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Madras HC indicts Jayalalitha over SPIC cases

Quashing the controversial SPIC disinvestment deal struck during the previous All-India Anna Dravida Munnetra Kazhagam regime, the Madras high court has directed former chief minister J Jayalalitha and SPIC promoters M A Chidambaram and A C Muthiah to pay Rs 282.9 million to compensate the loss caused to the state government.

Justice Y Venkatachalam, on a public interest litigation filed by Janata Party President Subramanian Swamy, made a severe indictment of the deal and directed the Central Bureau of Investigation to probe the "collusion" among the three in the deal which had caused a loss of at least Rs 282.9 million to the state government.

While asking Jayalalitha and the two industrialists to pay the amount within six months, the judge directed the CBI to ascertain the total loss to the state government due to the deal and report before the special judge trying cases of corruption during the previous regime, within one year.

The judge also ordered that all consequential actions pursuant to the government order of March 1992, which enabled the state-owned Tamil Nadu Industrial Development Corporation to renounce its entitlement to the zero bonds in the SPIC, stood invalidated.

Sharply criticising Jayalalitha's role on the disinvestment issue, the judge said, before signing the relevant papers, she had overlooked, omitted, neglected or discarded the note of the then chief secretary dated February 24, 1992, which had stated that it would be desirable to retain TIDCO's interests in SPIC at 26 per cent.

He said that Jayalalitha, by renouncing the shares in favour of Chidambaram and Muthiah, had helped them to build their own interest in SPIC and strengthen their hold on the company, at the cost of the government's interest.

This amounted to clear abuse of office on the part of Jayalalitha. Her action could be held as misuse of office in bad faith and branded as grave illegality, he said.

Stating that it was very painful to see such conduct on the part of a chief minister, he said this was shocking to the judicial conscience.

Such acts and conduct on the part of a chief minister, if allowed to stand or continue, would not only create an indelible stigma on the flourishing of democracy, but would also destroy the economic structure of the country, he warned.

The judge said the state government should repay the amount it had received from Chidambaram's firm and get back the entire rights shares which were renounced by the TIDCO along with all its consequential benefits that accrued to Chidambaram's firm as on date.

He said Jayalalitha, as chief minister, should have convened a cabinet meeting in matters involving such a huge amount.

She, however, had passed the order even before a cabinet subcommittee or a committee of IAS officers or experts in financial and technical aspects could be set up and its recommendations considered.

It is very clear that none of the essential procedures had been followed by Jayalalitha as chief minister, he pointed out.

Accepting the loss figure of Rs 282.9 million arrived at by the present government, the judge said the actual loss, however, could be ascertained only after a thorough and detailed CBI probe.

The figure of Rs 282.9 million was only tentative and subject to the final report to be filed by the CBI, he said.

He said it was true that there was no formula or procedure for arriving at the rights value of zero bond issue. The state government could have adopted the more advantageous market-related approach in fixing the price for renunciation of the shares held by the TIDCO.

It was the duty of the then government to do so in the public interest, but it had miserably failed in this, he asserted.

He said it was clear that TIDCO had lost control over SPIC only because of the renunciation made by the government headed by Jayalalitha.

The judge said a careful consideration of the aspects of fixing the renouncement price showed that the amount fixed, at Rs 123.7 million, was an undervalued figure on account of using the record date of January 24, 1992, as the basis for calculation.

He said the market price, on the date of communicating the decision by the government to TIDCO, viz March 13, 1992, or the date of TIDCO's board meeting, viz March 18, 1992, should have been taken as the basis for calculating the renouncement price.

Taking the lowest price on the record date for calculation was clearly against the interest of TIDCO, he pointed out.

UNI