LIC holds stake of more than 15% in at least 40 companies, including state-run banks.
NEW DELHI: The government wants state-owned Life Insurance Corporation of India (LIC) to play a more active role in companies where it is a major shareholder, following developments at Infrastructure Leasing & Financial Services Ltd.
LIC, with an over 25% stake in IL&FS, is the biggest shareholder in the infrastructure financier, which has defaulted on its debt obligations. The government sacked members of the IL&FS board on Monday and appointed six new directors in a bid to restore the company’s credibility and stem any contagion from spreading in the markets. A senior finance ministry official said the country’s largest insurer cannot be a silent shareholder.
“They need not be aggressive, but at least keep a close watch on corporate governanceissues,” the official said. In the case of IL&FS, the insurer was caught totally unawares, the official said.
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LIC appoints nominee directors on the boards of companies in which it has a substantial stake by way of debt and/or equity. The insurer had two nominee directors on the IL&FS board.
“Nominee directors provide feedback with regard to operations, problems, prospects and corporate governance standards,” LIC said in its 2017-18 annual report. Last week, after the crisis at IL&FS, LIC promised all support to the embattled lender.
“We will ensure IL&FS does not collapse. We will not allow contagion to spread from IL&FS,” LIC chairman VK Sharma had said, adding that all options were open, including increasing the insurer’s stake in the debt-laden company, to help it overcome a liquidity shortfall.
“They have a responsibility and as a public sector institution they should bring to notice any deviances in a firm where they are a shareholder,” said another official aware of the developments. Some former IL&FS board members have blamed LIC for inaction.
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According to various reports, LIC holds stake of more than 15% in at least 40 companies, including state-run banks. The Insurance Regulatory & Development Authority of India has relaxed for LIC — in some cases — a norm that restricts insurers from holding more than a 15% stake in a company.
LIC holds 16.18% in ITC Ltd. and 17.57% in Larsen & Toubro. In June, the insurance regulator allowed LIC to buy a 51% stake inIDBI Bank for Rs 10,000 crore-12,000 crore. The insurer had over Rs 30 lakh crore of assets under management, including Rs 5.74 lakh crore in equity and Rs 19 lakh crore in debt.
On Monday, the National Company Law Tribunal approved the takeover of the IL&FS board by government nominees under Article 241 of the Companies Act. It ruled that the government can appoint six directors to replace existing members of the board.
I just finished reading a report in The Times of India. It is titled 'LIC, SBI'S stakes in IL&FS to rise after Rs.4,500 cr. Rights issue'
It is subtitled as 'PSU Fin giants set to provide liquidity to stave off crisis'
I especially read with interest, the paragraph which contained the following lines:
'Earlier on Monday, LIC chairman V.K.Sharma had said that the corporation would ensure that the IL&FS does not collapse.'
We, the resigning ex-employees, would like to urgently remind the Chairman of LIC about his responsibility towards us too! We have sincerely worked hard for the Corporation and left for personal reasons, but have been unjustly deprived of our Wage Revision Arrears and difference in retirement benefits, despite a Supreme Court verdict declaring the controversial Clause 3 1 b to be 'ultra vires', in 2007.
This injustice has been continuing since 1997, that is more than 2 decades!
Please show similar concern towards the Corporation's beleaguered ex-employees too, who have contributed towards the Corporation's progress and prosperity, due to which LIC can fund and support loss-making enterprises and bolster the economy!
WE URGE THE GOVERNMENT WHICH ESPOUSES WORTHY CAUSES, TO ENSURE OUR WELL-BEING TOO; AND PREVENT US AND OUR FAMILIES FROM COLLAPSING!
The latest ad by LIC on the occasion of LIC day, the 1st of September, this year, proclaimed grandly that LIC is trending with times.
We, the resigning ex-employees, unjustly deprived of our rightful dues since 2 decades, despite a Supreme Court verdict in our cause's favour; beg to differ!
With its regressive HR practices, LIC's ad's title should probably be rewritten as:
'LIC - Trending with medieval times!'
Read any report pertaining to LIC. Or any advertisement. It will be filled with statistics. But the minute an RTI appeal asks for any statistics, the same officials who rattle off statistics like professionals, develop selective amnesia and refuse to divulge them on the grounds that they are not available with them! Thus it is proved that only the ones that don't raise uncomfortable questions are provided.
For instance the statistics like how many employees have resigned from LIC, what amounts have been repudiated, how much Income tax at source has not been paid to the revenue officials because of the said repudiation, amounts of Statutory retirement benefits like difference in Provident Fund and Gratuity payable due to wage revision arrears payment that have been repudiated.
It would be interesting to note that the CPIO (WZO) categorically told me in his "off the record" (in his words) call that LIC will surely NOT provide me with any answers to my questions in my RTI APPEAL as it doesn't want to open a PANDORA'S BOX!
It is a pity and a matter of grave concern that the Government chooses to turn a blind eye to this situation in spite of the fact that LIC is a reputed public authority and a Trustee of the policy-holdérs'
money.
