The Hindu : Tatas violated corporate governance: Mahajan

Online edition of India's National Newspaper
Friday, Aug 02, 2002

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Tatas violated corporate governance: Mahajan

By Our Special Correspondent

NEW DELHI AUG. 1. The Communications and IT Minister, Pramod Mahajan, today accused the Tatas of violating the basic tenets of corporate governance, while proposing the diversion of Rs. 1,200 crores from the reserves of the recently-acquired Videsh Sanchar Nigam Limited (VSNL) to one of its sister companies.

Calling a board resolution passed by the Tatas-dominated VSNL board as a "breach of trust'', he said the company should have carefully deliberated on the proposal instead of giving the impression of being in a hurry to channelise the VSNL's reserves in Tata Teleservices Limited (TTL).

Replying on the subject in the Rajya Sabha, Mr. Mahajan said his observations were meant to protect the interests of the Government, which still had a 26 per cent stake in the company. It was not his intention to run down the Tata Group.

However, he refused to get drawn into the finer points of the controversy by pointing out that "I am not an expert, that is why I am a Minister''.

"At this juncture, the Government's nominees on the board will protect the Government's interests. Let us wait for the decision that the (VSNL) board takes.''

The board was asked by the Government to review the proposal through a committee, which will conduct a full analysis of the desirability of such an investment by VSNL in TTL. Thereafter the matter will be taken to the board for a final decision.

Mr. Mahajan denied that a cash-rich company was handed over to the strategic partner who resorted to asset-stripping. It was logical for the Tatas to consider investment in a sister company.

The Rs. 1,500 crores in reserves left with VSNL was just enough for a company to "live on''.

Of the reserves, Rs. 800 crores was earmarked for refunding GDR money, returning debts of Rs. 200 crores from MTNL and BSNL and Rs. 300 crores for basic service licences.

The Minister made it clear that the Government did not intend interfering in the day-to-day activities of VSNL but would step in through its nominees if it felt there was something amiss. At the same time, he sought to put a lid on the controversy by observing that "till today, no money was given.''

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