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EDITOR's KEYBOARD - FROM ARCHIVE

Bad time for quasi-judicial bodies; Wake up time for Ministry of Corporate Affairs!
By Shailendra Kumar, Founder Editor (Nov 26, 2009)
May 13, 2019

LAST one week had been a bad time for quasi-judicial bodies overseeing multiple economic laws in India. It started with the Customs, Excise & Service Tax Appellate Tribunal (CESTAT). It is one of the most respected tribunals in the country. In the eyes of the Supreme Court Judges, its judicial decisions are often better in quality than those of many High Courts. This is what the TIOL had heard from the mouth of Justice S H Kapadia on the occasion of CESTAT's Silver Jubilee celebrations in New Delhi. The Chief Justice of India, Justice K G Balakrishnan , was equally generous in heaping praise on this body, on the same occasion. But the shenanigans in the past few days, have indeed sown the seeds of doubts about the integrity of some of its Members. Although there is no information in the public domain as to why one of its Judicial Members was unceremoniously shown the door in a huff, but there is indeed no stopping to the rumour mills. All kinds of speculative stories are doing the rounds amongst the Netizens. These may not at all be correct and authentic. But, perception matters and that has taken a beating. What further adds to the masala , forming a thick layer in the air, is the news that the sacked (or resigned) Member's room was 'sealed' for comprehensive scrutiny of files! Whatever is the element of truth or untruth in this story, the fact remains that a hallowed institution has suffered major loss of positive aura it used to trigger in the minds of litigants and their facilitators.

Let's now move to the hottest news coming from another hallowed quasi-judicial body - the Company Law Board. The premier investigating agency, the CBI, has arrested its acting Chairman, Mr R Vasudevan, for accepting a bribe of Rs seven lakh at his official residence. The Company Secretary who was delivering the negotiated sum was also arrested for illegal gratification for a favourable decision by the Board. The CBI has registered a case against the Acting Chairman, the Company Secretary and also an advocate who happens to be the son of a noted journalist. The CBI spokesperson told the media-persons that the sleuths raided seven premises in Delhi, Kolkata and Chennai in this connection. A cash of Rs 55 lakhs , including seven lakhs bribe amount, from the residence of accused Member and a cash of Rs. three lakhs from the possession of the Company Secretary at Delhi, have been recovered. Incriminating documents recovered during searches from the premises of accused persons are being scrutinised.

If one lends one's ears to other versions making rounds in the corridors of the Ministry of Corporate Affairs, one hears the story that the entire case for which the alleged bribe was being managed, relates to a leading Hindi Daily Group. There is apparently an internecine battle going on among the family members of this Group. Fearing an adverse order, one of the parties has allegedly stage managed this bribery episode. Whatever be the element of truth in such stories, the fact remains that the CLB has been an ailing tribunal for long. It would not be wrong to say that it has always been a neglected 'baby' for the Ministry of Corporate Affairs (MCA) which has activated it only when it has politically served the interest of the Govt of the day. At present, seven positions of its Members, including the Chairman, have been lying vacant for too long. The new Chairman who happens to be a retired HC Judge was scheduled to join on December 1, 2009 (now, he is expected to join tomorrow). But, given the fact, the CLB has gone down several notches in public esteem, whether the Hon'ble former Judge would like to take over is being speculated.

Interestingly, a close analysis of the staffing behaviour of not only the CLB but all the Statutory Regulators in the country may reveal that poor staffing tends to ail most of them. For instance, there has been no organised Group A Service for manning the Companies Act (Only from this year, the UPSC has begun recruitment for Corporate Law Service). Historically, the UPSC has been recruiting Group B officers who have been manning the Registrar of Companies and other important arms of the Ministry. Over the years, these officers have been getting promoted to all senior posts in the Ministry, including the Member in the CLB . Mr Vasudevan happens to be one of such promoted officers. A close look at the various arms created by the MCA like the Competition Commission, the SFIO , the MRTPC etc may reveal that all these institutions suffer from serious staffing crisis. They function on the strength of borrowed officers from various services, including the IRS .

Thanks to the messy character of the New Transfer Policy, approved by the former Finance Minister, Mr P Chidambaram, all these institutions and also key Regulators like SEBI and TRAI , have regularly been getting IRS officers on deputation. If they advertise 10 vacant positions, the maximum applications come from the officers from either CBDT or CBEC, and 50% of the selected ones are IRS officers who lend them an aura of stable functioning. Take the case of SEBI , half of their investigators are from the Revenue Service. Take another example of the newly-constituted Competition Commission. Many of the officers are from the Customs & Excise or Income Tax departments. Let's presume that the North Block manages to iron out the irritants of its Transfer Policy, there would indeed be very few takers for these posts, and these bodies will have serious crisis of trained manpower. Getting someone to fill the slot is not a tough proposition. What is tougher is to get a trained hand who could contribute to the overall functioning of the body. And this has not been happening in the case of all these new bodies which the MCA has created over the years.

Apart from the staffing crisis, the biggest stigma which is often attached to the working of the MCA and its various arms is the lack of transparency. Let's take the case of the SFIO. Whether it is the high-profile Satyam case or many other corporate fraud cases involving big corporate houses and substantial funds of small investors, its investigation reports are never made public. Why? It seems that the MCA bosses have no faith in the principles of transparency. No one knows how sound have been the SFIO investigations, and whether they have reached any logical end whereby any action has been initiated against the swindlers of public fund. The only time one comes to know about the SFIO's working is when a Parliament question is replied. Only recently the Minister for Corporate Affairs, Mr Salman Khurshid, told the House that the SFIO has handled 70 cases since its creation. Let's see how much information the Minister has revealed to the House when says: '' ... exact amount of funds in each investigation has not been quantified.'' However, the Minister was able to disclose that a sum of Rs 17.5 Crore has been spent to run SFIO since its creation till October, 2009.

The CLB has been functioning as a crippled body. There is no time-frame given to it for disposing of all these high-profile company law disputes. More than 2500 cases have been pending, and they go on getting adjourned. When the final decisions are given, no one knows, nor are they uploaded on their official web sites. How does a small-time investor whose life-time savings have been swindled by a company keep track of all these cases? There is no answer. The MCA keeps granting permission to various corporates to pay more than the admissible amount of fees to their CA firms. But why the same is granted and on what grounds are not known to anybody. Nor do they come under public scrutiny. The MCA never insists on making public the balance-sheets of multiple subsidiaries of big corporate houses. And this is even after knowing fully well that the subsidiaries are often the favoured routes for siphoning off investors' funds or financial institutions' funds. If one goes on compiling, the list of loopholes in the MCA's working may turn out to be unending!

It is high time Mr Khurshid, a dynamic politician with a vision, acts fast to set his house in order. Drastic and surgical reforms are required to make the MCA along with its various arms a forward-looking policy-making body which can keep pace with the rapidly-changing business practices in the economy. India has become a favoured destination for global FDI investors. And the first law they confront after coming to India is the Companies Act, to create a business-doing body. Unless the MCA drafts a long-term vision document for itself, it may not be able to keep pace with the changing time and may end up creating a bigger mess of the economy. Let's hope Mr Khurshid wakes up to the harsh realities and lives up to the faith of the common investors as well as global investors in the economy.