Likewise why doesn't the media raise this issue?
Think about it.
By the way, we, the resigning ex-employees think that it is high time that the PANDORA'S BOX is opened! Strictly in Public Interest!
In its latest ad regarding observance of Vigilance Week, LIC states its commitment to ethics.
In my opinion, it is not enough to just profess the same without actually practising it. In the course of my RTI struggle to obtain information from LIC, it was amply proved that LIC has no ethics as far as its responsibility towards its resigning ex-employees is concerned. Consider the following points:
LIC didn't bother to reply to my registered letter for representation of my case for arrears payments, nor to my subsequent 22 emails sent for follow-up thereafter; for eight months!
LIC's CPIO(WZO) called me up on my mobile from the office number and intimidated me so that I could back off from my RTI case. He also requested me to treat his call as "off the record". He mocked me and challenged me to file a case against LIC boasting that I would surely lose the case and that the RTI case would also be closed within 3 months.
He lied in front of the IC that he had never spoken with me, to which I retorted that he was lying. He was dumbfounded and the IC reprimanded him to be transparent in his dealings in future.
LIC expects us to approach courts for our legally rightful dues, despite a Supreme Court ruling that declares Clause 3 of the Charter to be ultra vires. This clause repudiates the arrears payable to the resigning employees.
LIC didn't answer a majority of the 21 questions in my RTI appeal. Only three questions were answered incompletely.
LIC hasn't posted my RTI details on its website as is mandated by law.
LIC has wilfully, arbitrarily and illegally deprived its resigning employees of their arrears payments and difference in retirement benefits' payments since two decades.
LIC is heartless towards its ex-employees who have served it loyally and sincerely.
LIC has avoided paying TDS to the Central Exchequer by repudiation of our wage revision arrears since two decades, thus causing the Exchequer a whopping loss of crores of rupees!
My sincere request to LIC is to examine which of the following qualities does it possess to proclaim itself as ethical in our case:
Empathy and Ethos
Trustworthiness
Honor and Honesty
Integrity
Core values, Consideration and Conscience
Soul
If even one of these is missing, it needs to do an urgent soul-searching exercise and walk the talk!
If it is indeed ethical, it will immediately reimburse to all of us, our legally rightful dues.
When we started investigating this story two months ago, one thing we didn’t
anticipate was a situation in which we’d find ourselves using ¯\_(ツ)_/¯
while writing about the top 10 defaulters in India, as of December 25, 2015.
(That’s a shruggy in case you didn’t know.)
Check out their names below. Top 10 Companies/Rs Crore
In the first part of this series, Newslaundry
introduced key elements of RBI’s Wilful Defaulters and Defaulting Borrowers
List, which places corporate bad debts in the banking system at Rs 5 lakh crore
as of December 24, 2015.
These are accounts against which banks have not taken any legal action. In
banker-speak, they are non-suit filed accounts. Of these accounts, only Rs 1.08
lakh crore are labelled as wilful defaults.
It is not normal practice the world over to put out bank defaulter names.
Our case is different since in India, the banks involved are state-owned and
many of the companies are public sector undertakings. Add to that the size and
seriousness of the NPAs in the banking system, and public disclosure is a
crucial way to put pressure on the powers that be to expedite important reforms
in the way banks classify and treat defaults as well as in the way the legal system is
geared to handle bankruptcies. Newslaundry sent a detailed questionnaire to all the above
companies to get their side of the story. None of them have responded yet. The
story will be updated if and when they do. We also reached out to Reserve Bank
of India spokesperson Alpana Killawala by email, text and phone calls. We are
yet to receive a response from her too.
Steel and the metals and mining sector feature prominently on the list of
top 10 defaulters. Heavy industries and mining have generally been at the
centre of scandals involving political corruption, due to the number of
licenses and government approvals required. The owners of these companies
— like Usha Ispat, Malvika Steels, Lloyds Steel and Prakash Industries —
have seemingly benefited from political and regulatory forbearance when it
comes to their debts.
Of the 10 companies, four are public sector undertakings: Hindustan Cables,
Hindustan Photo Films, Prag Bosimi and Malvika Steel (which was bought over by
SAIL from Usha Group in 2009). Both Hindustan Cables and Hindustan Photo Films
are declared terminally sick, and the former may shut down soon. Prag Bosimi Synthetics is the only
industrial venture of public-private partnership in the Northeast. It started
operations in 2012 after remaining shut for a decade. PSU companies have
defaulted the most to public sector banks and financial institutions, which means
the taxpayer loses money twice over in case the PSU shuts down.
Mismanagement, therefore, is evident when it comes to both the lenders and
the borrowers. It is not hard to imagine the lax standards followed when public
sector banks lend to public sector companies, as well as the tolerance shown
for their defaults. It also points to the subjectivity of the wilful default
classification as none of these companies are labelled wilful.
