LDF claims trashed. Centre asks CAG to audit Kannur International Airport accounts

LDF claims trashed. Centre asks CAG to audit Kannur International Airport accounts
Kannur airport, Kerala CM Pinarayi Vijayan (R)

In what is seen as a huge setback for the Pinarayi Vijayan government, the Centre's Ministry of Corporate Affairs (MCA) has asked Kannur International Airport Limited (KIAL) to throw open its doors to the Comptroller and Auditor General. Any failing on this count could invite even the prosecution of KIAL director board members, an MCA missive to KIAL on Thursday said.

The LDF government had kept the CAG out since it came to power saying the KIAL was not government-controlled. It said the government shares in KIAL was far less than the 51 per cent required to call a company government-controlled. The MCA, in its letter today, rubbished the claim and said over 60 per cent of the KIAL shares were held by the government and government-controlled agencies.

After pushing out the CAG, the KIAL management has appointed the private auditor Deloitte and Touche, one among the four largest audit firms in India, to audit KIAL's accounts.

The Opposition UDF had alleged that the CAG audit was blocked to keep the lid over the government's misuse KIAL funds. Congress MLA V D Satheesan charged that KIAL's money was used for Pinarayi Vijayan's 'Nava Kerala Yatra' in 2016 and to support the election campaign of E P Jayarajan, now minister for industry and sports.

“In fact, an earlier CAG report had criticised the company's decision to erect a perimeter fence around the Kannur airport,” Satheesan said. “If the CAG is kept out, the government can also go ahead with its irregular appointments to the company without any hindrance,” he said.

Chief Minister Pinarayi Vijayan said that the KIAL fell outside the ambit of the CAG from April 1, 2014, when the Companies Act, 2013, came into being. He said the new Act had taken out Section 619 (B) of the original Companies Act, 1956. 

Section 619 (B) had stated that the CAG would audit a company if 51 per cent or more of its shares are held by the government or government-controlled companies or corporations. “Though the Section was taken out, the new Act did not insert a similar clause,” the Chief Minister said. 

Now, only the government shares matter. “So as per the 2013 Act, a CAG audit needs to be done only if the government holds more than 51 per cent of the shares in a company,” he said. The Kerala government holds just 32.99 per cent of KIAL shares.

In fact, Central Public Sector Units, State PSUs and the Airport Authority of India together hold 28.08 per cent shares. If the government share is added to this, the total shareholding by government and government-controlled agencies would amount to 61.07 per cent. The Chief Minister had maintained that this would not matter as only the government shares needed to be factored in.

The new Act, however, says that government-controlled companies should be brought under CAG scrutiny. The Chief Minister insisted that KIAL could not be called government-controlled. He said according to Section 2 (27) of the Companies Act, only if the government had the right to appoint a majority of directors to the director board or if it has control over management or policy decisions can a company be called government-controlled.  

In KIAL's Articles of Association, Pinarayi said the government has the right to appoint just one-third of the director board members. “And there are no existing MoUs or shareholder agreements or voting agreements that give the government any special powers,” the Chief Minister said.

The MCA has now debunked all such claims and has asked the KIAL to make way for the CAG's re-entry.

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