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Corporate

APURV GUPTAMUMBAI

Lawyers, chartered account-ants, management consult-ants and other senior profes-

sionals may be stripped off manyplum assignments once Parlia-ment passes the new CompaniesBill, 2011.

The law will make it difficult forthem to hold board positions asindependent directors of compa-nies with which their firms have asignificant business relation-ship. Clause 149 of CompaniesBill, 2011 states that an independ-ent director must not have “anypecuniary relation” with thecompany, amounting to 10% ormore of the gross turnover offirm the professional belongs.Clause 49 of the stock exchangelisting agreement disqualifiespersons from becoming inde-pendent directors if they share a‘material’ pecuniary relation-ship with the company. But, itdoes not define what constitutes‘material.’

“Currently, companies havebusiness relationship with direc-tors as as many independent di-rectors are partners of law firmthat provide services to the com-panies on which they are inde-pendent directors,” says ShriramSubramanian, managing direc-tor, InGovern Research Services,which advises institutional inves-

tors on voting strategies on spe-cific resolutions.

Subramanian adds that the Billshould have also prevented thefirms from having any kind of pe-cuniary relationship with thefirms rather than only capping itto a certain level. Any direct or in-direct pecuniary relationshipshould make the person ineligiblefor appointment as independent

director. There are regulatoryconcerns as independent direc-tors chair key committees like au-dit, remuneration or investorsgrievance in some companies.

Any financial/pecuniary rela-tionship can be seen to compro-mise independence because whatnot be material to the companycan be material to an individualor the firm, where the individual

Bansi S Mehta’s firm offers pro-fessional advice to companieswhere Mehta holds board posi-tions. P&G and Pidilite are a fewsuch companies.

A study by InGovern suggeststhat there are over two-dozencompanies where the corporatehas pecuniary relationship with afirm whose partner is an inde-pendent director on the compa-ny’s board even if it is not ‘materi-al’ as per the company.

Some professionals follow an in-ternal code on “acceptance of di-rectorships”.

“As a principle, I don’t accept di-rectorship on the board of any In-dian company, partly also be-cause of ambiguity concerningthe duties and liabilities of a di-rector,” says Nishith Desai, foun-der of the law firm Nishith DesaiAssociates.

A sterner view by regulators aswell as a degree of cynicismamong investors can be attribut-ed to independent directors’ in-ability to prevent corporate scan-dals like Satyam. “If independentdirectors are also partners in pro-fessional firms rendering servic-es to companies, then where is theindependence,” says Ashokku-mar Bakliwal, president, BombayShareholders' Association. Giventhe strong relationships betweencompanies and professionals inmany cases, the issue will havevarious interpretations.

is a partner. But it’s a debate thatis unlikely end in a hurry. Accord-ing to RA Shah, senior partner atCrawford Bayley and a director inseveral top firms, independenceis a trait of character. “Just as youcannot legislate on character, youcannot legislate on independ-ence. It is an intangible state ofmind, attribute and culture, saysShah, who is on the board of 13companies including some com-panies like Asian Paints, P&G,Clariant Chemicals, Pfizer India,Century Enka, Abbott India, Pira-mal Healthcare, Wockhardt, Lu-pin, Bombay Dyeing and BASF.He also chairs the audit commit-tee at P&G, Clariant, PiramalHealthcare among others.

Audit committee is expected toprovide an independent reassu-rance to the board through itsoversight and monitoring role.But according to Prithvi Haldea,CMD, Prime Database, it is a myththat all audit committees can de-liver wonders. “Most of the inde-pendent directors are appointedby the promoters…nothing mea-ningful should be expected fromthem.” However, firms also pickindependent directors who are re-puted in their areas of expertiseand people whom the entity andthe promoters can trust morethan other consultants, particu-larly if they have business rela-tion with rivals. For instance, the76-year old chartered accountant

Financial Interest? IndependentDirectors to be Stripped off PostCompanies Bill to make it difficult to hold posts in firms with which they have significant business relationship

OUR BUREAUMUMBAI

A investment subsidiary of Relianceindustries has purchased the stakesheld by two investment companiesowned by Analjit Singh, the promo-ter of Max India, in East India Hotelsenabling India’s largest private sec-tor company to overtake ITC as thelargest minority shareholder in thepremier hotel chain.

Analjit Singh was at one point be-lieved to have played the role ofwhite knight, as EIH owner PRS Obe-roi sought to strengthen his defencesagainst ITC, a cigarette to FMCG ma-jor that owns a string of hotels, thatwas believed to be coveting the hotelchain, widely known as the OberoiGroup. In September 2010, RIL, con-trolled by billionaire Mukesh Amba-ni, bought 14.8% stake in a friendlytransaction.

The investment arm— Reliance In-dustries Investment and Holdings —increased its stake in the hotel chainfrom 14.80% to 18.52% by way of twotransactions. ITC, which has assert-ed that its investment is financial,continues to hold 14.98%. Both inves-tors- ITC and RIL - till recently werecareful to keep their stakes below15%, because of the takeover code.

