Corporate Governance @ Malabar Cements Ltd, Walayar, Palghat

 

Malabar Cements Ltd is an unlisted public company incorporated on 11 April, 1978. It is classified as a State government company and is located in Palakkad, Kerala. It's authorized share capital is INR 28.00 cr and the total paid-up capital is INR 26.01 cr. Malabar Cements Ltd's operating revenues range is INR 100 cr - 500 cr for the financial year ending on 31 March, 2013. It's EBITDA has decreased by -19.80 % over the previous year. At the same time, it's book networth has increased by 6.48 %. The company manufactures portland pozzolana, portland slag cement and specialty cement.

The chargesheet in the case was presented and the trial started in 2010. In July 2008, a case pertaining  to corruption with regard to the purchase of fly ash from ARK Woods and Metals with inflated bills, causing a loss of Rs 2,78,49,381. VM Radhakrishnan is an accused in this case. MCL had also provided Rs 50 lakh as bank guarantee to ARK Woods and Metals for the due performance of the contract. However, after backing out, the private company allegedly illegally withdrew the bank guarantee amount along with interest, due to which MCL sustained a loss of Rs 52 lakh. It was alleged that the money was released in connivance with Coimbatore-based ARK Wood and Metals and MCL. The persons arraigned in the case include MCL’s M Sundaramoorthy and legal officer Prakash Joseph, ARK Wood and Metals’ Radhakrishnan and executive director AR S Vadivelu.

The chargesheet on Corruption in the import of fly ash from Thoothukudi through SRV Transports during 2004-2008 was presented in December 2011. However, the trial has not happened (June 2020). VM Radhakrishnan is also a co-accused in this case. It is reported that corruption occurred in the purchase of spare liner plates for the cement mill at Malabar Cements’ Cherthala plant before it was commissioned in 2003. There are six accused in the case (January 2009). Though the chargesheet was filed in 2011 and trial began the same year, the court issued bail to the accused and there has been no further progress in the case(June 2020).

It is also reported that corruption involved  in the purchase of laminated polypropylene for packing cement during 2003-2006. There are 11 accused in the case, including VM Radhakrishnan. Though the chargesheet was presented in 2012, the trial has reached nowhere(June 2020)

On January 24, 2011, 46-year-old Saseendran, then Company Secretary with the Malabar Cements Private Limited in Kerala, a state government-owned cement production firm,  was found dead inside his house in the state’s Kuridikadu in Palakkad, along with his sons Vivek (10) and Vyas (8). Speaking to the media after the tragic deaths, his family alleged that the three of them were murdered in retaliation for Saseendran’s objection to corruption going on within the company and pointed to ‘illegal transactions’ of raw materials at Malabar Cements, that led to a loss of over Rs 400 crore.

Mr.V Saseendran, who was highly qualified as company secretary, chose the Malabar Cements assignment after ignoring foreign job offers so as to stay in Palakkad. However, only after joining the company did he come to know about the lobbying in the government sector institution. When he told his relatives about the corruption at Malabar Cements, they gave him moral support to be honest and upright. He visited his brother-in-law Sanalkumar, who is an award-winning higher secondary school teacher, often in the days before his death and was never tense despite the issues within the company. Saseendran had written to the chief minister in August 2010 about malpractices in MCL involving its Managing Director Sundaramurthy, his secretary P Soorya Narayanan and V M Radhakrishnan, a contractor of MCL.

Saseendran was the prime witness in the five Vigilance cases registered against Radhakrishnan and others in connection with the Malabar Cements scam case. He was allegedly put under severe pressure by Radhakrishnan on various occasions, with the demand of providing favourable statements in all the Vigilance cases so as to save Radhakrishnan. The corruption charges were initiated by VACB, an organisation that worked for the protection of public sector undertakings, based on Saseendran's complaint. Subsequently Saseendran was under tremendous psychological strain due to the threats and criminal intimidation. It further submitted that Sundaramurthy and Suryanarayan also harassed the victim and issued as many as eight memos, even on trivial matters, at the instance of Radhakrishnan, to oust Saseendran from MCL. The three then started harassing Saseendaran in a systematic manner. Saseendran eventually resigned from the company in September 2010, with the resignation being readily accepted by the MD, the CBI submitted. The probe team pointed out eight memos issued to Saseendran as evidence of the harassment.

A confessional statement given in a judicial magistrate court by a former managing director (MD) of the firm was made public(May 21, 2015)  alleges that Communist Party of India (Marxist) [CPI(M)] central committee member Elamaram Karim had accepted a money packet from the Palakkad-based controversial businessman V.M. Radhakrishnan, who has close links with the cement company. The incident, according to MCL ex-MD M. Sunderamoorthy, took place in 2010 when Mr. Karim was Industries Minister in the then CPI (M)-led government.Sanal Kumar alleged(Jan 23, 2021)  that except AK Balan, no state leader of the CPI(M) visited their house and that ruling Left Democratic Front (LDF) cadres never participated in the functionings of the action council constituted to find the truth that led to the death of Saseendran and his two children. He further alleged that the CPI(M) leadership had instructed its cadre to not participate in the action council, and that then Chief Minister VS Achuthanandan was also constrained to intervene in the issue despite being personally interested in the case.

V M Radhakrishnan alias Chakku Radhakrishnan, who was arrested on Tuesday, was produced before the CJM court at 1 pm on Wednesday(21 March 2013). The charges levelled against him are under sections 306 (abetment of suicide) and 506 (1) (criminal intimidation) of the Indian Penal Code. The probe team (2014) however found that the controversial businessman V M Radhakrishnan alias Chakku Radhakrishnan was guilty of abetting the suicide and intimidating the victims. The CBI probe team was unable to find any evidence to prove that it was not a suicide and somebody had killed them. Sundaramurthy and Soorya Narayanan were treated as approvers as they had voluntarily confessed their guilt(Sept 04, 2014).

Questions to answer

1.      Identify the stakeholders of Malabar Cements Ltd

2.      Define Corporate Governance

3.      Spot the stakeholder relationships that had conflict of interest in Malabar Cements Ltd

4.      How do you think Corporate Governance can be nurtured

    5.   State the Principles of Corporate Governance and delineate the deficiencies that you have observed

References

      1 https://www.tofler.in/malabar-cements-ltd/company/U26941KL1978SGC002975
2 https://www.thehindu.com/news/national/kerala/malabar-cements-in-the-news-again/article7229656.ece
3.   https://www.thenewsminute.com/article/move-sabotage-trial-malabar-cement-corruption-cases-says-petitioner-cm-126520
4.      https://www.newindianexpress.com/states/kerala/2013/mar/21/it-was-murder-says-saseendrans-brother-460673.html
5.      https://www.deccanchronicle.com/140904/nation-crime/article/former-company-secretary-malabar-cements-ltd-saseendran-committed
6.      https://timesofindia.indiatimes.com/city/coimbatore/malabar-cements-corruption-case-victims-wife-receives-threat-against-seeking-justice/articleshow/29429378.cms
7.      https://b2bchief.com/malabar-cements-graft-case-kerala-govt-sanction-against-ex-md-other-accused/