Independent directors in Money Matters: former LIC chief,top banker

The housing loan scam involving state-owned institutions and a private and listed Mumbai-headquartered company Money Matters Financial Services Ltd,has once again put independent directors under a cloud. At least three of the four independent directors in Money Matters,whose CMD and two senior executives were arrested by the Central Bureau of Investigation (CBI) today,are ex-bankers and chairpersons of financial institutions. In fact,RN Bhardwaj,non-executive independent director on the board of Money Matters was the chairman of LIC and LIC Housing Finance for more than a year till May 2005. He has served in LIC since 1968 till his retirement in 2005. Money Matters,the CBI has alleged,bribed senior officials in LIC and LIC Housing Finance while mediating and facilitating loans for builders and corporates from these institutions. Among those arrested include the chief executive of LIC Housing Finance.

The other two are B Samal,who is the former chairman and managing director of state-owned Allahabad Bank and VP Singh,former CEO and chairman of state-owned financial institution IFCI Ltd. Given their understanding and clout in the financial services sector,experts wondered if they took their role of ‘independent directors’ seriously and asked the right questions. The fourth non-executive independent director in Money Matters is Sanjiv Kapoor,a chartered accountant,who has audited the books of the state-owned insurer LIC.

While Samal,Singh and Bhardwaj are on the board of Money Matters since August 21,2009,Kapoor was appointed as an independent director on July 10 this year. What is disturbing is the fact that some of these independent directors are also on the board of companies that CBI alleges have been favoured with loans by these institutions. For instance,Samal and Bhardwaj are on the board of JP Group companies which CBI has listed as one of the beneficiaries of loans.

According to the CBI’s remand application submitted in court,the list of companies allegedly favoured with loans include Krishna Group (Rs 1,000 crore),OPG Group (Rs 330 crore),BGR Energy (Rs 20 crore),Suzlon (Rs 125 crore under process),Adani,JP Hydro,JSW Power,Pantaloon,Adalite,MTECH,Lavasa,DB Realty,Pashmina,Mantri Realty,Sigrun,Entertainment World,Indore City Treasures,JP Group,Gold Sukh Project,JP Group and MBD.