Rai involved in fraudulent appointment of IFCI CEO

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BT EXCLUSIVE: It is shocking that Indian government officials continue to contribute to the erosion of the aam aadmis faith by becoming a party to some scam or the other. The fresh matter pertains to none other than the current Comptroller and Auditor General of India (CAG), Vinod Rai, one of the reputed officers in the country, who allegedly gifted the top job in the Industrial Finance Corporation of India to Atul Rai. The IFCI, which was created to cater to the long-term finance needs of the industrial sector, now seems to be scam-hit with questions being asked about the appointment of its current MD and CEO Atul Kumar Rai. An exclusive report:

The current CAG and the IFCI top man have more in common than their surnames, which is Rai. They both are allegedly believed to have connived for the top job in the IFCI. CAG Vinod Rai and IFCI CEO and MD Atul Kumar Rai have allegedly helped each other and got the latter placed at the helm of affairs in the IFCI. Vinod Rai has allegedly gone out-of-the-way to ensure that Atul Kumar Rai gets the plum posting at the IFCI by exercising his influence.

Chronology of events

Prior to his appointment as Comptroller and Auditor General (CAG), Vinod Rai, a 1972 batch IAS officer, was posted as Joint Secretary, Additional Secretary and Secretary ( Financial Services) in the Ministry of Finance. He was also the Government Nominee Director on the Board of Directors of IFCI. Atul Kumar Rai (IES 1985) worked under him in the Department of Financial Services (DFS), Ministry of Finance, from November 2002 to May 31, 2007. Among other responsibilities Atul Kumar Rai was looking after the issues relating to the sanction and disbursement of loans and grants by the Government to the IFCI, exploring various options for restructuring of the IFCI by way of induction of a strategic partner, it’s possible merger with a PSU bank and the restructuring of IFCI liabilities towards PSU banks and insurance/ financial institutions for a period of about four and a half years. And Atul Kumar succeeded Vinod Rai as the Government Nominee Director on the IFCI Board on August 21 , 2005 and remained in the position till May 31, 2007.

While in the DFS, Atul Kumar had active personal support and recommendations of Vinod Rai, who later on got himself appointed as a wholetime Director of the IFCI from June 1, 2007 and subsequently re-designated as the CEO and MD from July 11, 2007. The two seem uncomfortably close.

Now, how did that happen is a story worth following.

Modus Operandi

On February 5, 2007, Atul Kumar sought voluntary retirement from the DFS on the reasons of attending to  certain personal and family matters at the earliest.  The application of Atul Rai was examined at various levels and forwarded to the Secretary, Financial Services, Banking, Vinod Rai, who apparently helped Atul Rai in getting relieved as soon as possible. Subsequently Amitabh Verma, Joint Secretary (Admin), MoF, recorded on April 30, 2007,

“Discussed with Secretary (FS). In view of the budget session of Parliament being in progress, it may be difficult to relieve Atul Rai immediately. Hence it has been decided to relieve him with effect from May 31, 2007. Shri Rai has agreed to this. May inform DEA (Cadre Controlling authority in IES).”

As soon as the above notings were recorded, the same day–April 30, 2007– Atul Rai submitted another note seeking permission for taking up the appointment as a Wholetime Director in the IFCI. In the above mentioned note Atul Rai explained that the Board of the IFCI, which is a public financial institution, at its meeting held on March 7, 2007 had resolved to offer him the post of Whole time Director and he wants to join them as soon as possible.

The question arises here that though his appointment was approved by the IFCI Board on March 7, 2007 Atul Rai did not disclose this fact to the DFS for 54 days. Why?

While examining the request of Shri Atul Kumar Rai, it has been stated on page 43 of the noting of the DFS that he had applied for the appointment in the IFCI against an advertisement. However, in a reply to an RTI query the IFCI said “No advertisement was issued by IFCI for the post.”

How did Rai come to apply for the post which never appeared in advertisement and why did he write to the DFS that he had been offered a job at the IFCI?

Commission of alleged Fraud

As per Rule 10 of the CCS (Pension) Rules, Atul Kumar Rai was required to seek Government approval in the prescribed Form no. 25 for taking up a post retirement commercial employment and was required to state if he had any dealings with IFCI in the last three years of his official career and make a mandatory declaration in the form of an affidavit that he has not been privy to sensitive or strategic information in the last three years of service. As per Notings of the Finance Ministry, Atul Rai has never submitted his application in Form 25 which was a necessary prerequisite for seeking Government permission.

While Government approval for appointment in IFCI was conveyed to Atul Rai on 1st June 2007 vide Banking Division letter no. A-19011/229/2002/-Estt subject to his submitting the Mandatory Declaration, Rai chose to submit a back dated (31st May 2007) Declaration wherein he declared,

“I have not been privy to sensitive or strategic information in the last three years of service, which is directly related to the areas of interest or work of the organization that I propose to join to areas in which I propose to practice or consult.”

Now, contrary to the above mandatory declaration submitted by Atul Rai, it may be observed that by holding strategic dual position of Director (IF) and as a Government Nominee on the Board of Directors of IFCI , Rai had been privy to all sensitive and strategic information about IFCI for more than three years of his service. This fact has been confirmed by Namo Narain Meena, Minister of State for Finance, in his letter no. 1/43/2009-stt (part file) dated 19 May 2010.

