Another victory for Jayalalithaa

Published : Feb 13, 2004 00:00 IST

A Special Court acquits Chief Minister Jayalalithaa in the SPIC-TIDCO disinvestment case, saying the CBI charge-sheet has failed to prove the corruption case beyond doubt.

IN yet another legal victory for Tamil Nadu Chief Minister Jayalalithaa, a Special Court in Chennai acquitted her and two others on January 23 in the Rs.28.29-crore SPIC-TIDCO disinvestment case. On November 24, 2003, the Supreme Court upheld a Madras High Court verdict acquitting her in the two TANSI cases. All these cases relate to the corruption charges against her.

The Central Bureau of Investigation (CBI) had charge-sheeted Jayalalithaa on August 18, 2000, in the SPIC-TIDCO disinvestment case. It relates to the decision of the Tamil Nadu Industrial Development Corporation (TIDCO), a State government undertaking, in 1992 to renounce its rights in the Southern Petrochemcial Industries Corporation (SPIC) in favour of M.A. Chidambaram and A.C. Muthiah, then its Chairman and Vice-Chairman respectively. Jayalalithaa was the Chief Minister at that time, heading the All India Anna Dravida Munnetra Kazhagam (AIADMK) government. The accused in the case other than Jayalalithaa were C. Ramachandran, formerly Industries Secretary and Chairman and Managing Director of TIDCO, and Muthiah. Chidambaram, Muthiah's father, passed away in January 2000.

Special Judge R. Rajamanickam, who gave his ruling in a crowded court hall, acquitted Ramachandran and Muthiah as well. He said that the CBI had failed to prove the case beyond reasonable doubt and hence awarded the benefit of the doubt to the accused. He found all the accused not guilty. The Special Judge held that the sanction granted for prosecuting Jayalalithaa and Ramachandran was not valid.

The CBI charge-sheet said that Jayalalithaa and Ramachandran, an Indian Administrative Service (IAS) officer, plotted a criminal conspiracy during 1991-92 with Chidambaram and Muthiah, reversed the decision of the previous Dravida Munnetra Kazhagam (DMK) government, and facilitated Chidambaram becoming SPIC's Chairman and gaining control over the company. The DMK government headed by M. Karunanidhi had decided that the State Chief Secretary should be SPIC Chairman because it was a joint venture undertaking of TIDCO and M.A. Chidambaram and Associates. TIDCO had a majority shareholding of 26 per cent in SPIC.

According to the charge-sheet, Jayalalithaa and Ramachandran permitted TIDCO to renounce in favour of Chidambaram and Muthiah its rights with regard to 2,03,320 zero-conversion bonds (ZCBs) worth Rs.12.37 crores although under the prevailing rate of Rs.2,000 for one ZCB, a price of Rs.40.66 crores was warranted. As a result, the State government sustained a loss of Rs.28.29 crores, and Chidambaram and Muthiah derived corresponding financial advantage, it said (Frontline, September 15, 2000, and January 15, 1993).

The accused were arraigned for offences under Section 120-B (criminal conspiracy) of the Indian Penal Code (IPC) read with Sections13 (2) and 13 (1)(d) of the Prevention of Corruption Act (PCA). The PCA sections deal with criminal misconduct by a public servant. Muthiah was also charged with offences under Section 109 (abetment) of the IPC.

The case has periodically hit media headlines since Janata Party president Subramanian Swamy filed a public interest petition demanding a CBI probe into the alleged loss to the government.

Justice Y. Venkatachalam of the Madras High Court, on December 15, 1997, directed Jayalalithaa, Chidambaram and Muthiah to pay Rs.28.29 crores to the State government within six months for the losses suffered because of the "collusive" deal. He accepted the DMK government's statement filed in the court that the government had sustained a loss in the transaction. Justice Venkatachalam directed the CBI to investigate the matter and quashed a Government Order (GO) of March 1992 (when Jayalalithaa was Chief Minister) for the renunciation. The Judge said that the court considered her action "an act of privatisation of SPIC", adding that "this type of action has to be dealt with firmly".

On an appeal from Jayalalithaa, Chidambaram and Muthiah, the First Bench of the High Court stayed that portion of Justice Venkatachalam's order that directed them to pay Rs.28.29 crores to the State government.

The CBI investigated the matter and presented the final report, that is, the charge-sheet, in the Special Court. The court framed the charges on December 26, 2000. Examination of witnesses began from April 10, 2001.

In his order, Special Judge Rajamanickam said that it was clear from the evidence of prosecution witnesses that there was no misconduct in the appointment of the SPIC Chairman. A GO issued in January 1970 accepted the Articles of Association of SPIC and agreed to Chidambaram being its Chairman. Evidence was tendered that according to the 1970 GO and Articles of Association, neither the State government nor TIDCO had any authority to appoint the SPIC Chairman. Another GO, issued in November 1971, vested the chairmanship only with the promoter. This order was not amended or cancelled. The government nominee (the Chief Secretary) was Chairman only for a short period.

The Special Judge found that Chidambaram and Muthiah received no monetary advantage (in acquiring the rights). The State government did not suffer any loss because it had followed "The Economic Times formula", which was a well-accepted method for fixing share prices. There was evidence to show that Ramachandran had applied his mind to the subject matter, that TIDCO's decision to renounce was right, that procedure was followed in the matter, and that neither the government nor TIDCO suffered any financial loss because of the renunciation. There was evidence to show that TIDCO did not pass any resolution regarding the decision to invest in SPIC's ZCBs. Only the government's direction was sought. A witness testified that the Economic Times formula was the correct formula and that it was used to arrive at the rights renunciation value.

The share price boomed artificially at the relevant time and it crashed subsequently. Chidambaram and associates lost heavily by acquiring the rights. The audit report of TIDCO showed that it had netted a profit of Rs.12.37 crores by relinquishing its rights. According to the Judge, this report was approved by the Comptroller and Auditor-General.

The Judge said that Subramanian Swamy's deposition could not be considered as he had in his oral evidence admitted that he had filed his public interest petition on the basis of a magazine article, that too three and a half years after the article was published. Besides, he had said that he had no personal knowledge of disinvestment transaction.

The Judge said that sanction to prosecute Jayalalithaa and Ramachandran was given without the Governor's approval. (The Governor has to accord sanction for prosecuting Ministers and IAS officers.) A prosecution witness had given evidence to the effect that after the GOs were issued sanctioning the prosecution of Jayalalithaa and Ramachandran, the CBI wanted some amendments made in them. So a new order was issued granting prosecution. But the second (new) order did not go to the Governor, the witness said. The Governor's approval was not received for cancelling the earlier GO either. Hence, it was clear that the new order was issued without the Governor's approval, the Judge said.

Jayalalithaa came out of the court hall looking pleased. She, however, did not speak to the media. Muthiah said, "Truth has prevailed."

Outside the court, AIADMK cadre celebrated the verdict by bursting firecrackers.

It is a moot point whether the CBI will appeal in the High Court against the Special Judge's verdict.

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