Moily says will probe Gadkari's companies
BS REPORTERS
New Delhi, 23 October
The Union ministry of corporate affairs, which regulates the affairs
of registered companies, was quick to pounce on the allegations
against BJP President Nitin Gadkari. Gadkari and the Purti Group he
was heading until a few months ago have become targets of several
allegations, including their having received corporate favours such as
unsecured loans and having routed funds through letter-head companies
that do not exist on the ground.
Shedding the inhibitions shown recently when similar allegations
surfaced against Robert Vadra, M Veerappa Moily, minister for
corporate affairs, today said, "I have told our ministry to make some
discreet inquiry to find out what exactly is the matter... are there
any violations of the Companies Act?" Moily added the ministry would
probe it as the matter was in the public domain. "It is all coming in
the newspapers," he said.
Media investigations have traced the registered offices of companies
that invested in Purti Group to slums and a building under
construction, among others. According to filings of Purti Power and
Sugar, the Purti Group flagship, Global Safety Vision, a company part
of the D P Mhaiskar-promoted Ideal Road Builders (IRB) Group, has
extended a loan of ~164 crore. "The company is paying the implied
interest in weekly instalments," the filing showed. IRB Group is said
to have won several road contracts in Maharashtra during the tenure of
Nitin Gadkari as public works department minister in the SenaBJP
government.
Documents filed with the registrar show this loan had been given
against the collateral of "a parcel of land measuring 47.69 hectares
together with the structures and building thereon situated lying at
Mouza Kinhala and Mouza Khurspar Tahsil of Umred in Nagpur district".
In its prospectus filed with the Sebi in February 2008, IRB Infra, the
listed arm of IRB Group, had disclosed that Global Safety Vision Pvt
Ltd was a promoter group entity. However, in an exchange filing today,
IRB Infra clarified that "Global Safety Vision Pvt Ltd is not and has
never been a subsidiary of IRB Infrastructure Developers Ltd or part
of IRB Group. Neither IRB Infrastructure Developers Ltd nor any of its
downstream subsidiaries have ever committed or made any investments in
Global Safety Vision Pvt Ltd." RoC (registrar of companies) documents
further showed that Nagpur Sahakari Bank, Buldana Urban Cooperative
Credit Society, Shikshak Sahakari Bank and Wardha Nagari Sahakari
Adhikosh are among the major lenders to Purti Power and Sugar. These
cooperatives have lent between ~70 lakh and ~15 crore to Purti Power.
Both Gadkari and the company have denied any wrongdoing. Gadkari has
also said he resigned as director 14 months ago and was ready for any
investigation. Documents accessed by
Business Standard showed he ceased to be adirector on August 27, 2011.
However, within a month, the company appointed Gadkari's son Nikhil
Gadkari as joint managing director of Purti Power for a period of
three years.
India Against Corruption (IAC), which first levelled allegations
against Gadkari last week, brushed aside the minister's statements.
"He had done a probe into Vadra's accounts too and said nothing was
amiss. Now, he would say the same thing about Gadkari, too," Prashant
Bhushan of IAC said. "We alleged a nexus between the NCP and Gadkari
in Maharashtra. Now, we have been proved right," Arvind Kejriwal of
IAC said. THE STORYSO FAR
|Nitin Gadkari was the PWD minister in Maharashtra during 1995-99
|Ideal Road Builders (IRB) Group won several contracts during his
tenure, including Pune-Mumbai Expressway |D P Mhaiskar, promoter of
IRB Group, lent ~164 crore to Purti Power and Sugar through Global
Safety Vision in 2010 |Gadkari resigned as director in Purti Power and
Sugar in August 2011 |Purti Power and Sugar says up to ~62 crore
repaid so far, including interest |Purti Power and Sugar had 10,501
shareholders as of September 2011 |Some of these shareholders not
found at their given addresses during media investigations
ECONOMY, P6 BJP leaders hint'internal leaks' could be behind allegations
Even as the BJP is strongly defending party presidentNitin Gadkari,
seniorleaders are gearing up to countercorruption allegations
againsthim, which are likely to continue in the coming days. While the
leaders conceded that'internal leaks' could be the source of these
allegations, they hinted Gadkari's bete noires within the party could
be behind the leaks.
