An ironic twist

Ignoring problems of corporate governance

The depositions of the chairman of Reliance ADA Group, Anil Ambani, and of his wife, Tina Ambani, before the special court investigating the allocation of 2G telecom licences were dramatic in their execution and in their implication. Both the Ambanis were supposed to be witnesses for the prosecution - but the Central Bureau of Investigation's lawyer complained that Mr Ambani was "resiling", or going back on, his previous statements to the investigating agency. Ms Ambani, who had given no such previous statement, was also held to have become "adverse". Both Mr and Ms Ambani were shown documentary proof, with their signatures appended, of transactions that demonstrated the complex string of shell companies that sought to connect Swan Telecom, which was awarded several 2G licences, and Reliance ADAG's telecommunications company. However, both husband and wife declared that they not only had no knowledge of the companies in question but also did not recall the board meetings at which the crucial, documented decisions were taken.

The supposed shell companies include Tiger Traders, Parrot Consultants, and Zebra Consultants as part of a link to Swan Telecom, indicating a strange coincidence in naming for supposedly disparate enterprises. Along with them were various items of paperwork, including bank account opening forms and fund transfer documents; but neither of the two people with signing power, Anil or Tina Ambani, seemed to have any recollection of either signing the documents or even the companies in question. If such claims are to be taken at face value, then this is a pretty big dereliction of duty for anybody with signing powers - indeed, it is a major failure of corporate governance at the very least.

Nor is this the only time when companies in Reliance ADAG have apparently fallen short in such norms. The Delhi Regulatory Electricity Commission, for example, has said that the two Reliance ADAG companies that supply power in Delhi submitted information regarding their purchases of power that contains unexplained discrepancies. That information supported the conclusion that they could not clear power purchase dues worth Rs 3,000 crore and led to the Delhi government infusing an additional Rs 500 crore of taxpayer money into the company. Then there was also a "consent order" passed by the Securities and Exchange Board of India against Reliance ADAG.

That Reliance ADAG should repeatedly fall foul of corporate governance norms is ironic. When Anil Ambani was still in the undivided Reliance Industries, but was feuding with his brother Mukesh Ambani, the reason he gave for his disaffection was that corporate governance norms were being ignored. In fact, he sent a 500-page note to the board of a Reliance company detailing these norms and said "there are substantial issues of corporate governance, disclosure ... among others that the board needs to seriously address." Perhaps some of that spirit needs to be carried over to his own group.