The letter says:

“I have been informed that during his tenure in the department of Financial Services, Atul Rai had dealt with matters pertaining to IFCI requiring Government interface. Further during the period from 21.08.2005 to 31.05.2007 he was on the Board of IFCI Ltd as a Nominee Director and in that capacity he was privy to all Board level matters of IFCI Limited.”

Further IFCI to whom the letter was referred also confirmed that “As Director (IF) Atul Rai was handling policy issues of Banks and FIs.

Still Atul Rai got the top job at IFCI allegedly by the consistent backing of then Secretary (FS) Vinod Rai.

Role of Vinod Rai

Being a senior bureaucrat Vinod Rai must be well aware about the Rules and Regulations for post retirement commercial employment by Class I Officers of the Government according to which an officer intending to join commercial employment after taking retirement from Government service must have not been privy to sensitive or strategic information in the last three years of service, which is directly related to areas of interest of the organization he proposes to join. It was well within the knowledge of Vinod Rai that  Atul Rai was holding strategic position in IFCI. Despite this ignoring all rules, Vinod Rai  had repeatedly made strong recommendations with his appreciative remarks for the appointment of Atul Rai as a Whole time Director in IFCI on a salary much higher than his Government service. The following will substantiate the favouritism shown by Vinod Rai for Atul Rai:

1) Noting by Amitabh Verma, JS (Admin) on 30th April, 2007 at page 37 wherein he had discussed the matter with Secretary (FS) Vinod Rai, about relieving of Atul Rai deferred to 31-05-2007. On the same day 30-04-2007 Atul Kumar Rai submitted a Note seeking Govt approval to join IFCI.

2) Noting on page 45 on 21.05.2007 Vinod Rai wrote “FM may consider granting permission to enable Atul Rai to join IFCI on his seeking pre-mature release from Govt. He is professionally competent and IFCI Board has sought his services.”

To which Finance Minister, P Chidambaram then replied, “Para 8 not correct. Pls Discuss.” (This Para pertained to the eligibility of Atul Rai’s candidature for top job at IFCI).

3) Noting on page 45-46. Discussed with FM. Approval of FM is sought for Shri Atul Rai to join as Whole Time Director on the board of IFCI. The officer is professionally competent, has a good track record and had acquitted himself in handling policy issue of Banks and FIs.” signed –Vinod Rai.

4) It is informally understood that Vinod Rai was himself present at the meeting of Board of Directors of IFCI on 7th March 2007 when appointment of Atul Kumar Rai was approved.

The strong and repeated personal recommendations of Vinod Rai for Atul Rai presents a clear picture of favouritism shown by the former towards the latter. Without which Atul Kumar may not have got the top job at IFCI.

The CAG should clarify and come out clean on this matter as it pertains to a very esteemed and high office in a democracy.   

The story above is a precursor and part one of the full and final story to be printed in Bureaucracy Today Magazine in the forthcoming March issue.

Suhaib Ilyasi

Editor-in chief- Bureaucracy Today

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Ham-fisted CVC

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The growing cynicism among the people of this nation forces us to ponder over whether India needs official watchdogs as inept as the Central Vigilance Commission? The functioning of the CVC is the testimony to the fact that a national vigilance body can be abused by senior corrupt officials. The National Crime Records Bureau figures for the year 2008 show that 8, 554 cases were investigated by State vigilance/ anti-corruption bodies under the Prevention of Corruption Act and related sections of the Indian Penal Code.

Of them, only 2, 543 accused persons were chargesheeted. Out of 29, 783 persons who were put to trial, only 997 have been convicted. The irony is that the CVC machinery has to seek sanctions for prosecuting corrupt officials. In spite of the Commission clearly mentioning in its annual reports tabled in Parliament that the Single Directive should be abolished, the House has not agreed to this suggestion.

 This also shows that there is lack of political will in striking off the Single Directive which only facilitates corruption in government departments, whether the NDA or the UPA rules the country. However, it cannot be ignored that the Commission has its own organizational and operational hurdles.

The CVC,with a wafer thin staff strength of 200, is supposed to check the vigilance and non-vigilance functions of over 1, 500 Central Government departments. Moreover, CVC functionaries themselves point out that the Commission does not get manpower that has specialization in vigilance related procedures. Thus the CVC is not a very preferred place to work. This strengthens the view that the Government should make the CVC an attractive career option for officers of the ranks of Director and others by it more teeth. Just as the Election Commission was given a spine in 1996 during TN Seshan’s tenure, the Government must seriously look into merging the CVC into the proposed Lokpal with all the mandatory powers.

 It will be interesting to see whether the present government is ready to give away its powers and liberties so easily. It is high time we put an end to this wholesale public loot.

Suhaib Ilyasi

Democracy, people and revolution

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Images of Arab capitals on fire due to civil uprising against the regimes created a strong resonance of the words of a senior police officer in my mind today:

“Naxalites are the biggest threat to Indian democracy since independence.”

Entire human history has been witness to this fact that no armed force could stop rightful demands of people for long. And the challenge for every nation state is that it should not be caught on the wrong side of people’s aspiration.

If the government of the day is anti-people, the vacuum is filled by the opposition in every democratic system. But the real threat emerges when people find the system as antithesis. This lack of belief in the system inspires revolutionary forces. And the floating elements like Naxalites tap and use these forces not necessarily in people’s favour, who they claim to represent.

With the hope that people always find system of this country on their side, I am going to bed.

Good night.