PURTI POWER AND SUGAR: Financials forFY11
Total fixed assets
~208 crore
Currentassets
~19.29 crore
Paid-up capital
~68.90 crore
Reserves
~24.41 crore
Loan funds
~166 crore
Revenue
~154.49 crore
Expenditure
~163.50 crore
Netloss
~9.01 crore
Nitin Gadkari >Source: MCA documents
Corporate affairs minister instructs registrars to conduct a 'discreet
inquiry' to see if there are company law violations
________________________________________
Click here to read more on Page: 6
Definite pattern' in allegations against Gadkari, says BJP
BS REPORTER
New Delhi, 23 October
Even as the Bharatiya Janata Party (BJP) is strongly defending party
president Nitin Gadkari, leaders are gearing up to handle more such
allegations.
While the leaders conceded 'internal leaks' could be the source of
these allegations, they hinted Gadkari's rivals in the party, who
didn't want him to get asecond term, could be behind the leaks.
The BJP had recently amended its constitution to allow consecutive
terms for its president. The Rashtriya Swayamsevak Sangh (RSS) will
now take adecision on Gadkari's second term.
According to senior party leaders, there is a "definite pattern" in
the allegations, which started just months before Gadkari was expected
to start his second term as BJP president. They point out that the
information being reported has been on the website of Gadkari's
company and with the Corporate Affairs ministry for a long time.
"Gadkari was the PWD minister in Maharashtra in 1999 and allegations
are being made after 13 years. The timing of the allegations is also
important because Gadkari is expected to become the first two-term BJP
President in the near future," said a close aide. The BJP president is
expected to finish his first three-year term in December and the next
term will start from January 2013.
Under pressure by the consistent allegations against Gadkari, senior
RSS leaders had recently met senior BJP leaders including L K Advani,
Sushma Swaraj, Arun Jaitley, and Murli Manohar Joshi to get their
views on the possible second term to Gadkari. PURTI POWER AND SUGAR:
KEYEVENTS
|2000: Incorporated as Purti Sakhar Karkhana Ltd
|October 2009: Name changed to Purti Power and Sugar
|February22, 2011: Nikhil Gadkari, son of Nitin Gadkari, appointed
joint managing director
|August27, 2011: Nitin Gadkari ceases to be director
|September 28, 2011: Nikhil Gadkari gets a term of 3 yrs as Joint MD
w.e.f. February 22, 2011
Othercompanies Nikhil Gadkari is a directorin:
Nitin Gadkari
Investcash reserves orpay more dividends, CPSEs told
BS REPORTER
New Delhi, 23 October
Amid sluggish economic growth, Prime Minister Manmohan Singh today
sent out a clear message to central public sector enterprises (CPSEs)
to invest their estimated cash reserves of ~2.5 lakh crore to boost
capital formation in the country. If CPSEs failed in this, they should
pay higher dividends to the government, he added.
"The prime minister asked the CPSEs to use the surplus for their own
benefit and the benefit of the economy. They should use it for driving
investment, growth and jobs," read a statement by the Prime Minister's
Office (PMO). It added investing such surplus cash would help reignite
growth impulses in the economy.
The meeting, chaired by the prime minister, was attended by Finance
Minister P Chidambaram, Planning Commission Deputy Chairman Montek
Singh Ahluwalia, Heavy Industries and Public Enterprises Minister
Praful Patel and the chairmen and managing directors (CMDs) of 25
CPSEs.
Officials said PSUs were asked to finalise their capital expansion
plans by January 2013.
At the meeting, CMDs of cash-rich CPSEs raised concern over autonomy
and regulatory issues. The prime minister assured them of setting up a
committee of secretaries headed by Cabinet Secretary Ajit Kumar Seth
to look into the issues, according to people in the know.
After the meeting, Patel told reporters, "While the government would
like them (CPSEs) to grow and invest in their development plans, if
PSUs (public sector undertakings) do not deploy investible surpluses
in their own growth and expansion, that money should not lie idle. It
must be paid back to the government by way of special dividend." He
said PSUs had about ~2.50 lakh crore of investible surpluses.
Patel said there was no specific discussion on disinvestment of
government stake in CPSEs, adding all efforts would be made to meet
the disinvestment target of ~30,000 crore for this financial year.
On growth, Singh said, "We cannot be satisfied with the status quo.
Our growth should be maintained at 8-8.5 per cent, regardless of what
happens in the world economy. We must learn to swim, and swim fast
enough, whatever be the circumstances." Various hurdles in the Indian
economy, particularly those relating to exports, could be attributed
to the slackening demand in the Euro zone and the US. However, the
prime minister said, "Even if international demand is not there,
domestic demand should drive the investment and our endeavours." A
major concern is in 2011-12, the investment rate stood at 34.7 per
cent of gross domestic product (GDP) ---the same as in 2010-11. This
financial year, it is projected to grow to 35.3 per cent. However,
this would be less than the 38.1 per cent recorded in 2007-08.
