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Mahindra quits PM panel - Industrialist takes voluntary step after Bhopal verdict

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By RASHEED KIDWAI AND OUR BUSINESS BUREAU WITH INPUTS FROM OUR LEGAL CORRESPONDENT
  • Published 30.06.10
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June 29: Keshub Mahindra, the veteran industrialist convicted in the Bhopal gas tragedy case, has resigned as a member of the Prime Minister’s Council on Trade and Industry.

Sources said the 86-year-old industry doyen was under no compulsion to resign but offered to do so to avert any embarrassment to Prime Minister Manmohan Singh.

On June 7, Mahindra and six others were found guilty by a chief judicial magistrate and sentenced to two years in jail. Mahindra was the non-executive chairman of Union Carbide India when the disaster struck Bhopal.

Mahindra today challenged his conviction before a court. District and sessions judge Subash Kakde has reserved his order on the continuation of Mahindra’s bail that will expire on July 7.

Sources said Mahindra’s resignation letter had reached the Prime Minister’s Office. Manmohan, who returned this evening from Toronto, is expected to take a decision soon, they added.

The Prime Minister’s council is an institutionalised framework created to foster partnership between the government and business. Its members include Ratan Tata, Mukesh Ambani and Sunil Mittal.

In 2002, Mahindra had voluntarily turned down the Padma Bhushan that was conferred on him by the Atal Bihari Vajpayee government. In a letter to then home minister L.K. Advani, Mahindra had said: “It is important to put absolute sanctity of the national awards above personal satisfaction.” He had pointed out that he “was not in any way involved with the day-to-day operations of the company”.

A few days ago, Mahindra’s nephew Anand Mahindra had tweeted: “My uncle was the non-exec chairman of Union Carbide India and of a number of other companies that requested him to join their board. At a time like this, there is little that one can say to counter the tidal wave of emotions that need an outlet. I agree that the debate is about no one being accountable for the deaths and the lives that have been affected.”

Legally, Mahindra is under no obligation to step down immediately as non-executive chairman of vehicle-maker Mahindra and Mahindra or vacate his directorships with four other listed companies. Mahindra doesn’t hold an executive position in any of these companies that include mortgage financier HDFC where he is a vice-chairman.

Legal mavens believe that since Mahindra doesn’t hold an executive position in these companies (either as a managing director or a whole-time director), he doesn’t face the rigours of Section 267 of the Companies Act.

Under this section, no company can appoint or persist with the appointment of a person “who has been convicted by a court of an offence involving moral turpitude”.

A convicted MD would have to secure a stay on his conviction if he wanted to cling to his post. A mere suspension of the sentence — which has been granted to Mahindra — would not have been enough.

Since he holds non-executive positions in the five companies, Mahindra has to contend with Section 274 of the act — a relatively softer proviso — which disqualifies a person from staying on if convicted of moral turpitude for over six months.

But the clause also provides an escape hatch: the central government can issue a notification waiving the disqualification. This could be either a blanket waiver or restricted to certain specified companies.

Legal eagles say that disqualification under Section 274 doesn’t mean immediate vacation of office either, unless Mahindra chooses to step down on his own. A convicted individual has to vacate his position as a director of a company under Section 283 of the Companies Act, which says the disqualification will not take effect for 30 days from the day the court issues the verdict.

During this 30-day period, the person can file an appeal against the judgment — as Mahindra has done. The disqualification will stay in abeyance until seven days after the appeal is heard and disposed of. A second appeal can be filed with the same grace condition.

If Mahindra’s appeal falls through, he will be barred from holding the post of director in any company, under Section 274 1(d), for five years after he completes the sentence.

Besides M&M and HDFC, Mahindra is a non-executive chairman with Mahindra Ugine Steel and an independent director with Bombay Dyeing and Manufacturing Company, and Bombay Burmah Trading Corp Ltd.

He is also a director with two unlisted companies: Mahindra Holdings Ltd and Kema Services (International) Ltd.

Moral turpitude is a portmanteau expression that covers a range of anti-social behaviour from murder and arson to financial shenanigans while running companies.

The term is vague and has different meanings depending on the context in which it is used. Even the Supreme Court has said that no absolute standards can be set to define the expression.

The term is usually intended to cover an act that is shameful, licentious, lewd or unchaste. It broadly covers a number of anti-social acts like black marketing, profiteering, hoarding, and adulteration.

Conviction for gambling or filing a false report would be covered by the ambit of this expression. But a conviction under the Arms Act or the Factories Act wouldn’t.

The Supreme Court has set a litmus test to decide cases of moral turpitude:

• Whether the act leading to conviction was such as could shock the moral conscience of society in general.

• Whether the motive which led to the act was a base one

• Whether on account of the act having been committed, the perpetrator could be considered a depraved character or a person to be looked down by society.

Lawyers quibble over whether a conviction in the Bhopal gas tragedy case would fall within the legal ambit of “moral turpitude”.

Lawyer Sameer Parekh of Delhi-based law firm Parekh and Co. said that conviction under Section 304A was usually good enough to be construed as “moral turpitude”. But not in Mahindra’s case, he said. “In the absence of intent, it would not be moral turpitude,” he added.

Sajid Mohamed of the Mumbai-based PDS & Associates said: “It is a matter of debate whether this conviction would amount to moral turpitude.”

Moral turpitude involves personal failings, he said. Mahindra’s lawyers can well argue that criminal negligence doesn’t fall within the ambit of moral turpitude. “They may be successful unless the Supreme Court extends the definition of moral turpitude,” he added.