Unique identifier for companies a must
The government is right to investigate shell companies that anonymise transactions or have no apparent operational business. Their purpose might be to launder money, or not. Preliminary action should be followed up by a speedy and time-bound investigation to separate wrongdoers from the rest. Detection of shell companies entails intelligence gathering, data mining and information-sharing among enforcement agencies.
Owners of shell companies name their cooks and chauffeurs as board directors, to obscure ownership. However, common Director Identification Numbers (DIN) in multiple companies or companies with the same address will not suffice to track the ultimate beneficiary. The need is to mandate companies to declare their beneficial owners.
The UK has already taken the lead in adopting a unique identifier for persons and legal entities and structures that include companies, charities and trusts. The registry of the real owners is in the public domain, as investors are interested in knowing who they are dealing with. India, on the same lines, should also institute a unique identifier for every corporate entity and mandate each entity to disclose its beneficial owner. It will enable the government to track down the ultimate beneficial owner along with the web of holding and cross-holding companies. The G20, which has committed to identifying beneficial ownership, should push member countries to adopt the legal identifier.
It makes sense to separate illegal transactions from the corporate structure in which it is carried out and to penalise the illegality. However, many shell companies are also created and operated for legitimate purposes, and such companies must not be penalised. A unique legal identifier will help achieve both the objectives.
This piece appeared as an editorial opinion in the print edition of The Economic Times.
https://blogs.economictimes.indiatimes.com/et-editorials/unique-identifier-for-companies-a-must/
The coal block allocation case may becomea benchmark for other ongoing prosecutions
It is arguably the logical consequence of the 2014 Supreme Court order declaring all coal block allocations made since 1993 illegal and arbitrary. The conviction of three Coal Ministry officials, including former Secretary H.C. Gupta, marks the first case in which individual criminal liability has been fixed on public servants in the coal block scam. Two previous trials had ended in convictions, but those held guilty were officials of private companies who had deceived the authorities into allotting them blocks. Mr. Gupta was the chairperson of the screening committee that recommended allocations. It functioned for years without regard for guidelines, norms or transparency, until the apex court halted its irregular run. He and two other public servants have been found guilty of abusing their positions to procure a coal block for Kamal Sponge Steel and Power Limited. While it was fairly clear that the screening committee route was only a mechanism to push through the applications of all and sundry for coal blocks, especially under the first UPA government, it was not certain if it could be proved beyond reasonable doubt that public servants had manipulated the system to their advantage. Special CBI Court Judge Bharat Parashar has now ruled that Coal Ministry officials deliberately allowed an incomplete application from an ineligible company to be taken up for consideration. Far from ‘screening’ applications, he finds that the accused actually let all applications pass without any checking so that “they will have an open field to arbitrarily exercise their discretion in favour of any company”.
The verdict is a studied indictment of government processes, or the lack of processes, during the period. Looking at the prosecution charges and the defence claims, it appears there was little clarity on whether the guidelines were being adhered to. The former Secretary and Joint Secretary said in their defence they could not verify applications for completeness and eligibility, as it was the job of the section concerned. The section says this is the job of the administrative ministry or the State government to which applications are forwarded. Other omissions include the failure to evolve any inter se criteria to decide eligibility, or to do any verification either before or after the screening committee recommended allocations to the Minister. Whether there was a conspiracy between the officials and the company and whether the prosecution proved that these omissions amounted to deliberate abuse of their positions will be matters that will, no doubt, be taken up on appeal; but the significance of the verdict is that it may become a benchmark for other ongoing prosecutions on similar lines. The case also raises questions about the role and responsibility of a Secretary to the government, who is not only the administrative head of a department but also an adviser to the Minister on matters of policy.
http://www.thehindu.com/todays-paper/tp-opinion/coal-comeuppance/article18521163.ece
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