Shares of Aditya Birla Group companies tanked the most in three months on Tuesday after the Central Bureau of Investigation (CBI) named group Chairman Kumar Mangalam Birla in a case relating to alleged irregularities in allocation of coal mining rights. A question mark also hung over the fate of the Aditya Birla Group’s bid to acquire a banking licence.

Former Coal Secretary P. C. Parekh was also named in the First Information Report (FIR).

Besides Birla and Parekh, the FIR listed unnamed government officials and Hindalco. “They have been booked for criminal conspiracy under Section 120B of the Indian Penal Code (IPC) read with Section 13 of the Prevention of Corruption Act,” a source in the investigating agency said.

“Simultaneous searches are going on at Mumbai, Delhi, Bhubaneswar and Hyderabad,” the source added.

The FIR, the 14{+t}{+h} the CBI has filed in its ongoing investigation into the alleged scam in allocation of coal mining rights, is regarding discrepancies in the allocation of the Talabira-II block. The block, allocated in 2005, is located in Jharsuguda district of Odisha. The coal from the mine was to be used for power production.

While the lodging of an FIR indicates that the CBI thinks there is a prima facie case, formal charges are framed in court when it actually begins prosecuting the case. So far, no charges have been framed in any of the 14 cases the CBI has filed on the coal scam. The first FIR was filed on September 4, 2012.

Hindalco shares fell nearly 5 per cent in morning trade, before recovering to close with a marginal gain of 1.45 per cent at Rs 112.20 on the BSE. Shares of other group companies such as AB Nuvo and Idea Cellular were impacted.

Company’s denial

Hindalco denied there were any irregularities and said it had followed due process. “Apparently, this seems to be part of a larger case entailing coal allocation to companies, and being one of the companies, we are being investigated also. We wish to state unambiguously that we have followed every process required for allocation of coal completely, as stipulated by the Government policy,” a company statement said.

However, the FIR is likely to hurt the Birla Group’s bid for a banking licence, sources in the banking sector said. The committee (headed by former RBI Governor Bimal Jalan) examining applications for new banking licences “is not going to ignore the legal actions initiated against promoters of various licence aspirants by governmental agencies such as the CBI,” a banking industry insider said.

Aditya Birla Group shares shrug off CBI chargesheet news

In deciding candidates that fulfil the ‘fit & proper’ criteria, pending legal cases can influence the decision of the committee, the sources added. On June 11, 2013 Congress Member of Parliament Naveen Jindal, his company Jindal Steel and Power, and former Minister of State for Coal Dasari Narayana Rao were also named in an FIR and later quizzed by the investigating agency. Delhi-based Rathi Steel and its promoter have been named in another case.

CBI sources said Kumar Mangalam Birla, the 46-year-old head of the Rs 2.45-lakh-crore Aditya Birla Group, is also likely to be questioned. The group includes companies such as Hindalco, Grasim, Aditya Birla Nuvo, UltraTech, Idea, and Novelis.

Other cases, other honchos

Between coalgate and spectrum scam, a number of corporate honchos have come under the scanner of investigating agencies in the last two years.

While Sunil Mittal, Chairman and Managing Director, Bharti Group, Ravi Ruia, Vice-Chairman, Essar Group, and Anil Ambani, Chairman, Reliance Communications, are associated with the 2G spectrum case, Naveen Jindal, Chairman of Jindal Steel and Power Ltd, has been named as an accused in the coal scam.

Most of these cases are either being investigated or are under trial. In the case of Sunil Mittal, the Special Court hearing the 2G spectrum case summoned him saying he was in control of affairs of Bharti Airtel when the alleged irregularities were committed in grant of excess spectrum during the NDA regime. Ravi Ruia of Essar is also facing similar charges. Anil Ambani was summoned by the court hearing the 2G spectrum scam case in which a number of telecom companies lost their licences. Outside telecom, Naveen Jindal has been named in the coal block allocation scam.

(This article was published on October 15, 2013)
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