oppn parties Fortis Healthcare and Singh Bros: Whither Corporate Governance?

News Snippets

  • Crude prices fall sharply as Saudi Arabia assures normal production in a few weeks. Prices fall by 5.4% to $65.30 per barrel
  • Sensex tumbles 700 points over fears that rising crude prices will deal a body blow to the tottering Indian economy
  • As Rajeev Kumar fails to appear before the CBI despite several notices, the agency forms a special team to locate and apprehend him
  • S Jaishankar says Pakistan is not a normal neighbour and its behaviour is a "set of aberrations"
  • External Affairs Minister S Jaishankar says PoK in Indian territory and the country hopes to have physical jurisdiction over it one day
  • Barasat Sessions court near Kolkata rejects Rajeev Kumar anticipatory bail application citing lack of jurisdiction as the reason
  • PM Modi celebrates his birthday with Narmada aarti and later has lunch with his mother.
  • All 6 Bahujan Samaj Party MLAs merge with the Congress in Rajasthan
  • Bengal CM Mamata Banerjee to meet PM Modi on Wednesday, state issues on the agenda
  • Pakistan to open Kartarpur corridor on Nov 9
  • Rajeev Kumar, ex-police commissioner of Kolkata and wanted for questioning in the Sarada scam does not appear before the CBI despite the state administration requesting him to do so
  • Supreme Court asks the Centre to restore normalcy in J&K but keeping national interest in mind
  • As Trump accepts the invitation to attend a programme in Houston with PM Modi, India rushes to settle trade issues with US
  • After drone attack on Aramco's Suadi Arabia facility, oil prices jump 19% in intra-day trading causing worries for India
  • Imran Khan raises nuclear war bogey again, says if Pakistan loses a conventional war, it might fight till the end with its nuclear arsenal
Sunni Wakf Board and Nirvani Akhara write to the Supreme Court for a negotiated settlement to the Ayodhya dispute
oppn parties
Fortis Healthcare and Singh Bros: Whither Corporate Governance?

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.
Although one case of misdemeanor (bordering on felony) cannot be cited to prove that the companies in India are run as personal fiefs of major shareholders, it can also be said that this one has come to light while other such cases might not have. Malvinder and Shivinder Singh, former executive chairman and vice-chairman respectively of healthcare major Fortis Healthcare Limited (they resigned just before the current matter was made public), have been found to have siphoned out Rs 473 crore of company funds for personal use. The matter came to light when the auditors of the company, Deloitte Haskins and Sells LLP refused to sign the second quarter results of the company till the money was accounted for and/or returned. The amount was shown as cash and cash equivalents in the books of the company.

Companies can undertake related party transactions after board approval but if the amount goes beyond a certain limit, shareholder approval is a must. But major shareholders of some companies in India are in the habit of treating the funds of publicly traded companies as their own despite there being proper checks and balances in the Companies Act and filing of various forms within time with the watchdog, Registrar of Companies. Short term lending is usually done on the sly to other companies in which the major shareholder is interested. Since these funds are returned within a few weeks or in the same quarter, not many questions are raised but this is an unhealthy policy that goes against the ethics of good corporate governance. The Singh brothers are already facing a similar case lodged by New York-based Sigular Guff & Co accusing them of siphoning money out of a publicly traded company. There are other cases of wrongdoing against them too in various companies they control. It seems they are habitual offenders.

But do a majority of Indian companies care for setting standards of corporate governance or even following the basic ethical standards followed worldwide or mandated by law? Checks and balances are kept in check by adopting ingenious accounting methods. Major shareholders in many companies use the funds of publicly traded companies to tide them over personal funding difficulties or those in other companies they control. This is an unethical and dangerous practice. The Registrar of Companies and SEBI should make an example of the Singh brothers by proceeding against them as per law and ensuring that the maximum penalty legally allowed is slapped on them. That will deter others from attempting similar (mis)adventures with public money in future. Both the bodies should also keep a strict watch on company filings on related party transactions.