The new takeover code has enabledRIL to increase its stake above 15%,as the trigger for an open offer is nowat 25% from the earlier level of 15%.

EIH in a filing to BSE, said theshares were bought from the openmarket through bulk deals on Fri-day. According to the filing, RILbought nearly 2.1 crore shares for .̀ 90a piece from Gaylord Impex and Pi-vet Finance, valuing the deal at.̀ 191.83 crore. Gaylord Impex sold88.19 lakh share of the company,while Pivet Finances offloaded 1.24crore shares.

In September 2010, RIL bought14.12% of EIH for .̀ 1,021 crore. As ofDecember 2011, the promoters of thecompany, the Oberoi family, hold34.96% stake. The other major stakeholders in EIH, which operates ho-tels and resorts under the Oberoiand Trident brands, are LIC andNew India Assurance, who hold6.24% and 2.06% stake, respectively.The shares of EIH ended 2.05% high-er at .̀ 89.70 on Friday, still lower thanthe price at which Ambani acquiredthe lot from Analjit Singh, indicat-ing the group’s confidence in the ho-tel chain. Last November, Nita Am-bani, wife of RIL chairman and hisclose confidante Manoj Modi joinedthe board of EIH.

RIL Arm BuysAnaljit Singh’sStake in EIH

OUR BUREAUMUMBAI

SpiceJet promoter media baron Ka-lanithi Maran is pumping .̀ 100 croreinto the budget airline SpiceJetthrough a preferential offer ofshares. In a statement to stock ex-changes on Friday, SpiceJet said itwill issue 4.29-crore preferenceshares to promoter Kalanithi Maran.Shareholder approval for the movewill be taken through a postal ballot,the statement added.

As a result of this issuance of sharecapital, promoter holding will go upto 48.6% from the current 43.59%.

“The cash gives us a cushion to fundour expansion,” said Neil Mills, CEO,SpiceJet. Mills said the cash will begoing into a general fund and will bethere to support growth of the air-line. Marans, promoters of SpiceJethave infused .̀ 130 crore into the air-

line in the current fiscal and with thelatest equity infusion the total pro-moter funding in the airline would bearound .̀ 230 crore.

Airline promoters are struggling tofind a way out of an acute fundcrunch that has hit airlines in recenttimes due to high crude prices ($125 abarrel) and an aversion by banks tolend to airline companies. SpiceJet,which is expanding, says it will begrowing at about a double digitgrowth and beyond the industry av-erage. SpiceJet made a loss of .̀ 39.6crore in the third quarter of the cur-rent financial year and a challengingmarket with a slump in growth num-bers is likely to make the fourth quar-ter not so palatable again for the air-line though SpiceJet was able tonarrow its quarter-on-quarter loss.

Maran acquired SpiceJet from USbillionaire Wilbur Ross in 2010, forabout .̀ 700 crore.

Kalanithi Maran to Infuse.̀ 100 Crore in SpiceJet

OUR BUREAUBANGALORE

GMR Power Corporation (GPC), a wholly-own-ed subsidiary of Bangalore-headquartered in-frastructure company, GMR Infrastructure,won a .̀ 537 crore payment due case from TamilNadu Electricity Board arising out of the Pow-er Purchase Agreement.

“Appellate Tribunal for Electricity, by its judg-ment dated February 28, 2012, has dismissedthe appeal filed by Tamil Nadu state electricityboard. It had upheld the order of the Tamil Na-du Electricity Regulatory Commission(TNERC),” said GMR in a BSE filing.

GMR had a dispute with the state electricityboard with respect to power purchase agree-ment, land lease rentals among others. “Thecase has been going on since 2008 and the TamilNadu state electricity board has paid the out-standing,” says Raj Kumar CEO GMR Energy.

The TNERC by its order dated April 16, 2010had allowed the claims of GMR Power Corpora-tion and directed TNEB to pay approximately.̀ 480 Crore with interest in six equal monthlyinstalments.

However, unhappy with the verdict of the reg-ulator, Tamil Nadu state electricity board chal-lenged the verdict of Tamil Nadu ElectricityRegulatory Commission before the nationalbody in December 2010.

“The payment of .̀ 537 Crore (including inter-est) received till date by GMR Power Corpora-tion from TN Electricity Board by virtue of in-terim order of Appellate Tribunal forElectricity (dated November 19, 2010), will beretained by GPC in settlement of the dues fromTamil Nadu state electricity board,” the com-pany said.

The Appellate Tribunal for Electricity orderhas also adjudicated on an interlocutory appli-cation filed by TNEB, wherein it has directedthat the interest will be computed on theamount of fuel invoices payable by GPC to Hin-dustan Power Corporation on/for credit peri-ods, should be paid or set-off against paymentsdue to GPC from TNEB.

The infrastructure company has a 15-yearpower purchase agreement with the Tamil Na-du State Electricity Board which ends in 2014after which the cost structure will be renego-tiated with the board. GMR has a 200 Mw powerplant in Chennai.

“We have provision to extend the power pur-chase agreement by another 5 years and willstart discussion in coming months,” say Ku-mar. GMR also has an outstanding of around.̀ 700 crore from the Tamil Nadu ElectricityBoard as on 31 December.

