What Veena had said about Pinarayi and her role in CMRL pay-off scandal

Before the surprise raids on Wednesday, Veena Vijayan was formally questioned by the Registrar of Companies (RoC) in late 2023 about her deals with Cochin Minerals and Rutile Limited (CMRL).

During this interrogation, Veena was asked why she had taken money from CMRL when her company, Exalogic Solutions Limited, was already paid. She was also asked about her father, the then Chief Minister Pinarayi Vijayan's role in her company getting the CMRL services contract. Veena refused to provide satisfactory responses to both these questions.

The RoC had questioned Veena after conducting a preliminary investigation of its own. The RoC report had recommended action against Veena for what it termed "fraud under the Companies Act 2013". It is on the basis of the RoC report that the Ministry of Corporate Affairs ordered a detailed probe against Exalogic Solutions.

The RoC's investigation was prompted by the findings of the Income Tax Interim Settlement Board that revealed that Veena individually and her company separately received ₹5 lakh and ₹3 lakh a month, respectively, for three years from 2017. It said that Exalogic had signed an agreement with CMRL to provide marketing consultancy and software services. However, the Income Tax investigation revealed that no such services were rendered.

The RoC first wanted to know how Veena could personally take money from the CMRL.

The service-level agreement between Exalogic and CMRL showed that the software services were to be given only through the company. So how come Veena, the director of Exalogic Solutions Private Limited, received ₹55 lakh from CMRL in an individual capacity?

The RoC told Veena that the poser was based on "reports available in the public domain", a code for the IT Interim Settlement Board report.

She was asked to explain whether she was providing services in an individual capacity other than through Exalogic Solutions. And if so, to provide the purpose and documentation. She was also asked to explain why action should not be initiated against her under section 447 of the Companies Act (punishment for fraud) for the diversion of amounts to the personal account of the director.

Veena took advantage of the non-specificity of the question. She said that the RoC had merely referred to "reports available in the public domain". "I am not in a position to reply since no specific reports were identified. If you can provide us the reports that were relied upon by you, we will give our comments, if it concerns us," she said.

The RoC termed this response "evasive".
The RoC also wanted to know why Veena failed to disclose that her service deal with CMRL came under the "related party" transaction.

Under Section 188 of the Companies Act, no company should enter into a contract/agreement with a 'related party". A list of 'related parties' is given in Section 2(76) of the Companies Act. There are nine; from the director of a company who is a close relative to a subsidiary or associate company.

One of the 'related parties' is: "any person on whose advice, directions or instructions a director or manager is accustomed to act".

The RoC found in this a clear link to the Chief Minister. It reasoned that the government-run Kerala State Industrial Development Corporation (KSIDC) holds a 13.4 per cent stake in CMRL. Therefore, KSIDC has a "significant influence" in appointing people to key managerial positions in CMRL. And KSIDC, in turn, is "bound to act as per the directions of the Chief Minister".

Veena's was a blunt denial, as per RoC records. She termed this "factually and legally incorrect". Veena said neither she nor her family members were involved with the functioning of KSIDC. She said none of her family members holds even an ex officio post in KSIDC.