Financial Daily from THE HINDU group of publications
Monday, Jan 28, 2002
Corporate - Regulatory Bodies & Rulings
Columns - Policy Watch
Probes against `shady' deals at dead end?
IN 2000-01, the Finance Ministry was pounded with carton loads of paper, listing out charges after charges against Reliance Industries (RIL), courtesy, the Bahujan Samaj Party Member of Parliament, Mr Raashid Alvi.
After the usual yawns, some officers including those in the Department of Company Affairs were directed to vet the material offered by the MP and to ascertain whether a case ought to be registered prima facie.
Given the lack of seriousness and the sedate pace at which some departments of the Government had reacted to the charges, an official was despatched by North Block to Mumbai to obtain information relating to funds raised by the company in the early 1990s. The visit hardly yielded anything.
Similarly, DCA's efforts to examine the charges look likely to skid.
Early this month, another MP, this time from the BJP, Mr Kirit Somaiya, who also pounds the Finance Ministry with letter after letter on behalf of small investors, complained against the sale of equity in Larsen and Toubro by RIL to the AV Birla group.
Mr Somaiya, one of whose favourite target is the capital market regulator (and UTI earlier when Mr P.S. Subramanyam was the Chairman) reckons that the small investors were short-changed because of the deal between the two corporates.
After protesting to the financial and investment institutions and also the Central Vigilance Commission, he had raised a stink in the Finance Ministry. Thanks to the MP, the Finance Ministry has now sought a report from the regulator on the deal, which resulted in Mr Kumarmangalam Birla, and his mother, Ms Rajshree Birla, being nominated to the board of L&T.
The CVC also had got into the act by seeking information from the financial institutions. However, neither the regulator nor the Government officials have found anything amiss in their preliminary assessment. As in the earlier case also, there are indications that the inquiry could turn out to be another dragging affair.
However, given the fact that the issue has been raised by a Member of Parliament, the Ministry does not want to brush it off lightly. The Government is now awaiting the report of the regulator on the deal to ascertain whether there were any violations, including insider trading.
Some corporates view this as a dark conspiracy hatched by corporate rivals against them. But not everyone is convinced given the handiwork of one top Indian corporate last week. The evidence was there for all to see when the telecom services provider, Bharti, kicked off its initial public offering.
In the run-up to the public offering, day after day journalists were passed on material purportedly against this telecom company as part of an effort to spike the issue. The effort was directed by a top Indian corporate which has courted several controversies and is seen to have an unduly unhealthy influence on politicians, officials and journalists.
Unfortunately, for the corporate that was seeking to plant stories against its relatively small-time rival, many hacks decided not to play ball. So an effort is being mounted to place more hurdles in the way- as for instance, instigating legal action on alleged past misdeeds.
In 2002, if managing the environment is still all too vital for the so-called cream of India's corporates, talks of being globally competitive appear to be a big joke.
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