Gross fixed capital formation in the quarter ended June grew just 0.65
per cent, against 3.6 per cent in the previous quarter and 14.6 per
cent in the first quarter of 2011-12.
"The prime minister noted the investment rate in the country had
declined due to the recent slowdown. To achieve eight per cent growth,
this should be increased to 36-37 per cent," the PMO statement said.
He added CPSEs contributed about six per cent to India's GDP and their
aggregate profits stood at a record level of about ~1,00,000 crore.
Dividend by CPSEs this financial year is pegged at ~27,178 crore.
Higher dividend by CPSEs might also help narrow the country's fiscal
deficit.
(Fromleft) :Planning Commission Deputy Chairman Montek Singh
Ahluwalia, Finance Minister P Chidambaram and Prime Minister Manmohan
Singh at a meeting with the chiefs of public sector companies, in New
Delhi on Tuesday. PHOTO: PTI
Doing business still tough in India, Singapore the best: World Bank
BS REPORTER
New Delhi, 23 October
India continues to be among the most difficult countries to do
business in, according to a World Bank-International Finance
Corporation (IFC) study titled 'Doing Business 2013'. Among the 185
countries where the study was conducted, India ranks 132nd in terms of
ease of doing business, while Singapore remains at the top for the
seventh year in a row.
Compared with the report published by the agency last year, India's
ranking deteriorated on seven of the 10 parameters in 2013. The
parameters on which the country's ranking slipped were starting
business, dealing with construction permit, getting electricity,
protecting investors, paying taxes, trading across borders and
enforcing contract. India, however, managed to climb up the order on
three counts - getting credit, registering property and resolving
insolvency - over the year.
India lagged even struggling neighboring economies like Pakistan,
Nepal, Sri Lanka and Bangladesh. Sri Lanka - where it takes just 19
days to start a business - ranked 81st, while Nepal ranked 108th,
Pakistan 107th and Bangladesh, three notches above India, 129th.
Among BRICS nations, India's ranking was the lowest. While South
Africa was ranked 39th, China stood 91st, South Africa 39th, Russia
112th and Brazil 130th. The World BankIFC report, however, lauded
India for the consistent improvement shown by it since 2005 by
simplifying and reducing cost of regulatory processes.
The 'Doing Business 2013' report noted that India had reduced the time
required to obtain a building permit by establishing strict time
limits for pre-construction approvals.
It added that it took 27 days through 12 procedures to start a
business in India, compared with China's 33 days through 13
procedures. However, India ranks 173rd in starting a business, against
China's 151st, due to the low cost involved in starting abusiness in
that country. In India, the average cost of starting abusiness is 49.8
per cent of the country's per-capita income, while in China it is just
2.1 per cent of per-capita income. The minimum capital to start a
business in China is about 85.1 per cent of its per-capita income,
while in India it is 140 per cent.
Confederation of Indian Industry Director-General Chandrajit Banerjee
said the time for getting approvals and doing business would get
streamlined and less cumbersome if the clearance procedure was made
electronic.
India and China have been the only two among BRIC members to rank in
the top-50 improvers since 2005.
"Both implemented regulatory reforms, particularly in the early years
covered by 'Doing Business," the report says.
After establishing its first credit bureau in 2004, India focused
mostly on simplifying and reducing the cost of regulatory processes in
areas like starting a business, paying taxes and trading across
borders, said Augusto Lopez-Claros, director, global indicators and
analysis, World Bank Group.
"India implemented strict time limits at the municipality level for
processing building permits," the report said.
However, so far as dealing with construction permits is concerned,
India's ranking slipped one notch to 182nd from 181st last year.
The report said, it took 67 days through seven procedures to get
electricity in India, which ranked 105th on this count. In terms of
dealing with construction permits, India took 196 days through 34
procedures and ranked 182nd. However, India has been named among the
countries that reduced time for processing permits in 2011-12.
This year, the report saw India, where it takes 1,420 days to enforce
a contract, as the second most difficult country on this parameter and
ranked it 184th.
The report cited a study that said simpler entry regulation and labour
market flexibility led to better growth in Indian states. The number
of companies in the informal or unorganised sector decreased and real
output grew in states, compared with those countries that had less
flexible regulations.
Another study that was referred to concluded that the establishment of
specialised debt recovery tribunals in India had a range of positive
effects, including speeding up the resolution of debt recovery claims,
allowing lenders to seize more collateral on defaulting loans,
increasing the probability of repayment by 28 per cent and reducing
interest rates on loans by 1-2 percentage points.