Zoom Developers defaulted on Rs 3,843 crore, out of which Rs 137 crore are labelled
as wilful default even though Zoom Developers owner Vijay Chaudhary was charged by the Enforcement Directorate for diverting bank
loans for realty projects in Europe and according to some accounts, he has been
absconding since 2014. Zoom features on CIBIL’s list as the top-most wilful defaulter (suit-filed accounts). Why, then,
are some of Zoom’s accounts non-wilful defaults?
Another anomaly is Kingfisher India, which has been dubbed a wilful
defaulter by various banks but features on the RBI list as just a defaulter.
Kingfisher’s bad debts amount to Rs 3,259 crore. Again, these are non-suit
filed accounts. As newspaper reports cite, Kingfisher owes in excess of Rs 9,000 crores to a consortium of
lenders led by State Bank of India (SBI). Which means Kingfisher owes about Rs
12,000 crore to banks.
Lloyds Steel and Cranes Software don’t have any criminal cases against them.
However, reports suggest that Lloyds was listed as one of the top wilful defaulters in Maharastra in 2002. Uttam Galva took
over the loss-making company in 2012 for a stake of 58.3 per cent and it was renamed Uttam Value Steels in 2013.
Cranes Software International, in 2010, was going to be delisted from the
National Stock Exchange due to continuous late filing of their financial
statements. It is still traded on the Bombay Stock Exchange. Cranes Software
Co-Founder Asif Khadar has stated that most of its business comes from exports and has
suffered due to the global recession following the 2008 financial crisis.
Seventy per cent of Cranes Software’s debt is labelled wilful in the RBI list.
Then there is the case of Prakash Industries whose promoter Ved Prakash
Aggarwal and Director Vipul Aggarwal were arrested in August 2014 for offering
bribes to get credit from Syndicate Bank. According to a 2012 story by Tehelka, Ved Prakash Aggarwal’s brother
JP Aggarwal ran Surya Foundation, which is an NGO that conducts poll surveys
for the Bharatiya Janata Party. Prakash Industries was raided by the CBI for
selling coal in the black market. However, the name on the list that is the cherry on the default cake, in
every possible way, is Usha Ispat. Usha Ispat owes banks and lending
institutions almost Rs 17,000 crore and has been defaulting at least since
2005.
The company is owned by Usha India Limited, which also features on RBI’s
list and has defaults worth Rs 2,828 crores. The group is family-run and owned
by brothers Vinay Rai and Anil Rai. In 2002, the Central Bureau of
Investigation raided the premises of both the brothers for allegedly duping
financial institutions of over Rs 100 crore. Newspaper articles from the time
painted Vinay Rai as a Mallya-esuqe figure, with a personal net worth of Rs
5,338 crore. Usha Ispat’s defaults as noted on the RBI list are as recent as March 31,
2013. Effectively, the company has been getting loans and defaulting on them
for more than a decade despite CBI raids, FIRs and The Serious Fraud Investigation Office initiating proceedings against its promoters. Only Rs 5,093
crore of Usha Ispat’s total defaults are labelled as wilful according to the
RBI’s list. Usha Ispat owes more than half of the total default sum to LIC at
Rs 8,619 crore.
A Financial Express report, headlined “How the Rais roll in money but won’t pay back”, states that
the CBI suspected the Usha Group of taking “money from banks and financial
institutions by showing fake bills for purchase of machinery from its own front
companies”. The article also mentions Rai’s political clout.
Interestingly, Usha Group also owned Malivika Steel, which defaulted on Rs
3,057 crore. Malvika Steel was acquired by SAIL in 2009 during the UPA-II
regime. The steel plant is located in Jagdishpur, in Amethi district, and has
defaulted on loans since 2007. All of its loans are owed to either General
Insurance Corporation, Mumbai, or Life Insurance Corporation. According to a Hindu
Business Linereport, the Modi government pulled the plug on the plant’s
revival in 2014 and it may be up for sale now -- Rs 300 crore had been sunk
into the project in the United Progressive Alliance (UPA) regime. We have to
wonder how much of a part Rai’s political connections played in Usha Ispat
staying under the radar for as long as it has, especially since the company
seems to be about as substantial as Casper the Friendly Ghost.
Our emails to Usha Ispat’s director Amit Kumar bounced back. According to
the RBI’s list, Usha Group’s office is in New Delhi’s Mohan Industrial Area.
Our calls to the office yielded no result since these numbers are no longer in
use. When we visited the office, we were told that the Usha Group no longer
operated there. As of its most recent filing, in 2014-15, Usha Ispat has had
zero revenues over the past two years. The company has no web presence. Its
office is registered in what appears to be residential complex in Pune. Newslaundry
has also posted a letter with questions pertaining to its huge default and is
waiting for a response. Update: Cranes Software has responded to Newslaundry
stating that the total amount due to Indian banks, as provided in the company’s
audited published balance sheet, is Rs 649.24 crore. For more details read
here. The authors can be contacted on Twitter @MnshaP and @garimachitkara