The company’s stock closed up by 1.06% at.̀ 28.65 on BSE on Friday.

GMR Power Wins .̀ 537-CrorePayment Case Against TNEB

Infrastructure firm arm was in

dispute with state electricity

board over power purchase

deal, land lease rentals

ANINDYA UPADHYAYNEW DELHI

Three senior offcials from the DGCA — thecountry’s aviation regulator— were suspend-ed for issuing licences classifying 28 flyingschools as charitable non-profit entities in-stead of fully commercial entities.

According to sources close to the ministry,Joint Director General A K Sharan and two oth-er officials at the Directorate General of CivilAviation (DGCA) have been suspended and an FIR has been lodged against the erring fly-ing clubs.

The wrong classification has caused a loss of.̀ 190 crore to the Airports Authority of India(AAI). These clubs were registered under thecharitable category paid a nominal fee ofjust 10% of the original fee they owed the gov-ernment.

This nominal charge is only permitted forthose that are registered as educational socie-ties and run on no-profit no-loss basis, and notas profit-making entities.

“The subsidised rates were extended to 28 fly-ing clubs without proper examination,” thesource said.

This was reported in The Times of India, a sis-ter publication of The Economic Times, in itsedition dated February 28, 2012.

“After a MLA made a complaint about certainflying clubs getting facilities of Category I orcharitable flying clubs not fulfilling the re-quired criteria, the Central Vigilance Commis-sion (CVC) made an enquiry and submitted areport to the aviation ministry last month,” ahighly placed source said.

Based on the recommendations of the CVC,civil aviation minister AjitSingh took the requisite actionagainst the people involved, thesource added.

While, the CVC has called this acase of criminal conspiracy be-tween the DGCA officials andthe erring flying clubs, the AAIhas been asked to recover itsdues of .̀ 190 crore by the end ofthis month.

Last year in October, DGCA’saudit of the 40 flying schools ofthe country revealed that almostall of them were flouting safetynorms and were issued noticesto comply with rules or else facea shut down.

False logging of flying hours,violation of standard operating proceduresand lack of infrastructure were the two maindiscrepancies that surfaced in this audit.

DGCA Officials Suspendedfor Causing Loss of .̀ 190 cr

Officialsissuedlicencesqualifying 28 flyingschools ascharitablenon-profitentitiesinstead of fullycommercialentities

MUMBAI Direct tax collection fromMumbai region is likely to fall littleshort of the revised target set by thegovernment, sources in the incometax department said here today.

As per sources, direct tax collec-tion for the Mumbai region was ini-tially set at .̀ 1.80 lakh crore for thecurrent financial year which waslater revised to .̀ 2.04 lakh crore.

“We may fall little short of the re-vised target of direct tax collection

set by the government. However, weare trying to meet it,” sources toldPTI here. Incidentally, the Centrehad initially estimated a 20% in-crease in direct tax mop-up for thecountry at .̀ 5.33 lakh crore for thisfiscal which was later revised to.̀ 5.80 lakh crore. However, direct taxreceipts in the current fiscal to Feb-ruary 5 were .̀ 3.6 lakh crore. Meetingtarget becomes crucial to containthe burgeoning fiscal deficit.— PTI

Mumbai’s Direct Tax mop-up May Miss Target

�i/No. 36001/212012-OMRAC�rr w� r�/Government of India

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�fk .�lIQs�l/Ministry of Agriculture ‘tw�i’iI�ciu Th’ir’r/DEPARTMENT OF AGRICULTURE & CO-OPERATION

cii*�1�i h i T . ���� 1�4 E�I 1�i ��l Ivl�l

DIRECTORATE OF PLANT PROTECTION , QUARANTINE & STORAGE

1f�L��, 4. ‘i’�c�I�lct . (�RiIuu)/N.HJV, Faridabad (Haryana) —121001

REQUEST FOR PROPOSALS

Plant Protection Adviser to the Government of India , Directorate of Plant Protection , Quarantine

and Storage, having its headquarters at Faridabad invites request for proposals fromPayment Gateway service providers to facilitate online collection of fees (through thebanking channel) towards issuance of Import Permits, Import Release Orders andPhytosanitary Certificates through Plant Quarantine Information System. The paymentmodes could be Debit Cards, Credit Cards and / / or Net Banking. The revenue collection duringthe financial year2ol 0-11 was Rs. 136 crores and the collections projected for 2011-12 wouldbe of the orderofRs , 150 crores approximately. The transactionswill be denominated in INR.

The gateway service providers will capture all the tee collections at different stations and creditthe proceeds to the clients designated bank account . Gateway service providers having therequired capabilities may submit their proposals in sealed covers in two bid format (technicaland financial), downloadable from www.plantquarantineindia.org/lte.htm to Joint Director(Plant Quarantine) , Directorate of Plant Protection , Quarantine & Storage, N.H.IV,Faridabad (Haryana) - 121001, Telephone - 0129-2418506, e-mail : ddk.sharma@nic.inlatest by 19th March, 2012 .

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