The Financial Express [FRONT PAGE][ECONOMY]

Wednesday, December 17 1997

Court order may see Chidambaram replaced as Spic chairman


CHENNAI, Dec 16: The embattled top management of fertiliser giant Spic downed shutters on the press on Tuesday, as it went into a huddle over the prospect of group patriarch and company chairman MA Chidambaram being replaced by the chief secretary to the Tamil Nadu government, its partner in the joint venture.

The company today refused to comment on the 229-page judgement delivered on Monday by Justice Y Venkatachalam of the Chennai high court, which has directed the state government to appoint the state chief secretary as Spic chairman after ensuring that the state-owned Tamil Nadu Industrial Development Corporation's (Tidco) original 26 per cent stake in Spic was restored ``as early as possible.''

But that's not the only blow. Chidambaram, Muthiah and Jayalalitha have been directed to ``jointly and severally'' pay Rs 28.29 crore to compensate the loss caused to the state government. But this figure could mount when the CBI submits its final report. ``The actual loss can be ascertained only after a thorough and detailed enquiry by specialised agency like CBI. The loss of Rs 28.29 crore, therefore, is only tentative and subject to final report to be filed by CBI'' the judge noted.

The CBI will be submitting this report to the special court handling cases relating to Jayalalitha, where the case has now been transferred.

Rapping the erstwhile Jayalalitha government for not adhering to essential procedures while divesting Tidco's stake in Spic in 1992, the judge said: ``Jayalalitha overlooked, omitted or rather neglected or discarded the note of the then chief secretary (T V Venkataraman) who said that it will be desirable to retain government interest in Spic at 26 per cent.'' Though several formulae were available for calculating the renouncement price, the government of the day should have adopted the more advantageous market related approach in fixing the prices of renunciation in the public interest, the judge observed, adding, ``but the government miserably failed in doing so.''

The judge felt that Jayalalitha should have convened a cabinet meeting for getting its approval before taking any decision on matters related to such a huge sum of money. Even before such a meeting, a cabinet sub-committee and committee of IAS officers or financial experts should have been formed and their recommendations should have been placed before the cabinet.

Justice Venkatachalam said: ``But it is crystal clear that none of the above essential procedures have been followed. The then chief minister by virtue of the renouncement in favour of Chidambaram and Muthiah helped them to build their own interest in the company and also to strengthen their hold in the prestigious company at the cost of government interest. It is a clear abuse of her office.''

The court held that it is a case of misuse of office in bad faith and the action and conduct of Jayalalitha can also be branded as grave illegality. ``Its is painful to see such a conduct on the part of the Jayalalitha and the governmental action is shocking the judicial conscience also,'' he added.

``If such kind of act and conduct on the part of Jayalalitha, who are empowered with ruling power' are allowed to stand or continue it will not only create an indelible stigma on the system of flourishing democracy but will also bombard the entire economical structure of the country as a whole.''

The government, Venkatachalam added, ``has to repay the sum received from Spic and get back the entire rights share that were renounced in this case along with all its consequential benefits that accrued to them as on date. By passing such an order, the illegality committed by Jayalalitha will be rectified and remedied and that will be end of this matter.''

The judge also took note of the fact that the erstwhile DMK regime had replaced M A Chidambaram with the state chief secretary as the chairman of Spic. The DMK government in 1990 also increased the number of directors representing Tidco alone to 8 out of the total 19. Till the DMK government was in power, Chidambaram ``could not regain chairmanship of Spic'', the judge said.

However, after the Jayalalitha government came to power it decided to reverse the decision of its predecessor. Chidambaram was reappointed as the chairman of Spic in February 1992. ``It is clear that Chidambaram's group managed or made the then government to reverse the decision of the earlier government having chief secretary as the chairman of the group,'' the judge said.

Tidco, he said, was entitled to allotment of 1,76,800 bonds which could have been converted to 44,20,000 shares on conversion. The cost of these bonds would be Rs 11.05 crore on partial conversion of 17,68,000 on November 16, 1992. The judge noted while the government desisted from subscribing to Spic bonds issue due to its difficult financial position, it was able to subscribe forthe rights issue of Titan Industries through Tidco.

Moreover, Subramanian Swamy had also noted that the then government had also set apart an amount of Rs 38 crore for building a sports stadium. Therefore there was no reason or necessity or financial difficulty for the government to refuse an investment of Rs 12.71 crore in the bond issue. The court also came down heavily on the erstwhile government for not entering into a formal MoU or any agreement to give effect to the right of first option. ``From the files it could be seen that there were no negotiations between chairman and managing director of Tidco and Chidambaram with reference to fixation of price for renouncing the rights of Tidco in favour of Chidambaram.''

Pointing out that the conduct of the parties raised vital questions about the deal, the judge observed that from the facts of the case, ``it is anyone's guess that there was and must be a clear private understanding'' between Chidambaram and Jayalalitha.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.

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