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RoC in the dock...

The arrest of the Registrar of Companies, Manuneethi Cholan, by the CBI, on charges of corruption raises serious questions.

There are serious  allegations that the Registrar of Companies, a very senior officer of Indian Corporate Law Service (ICLS), acted as a pawn in a brewing corporate power struggle between a father (MAM Ramasamy) and his adopted son (M A M Muthiah) to take over the reins of the Chettinad Group.

 

The Chettinad Group

The Chettinad Group is a business conglomerate based in Chennai.  The group has a finger in  several pies. From companies that manufacture cement and silica to interests in construction, transport, power, coal, health care, plantations and textiles.  The family run empire also extends to education. The family established India’s first private university, the Annamalai University.  It was founded by the group’s founder Raja Sir Annamalai Chettiar.  The group has been run by Raja Annamalai Chettiar’s grand son Ramasamy and  Ramasamy’s adopted son M A M Muthiah. The two are chairman and managing director of the group respectively.

The kings and pawn in a corporate power game

According to information available in the public domain and the CBI, a group led by M A M Muthiah allegedly planned to take control of the Chettinad Group of Companies from Ramaswamy, chairman during the AGM of the flagship company Chettinad  Cements.  This was to be done by removing Ramasamy from the post of chairmanship of the group.  Apparently, Ramaswamy had fallen out of favour with his adopted son M A M Muthiah who, as the managing director of the group, had taken complete control.  It is alleged that in order to make his control total and absolute, Muthiah has proposed a resolution at the AGM to remove Ramaswamy from all positions of power in the Chettinad Group.  This, he claims in his interview to a newspaper was “done in the interest of shareholders and the employees of the group” because Ramasamy had “other interests to cater to.  

On learning of this proposed resolution,  Ramasamy had sought the services of Chozhan, the Registrar of Companies,  to reject the resolution approved by the shareholders for an illegal gratification.  As per the CBI, Chozhan had taken a bribe of Rs 10 lakh for not approving the decision for removal of Ramasamy.  The CBI had received a tip-off from an unnamed source about the bribe and the CBI intercepted his vehicle and recovered Rs 10 lakh from his car.  The arrest was made as Chozhan was leaving Ramaswamy’s palatial residence in Chennai.  The CBI also recovered Rs 20 lakh from Chozhan’s residence and several incriminating documents after a search was made in the office of Chettinad House and the chamber of  Chozhan.  

Now, what caused the rift between the father and the son is not for us to comment or speculate. Perhaps the ambitions of youth and the dreams of seeking greater heights for the Chettinad group at a rapid pace did not gel well with the cautious yet sturdy administration of his father.  Consider, for example, that the resolution sought to be expunged by Ramasamy was finally passed by the shareholders in the AGM and the shareholders also approved the group’s investments in the newprojects to the tune of over 370 crore.

Now, in all fairness, it is for shareholders to decide in a democratic manner who should hold office at the helm of their company.  If shareholders side with the glorious plans and youthful leadership of Muthiah than with Ramasamy, perhaps that is the right course of action for the company as the same represents collective democratic wisdom of the shareholders.   

 

Another look at the murky episode

But that’s not all.  There is another way to look at this murky episode.  Consider that the RoC under the Companies Act 2013 is vested with large powers. These encompass plenary powers of administration, control and investigation of  operations....  For example: the RoC is vested with powers to approve and reject forms filed under the Act and even has power to strike out the names of delinquent companies.  Thus he has the power to make or break a company.  This is why the case must be scrutinised with extreme diligence.   Now, it is one thing for corporate lords to fight amongst themselves for power and control, but it is completely another for a senior class I officer of Indian Corporate Law Service to play the fiddle and use his office as an outpost of a corporate empire.


Is venality a revelation for a deeper rot within?

The sheer levels of venality of the whole episode is a dangerous revelation.  Here is a senior officer who takes bribe in his own car, at the house of a corporate lord, as though he was buying a soda from a departmental store or drawing money from a bank.  Mark it, the officer did not even try to veil his illegal gratification through a mediator or a third party or a complex web of receipts.  This only reveals a very, very deep rot in our system.  

The venality of the whole episode casts a dark shadow which does not augur well for our corporate democracy and efficacy of company law as a whole.  In future, genuine questions will be raised and rightly so, on whether the action of the ICLS officers are free of corporate influence and are really taken in an unbiased manner. It is necessary that those at the helm of ICLS act with speed to redeem that faith again.  At stake is the interest of shareholders (especially interests of the small shareholders) and the public at large.  

 

Our recommendation...

It is recommended that the leadership at ICLS orders a thorough internal departmental investigation to ensure that various decisions taken by Chozhan and the likes are re-examined for propriety and issue remedial orders as may be necessary.  It’s also time that the leadership at the ICLS send a strong message to its officers that officers shall act only in public interest and follow scrupulously and conscientiously the rule book.  Unless, they make an example out of this case, we wouldn’t have learnt our lessons.

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