India ranked 132 out of 185 countries in terms of ease of doing
business, the study says
India is ranked 173 in starting a business, while China is ranked 151
due to lowcost
Top 5 countries for Doing Business
Ease of Doing Country Business rank
Singapore 1 Hong Kong 2 New Zealand 3 US 4 Denmark 5 India lags behind
its neighbours and BRICS
South Africa 39
Sri Lanka 81
China 91
Pakistan 107
Russia 112
Brazil 130
India 132
India's rankings falls in several parameters in 2013 versus 2012
2012 2013
Registering property 97 94
Getting credit 40 23
Resolving insolvency 128 116
Protecting investors 46 49
Getting electricity 98 105
Trading across borders 109 127
Paying taxes 147 152
Starting Business 166 173
Dealing with construction 181 182
permits Enforcing contracts 182 184 BUSINESS AS USUAL
Source: World Bank-IFC, Doing Business 2013
Rules stump rights issue subscribers
SAMIE MODAK
Mumbai, 23 October
The mandatory Asba (applications supported by blocked amounts) rule
for rights issue had a few wealthy investors stumped. Unaware of the
new rules, some investors in the twin rights issues of Network 18 and
TV18 Broadcast put in applications by cheques, only to face rejections
later.
One such application came from Shri Parasram Holdings, which put in an
application of ~45 lakh through cheque for holdings in TV18 Broadcast.
The cheque was encashed and the money debited from the bank account.
Later, the application was rejected by the registrar for being a
non-Asba application of more than ~2 lakh.
According to a senior official at ICICI Securities, the lead manager
for the rights issues of both TV18 and Network18, a few investors and
even promoters who didnt have the knowledge of the new rules, had
their applications rejected for putting in big-ticket applications
through cheques. "The TV18 and Network18 rights issue, being the first
major rights issue after Asba was made compulsory, caught a lot of
investors unaware," he said.
Last year, the Securities and Exchange Board of India (Sebi) made Asba
compulsory for all non-retail investors in public and rights issues.
In acircular dated April 29, 2011, Sebi had said, "All applicants who
are qualified institutional bidders (QIBs), non-institutional
investors or are other equity shareholders applying in this issue for
equity shares for an amount exceeding ~200,000, shall mandatorily make
use of Asba facility." Asba is a facility where funds remain in an
applicants bank account till the time shares are allotted to him or it
in a public offer or rights issue.
What probably led to the confusion was the rule that renounced
applications, even if more than ~2 lakh, have to be made through
cheque.
Renouncement of application is the transfer of rights entitlement by a
shareholder to other investors who might not be a shareholder of the
company.
The aforesaid broker even complained to Sebi, alleging the letter of
offer of the TV18 rights issue was misleading as it didnt clearly
state that all nonretail applications for over ~2 lakh had to come
through Asba. He also questioned the lead manager and the banker as to
why the cheque was cleared and bank account debited if the application
was not proper in the first place.
The lead manager, however, said the bank was only a collection centre
and had no facility to determine whether the application was proper or
not. All cheques get encashed to make sure the application is genuine.
"Compulsory Asba for IPOs is very straightforward, while for rights
issues it is slightly more complicated as renounced applications of
more than ~2 lakh can be made through cheques and self applications
have to come through Asba," he said.
"We would have been happy to accept all applications. But according to
the new rule, certain applications had to be rejected. There is
nothing much that could have been done about it," the investment
banker added.
"Network18 and TV18 have provided adequate disclosures, as mandated by
Sebi under the heading 'Grounds for Technical Rejection for non-Asba
Investors' on page 278 in the Letter of Offer of Network18 and on page
86 in the Abridged Letter of Offer of Network 18 and page 337 in the
Letter of Offer of TV18 and on Page 77 in the Abridged Letter of Offer
of TV18, which state that applications made by (1) QIBs or (2)
non-institutional investors or (3) investors applying in the issue for
equity shares for an amount exceeding ~2,00,000, not through Asba
process are liable to be rejected," a spokesperson for Network18 said
in an emailed response.
Some non-retail shareholders saw applications rejected after cheques
got encashed
ASBA is a facility where funds remain in an applicants bank account
till the time shares are allotted to him in a public offeror rights
issue
--
.
-
CS A RENGARAJAN,, B.Com ,FCS, LLB, PGDBM
Company Secretary, Chennai
email csarengarajan@gmail.com
http://www.csarengarajan.blogspot.com
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