur

In Reply to A. Pereira 7 months ago

I agree with you completely. Both parties have weekened the efforts towards transparency in every possible way. The rot is deep and requires disruption in form and substance

Tata Sons cannot force Cyrus Mistry to sell his shares: NCLAT
In a partial relief to Cyrus Mistry, the National Company Law Appellate Tribunal (NCLAT) on Friday stated that Tata Sons cannot force him to sell his shares.
 
However, the two-judge bench headed by Justice S.J. Mukhopadhyaya, declined Mistry's appeal to stay the conversion of Tata Sons into a private company.
 
The court said it will decide on conversion of Tata Sons into a private company after the final hearing on September 24.
 
Further, NCLAT has admitted Mistry's appeal against his removal from the post of Tata Sons' Chairman in 2016. The appeal was against the order of the NCLT, Mumbai bench.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

 

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Algo Scam: Declare NSE Directors, Key Management Persons, Employees and Brokers as 'Not Fit & Proper', says petition in Madras HC
A Writ Petition filed in Madras High Court has prayed that the Court should declare directors, key management persons, employees and brokers of National Stock Exchange (NSE) involved in the co-location or algo trading scam, as 'not fit & proper'. The petition is also seeking probe of CB Bhave, the then Chairman of Securities and Exchange Board of India (SEBI) by Central Bureau of Investigation (CBI) for failing to take action in the case for three years. 
 
In his petition filed against market regulator SEBI, A Kumar, an advocate says, "... (the) NSE has violated the fundamental objective of equal access to all market participants, by its co-location fraud where few brokers with vested interests have illegally benefited and the entire market was made to suffer.”
 
He goes on to argue that the NSE algo scam was a case of “market abuse by insiders with prior access through preferential information front running as well as committing fraud… Whereas all the investors, brokers and listed companies including public sector units (PSUs) believed that on NSE the price discovery was scientific and transparent and all the participants had equal opportunity to access the market, it was not true due to the fraudulent design of NSE co-location and also trading facility.” 
 
The petition argues that “in national interest, prompt and strict action by SEBI against the unscrupulous personnel of NSE, the managing director and chief executive (MD & CEO), board of directors of NSE, and OPG Securities is required to restore public confidence and to protect the interest of the market participants and the public at large.”
 
It prays that “SEBI, without any further delay, should immediately declare the NSE directors, key management persons (KMPs), employees, brokers and others who are responsible for co-location fraud as not Fit & Proper person under the Securities Contracts (Regulation) Stock Exchanges and Clearing Corporations) Regulations, 2012 and the Securities Contracts (Regulation) Act, 1956."
 
Earlier cases of ‘Fit & Proper’
 
According to Mr Kumar, the petitioner, in the past SEBI had issued not 'Fit & Proper' order against various entities in the securities market. "...Similar or higher yardstick should be applied in this matter in public interest, as it involves collusion of brokers with Exchange staff to defraud the entire market running into more than trillions of rupees and shaking the investor confidence in securities market at large which has affected the national interest," he says.  
 
In 2015, SEBI has declared Sahara India Investment Corporation (SIIC) as not fit & proper to run the mutual fund business, almost seven years after the Reserve Bank of India (RBI) had cancelled Sahara India Investment Corp (SIIC)'s registration to carry out the business of an non-banking finance company (NBFC). Besides, based on the Forward Market Commission (FMC)'s not fit & proper order against Financial Technologies India Ltd (FTIL) in 2013, in 2014 the SEBI had promptly declared FTIL as not fit & proper to hold shares in recognised stock exchanges, in view of maintaining investor protection, market integrity, transparency, fairness and governance in the securities market.
 
"Therefore," the petition says, "in parity and in all fairness the SEBI is obligated to take comparable stringent action against the NSE's then Board of Directors, MD & CEOs, KMPs, officers, associated entities and Mr Sanjay Gupta, owner and promoter of OPG Securities Pvt Ltd, by declaring them not 'fit & proper' to operate in the securities market, in order to ensure investor protection, market integrity, transparency, fairness and governance standard, apart from penalising and prosecuting them for fraudulent and unfair trade practices and permitting insider trading in the securities market in the national interest."
 
“Further, there has been conspiracy to conceal facts by NSE to the regulator and therefore a consent order by SEBI at this stage will not meet the ends of justice. In addition to declaring the perpetrators ‘not Fit and Proper’, the SEBI should punish and levy highest penalty for fraudulent and unfair trade practices carried on at NSE," the petition says.
 
Mr Kumar also requested the Court to direct CBI to investigate the role of Mr Bhave, the then chairman of SEBI and other members of SEBI, who failed to take any action for three years. "Further, there is every likelihood of high level political involvement in perpetrating the fraud which needs investigation by CBI," he says.
 
Mr Bhave was chairman of SEBI for three years beginning February 2008. 
 
The petition alleges that the NSE had virtually created monopoly where the select brokers would never lose money by giving preferential access to few select brokers against the market at large. Requesting an intervention and probe by Competition Commission of India (CCI), the petition says, "As a result of such preferential access, the competition amongst the market participants was eliminated. CCI should look into the possible violations wherein the equal and fair access to all the market participants was defeated."
 
Last week, the HC had issued a notice to SEBI in response to the petition. While admitting a plea filed by Mr Kumar, the Court directed SEBI to respond to the notice in two weeks. The issue pertains to various offences, including alleged preferential access given by NSE employees to select stock brokers through co-location facility. (Read: Madras HC Issues Notice to SEBI in NSE Algo Scam)
 
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