Govt must go Satyam-way, get NSEL board replaced: DK Mittal

DK Mittal, former secretary, Department of Financial Services presents his views on the NSEL mess to CNBC-TV18. He also elaborated on the likely steps by the government to resolve this issue. According to him, the government should have turned it just like the Satyam case, wherein 24 hours after the revelations, it moved to the Company law Board (CLB) to get the company's management replaced.

Also Read: EOW arrests NSEL's Amit Mukherjee, is Anjani Sinha next?

He believes the Department of Economic Affairs (DEA) and Ministry of Corporate Affairs (MCA) should go to the CLB and get the NSEL board replaced by a new board which should then look into all cases of misappropriation and fraud and misrepresentation.

Below is the verbatim transcript of DK Mittal’s interview on CNBC-TV18

Q: The Arvind Mayaram panel that was setup to look into the NSEL imbroglio very clearly suggested that the government should consider a Satyam-like takeover of NSEL. Now, the NSEL as well as the MCX-SX boards have been reconstituted. Do you believe the time has come for the government to actually step in and do a Satyam-like takeover of NSEL?

A: In cases where frauds have been committed with money of large number of institutions and individuals, it is the speed with which one has to move to settle things in the right perspective. In case of Satyam, within 24 hours government moved to CLB and got the management of the company replaced by another management which ultimately turned around the company. In this case it is already very late.

Government has to move together, that is the DEA and MCA, they have to go to CLB and get the board replaced by a new board which should then look into all cases of misappropriation and fraud and misrepresentation.

Q: You are making a very important point because we have seen the finance minister saying that NSEL has been in violation from day one. We have seen what the Mayaram committee had to say, we have seen what the FMC had to say. The FMC has now finally issued fit and proper notices to the promoters of NSEL. Why do you believe the government has dragged its feet on taking over NSEL as was the case with Satyam? Have we seen any government action as far as the NSEL matter is concerned?

A: It will be very inappropriate for me to comment on that because I am not aware of what are the inherent contradictions if any into the matter. The government did not takeover Satyam. It only replaced it by a new management which is provided under the Companies Act. So, you could replace the existing management with the new management in case of misappropriation or mismanagement of the company.

The same thing should have been done here. There is no reason why it should not have been done after the fraud of Rs 3000 crore or Rs 4000 crore had come to the light of the public.

Q: Do you believe now the time has come for the government to actually force a management change at the parent company which is Financial Technologies?

A: As far as Financial Technologies is concerned, I am not aware of any misappropriation matter against that company. The Companies Act does not provide change of management unless there is misappropriation, mismanagement in case of the affairs of the company. So, it is only for NSEL that there is clearly a case. It is already very late for not getting the management replaced by a management which should have been more balanced and should have been looking into all issues.

Q: If the Registrars of Companies (RoC) probe report and government at this point in time believe that it is not just Anjani Sinha who is to blame for the mess at the NSEL and this argument of the ownership and the management being separate is not tenable. If the RoC probe report were to find that infact there was collusion on the part of Financial Technologies (FTs) promoters should the government swoop in?

A: I do not think we require any RoC report for replacing the board of a company through the company law board. An application has to be moved by the government on the basis of the facts available before it. So, it is not necessary that a report is to be obtained because the facts have already come in and that itself would be the basis for the government to move. So, the report of RoC is a totally different route. It will lead into explanation being sought from the company and then the prosecution to be launched or then moving to the CLB and that is a very different process altogether.