Another ‘Raju’ controversy emerges over ICSI elections4 min read . Updated: 16 Jan 2009, 12:12 PM IST
Another ‘Raju’ controversy emerges over ICSI elections
Another ‘Raju’ controversy emerges over ICSI elections
New Delhi: Datla Hanumanta Raju is contesting elections for the post of president of the Institute of Company Secretaries of India, or ICSI, the apex body of company secretaries, professionals who ensure their firm’s adherence to company law, and his candidature has become controversial because the website of India’s ministry of company affairs lists him as a director of a so-called vanishing company that defrauded stock market investors by raising money and, subsequently, disappearing.
It doesn’t help that his surname has suddenly become notorious.
While some of Raju’s peers vouch for his probity and innocence, and say the issue has been raised in the context of the January election to the post of president of ICSI, others say that the head of the institute shouldn’t just be straight, but also seen to be straight.
Raju was elected vice-president of the institute in January 2008 and his candidature for the president’s post would have likely not created a stir if not for the Satyam controversy. Last week, Satyam’s chairman B. Ramalinga Raju admitted fudging the company’s books to the tune of at least Rs7,136 crore. Since then, analysts, investors, regulators and the media have begun focusing on issues related to corporate governance.
ICSI’s members are expected to focus on compliance and ensure that companies follow corporate governance norms and some of its members are questioning the wisdom of electing as their president a person associated with a company that defrauded investors.
The list of such companies is on the website of the ministry of company affairs which also happens to oversee ICSI.
Raju maintains that the MCA’s list was factually incorrect as he had no connection with the company in question, Kamakshi Housing Finance Ltd, when it vanished. His name figures on the MCA website as a director of the company. Raju claims he has repeatedly written to MCA explaining his position.
“As a last resort I went to court," he added. Last month, Raju filed a petition with the Andhra Pradesh high court to have his name cleared ahead of the election. The case is still being heard by the court.
In the early 1990s, India saw a rash of initial public offerings, or IPOs. Many of the companies that raised money from investors failed to comply with stock exchange rules such as filing their financial statements. Subsequent investigations by the stock exchanges revealed that many of these companies did not exist at the addresses mentioned in the share sale document. In all, around 229 companies are estimated to have vanished with close to Rs800 crore of investor money.
India’s stock market regulator Sebi, MCA, and the country’s finance ministry formed a committee to prosecute the promoters and directors of these companies, which were dubbed vanishing companies.
Kamakshi Housing Finance was incorporated on 6 December 1994 with Raju as an independent director. The company’s IPO raised Rs5.71 crore, according to MCA’s website.
“I resigned (as independent director) on 25 August 1995," Raju said.
Subsequently, the management of Kamakshi Housing changed (the company was renamed Kisha Impex Ltd, according to the MCA website) Raju added.
A public notice on Sebi’s website dated 14 September 1999 listed Kamakshi Housing as a vanishing companies, and asked promoters and directors, including Raju, to respond within 15 days.
Raju did not respond and says he was not even aware that his name was on the list till 2004 when “somebody" brought it to his notice. That was the year Raju was first elected to ICSI’s council.
A former president of ICSI, who did not want to be identified, said the case was discussed in the council four years ago. “So we called for his record and we felt he was not guilty and that his name ought not to be there in the list of tainted officials or directors by the RoC (Registrar of Companies, an arm of MCA). Subsequently, regional director, RoC southern India also felt the same and therefore wrote to MCA that his name should be removed from that list."
MCA is aware of Raju’s case, but has not cleared his name, said a senior official at the ministry who did not want to be identified. “The president should not just be clean, he should appear to be clean," said a member of the current council who did not want to be identified. “As a council, where are we heading?" Another member of the 20-strong council, who did not want to be named, said questions about Raju’s integrity were “electioneering strategies."
The first member said some of the members of the council who elected Raju vice president last year were not aware that his name was on the MCA website in connection with a vanishing company, although Raju dismissed this claim.
One of the suggestions made by the council was that Raju step down till his name is cleared, much like current ICSI president Kevoor Bakshi did after Sebi passed an order against a company in which he was an independent director. After this order was quashed by India’s securities appeals body, the Securities Appellate Tribunal, Bakshi was re-elected to the council. Raju, however, said, Bakshi’s case was different from his own. “His (Bakshi) order was passed when he was a director," Raju said.
In contrast, he had already resigned from the board of Kamakshi Housing Finance when it violated rules.