August 15, 2020
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Slaughterhouse 37

A 10-hour meeting leaves the ITC board in shambles, and Deveshwar still on his feet, but tottering

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Slaughterhouse 37

HE’S managed to stay on top, for the moment at least. Yogesh Chandra Deveshwar, the first to arrive for the crucial ITC board meeting on November 15 and the first to leave, is still at the helm of affairs of India’s most controversial corporate giant. He is also heading the interim management committee formed to manage the day-to-day affairs of the company. But he may have been seriously weakened, and is likely to be looking at a gradual erosion of his powers over the next year.

Friday’s meeting was a bitterly-fought battle of influences. While ITC’s British parent BAT was gunning for a complete recast of the company’s board, including the removal of Deveshwar, the Indian financial institutions (FIs), which hold the largest chunk of ITC stock, threw their weight behind the chairman, pointing out that he has not been charged with any crime as yet by the Enforcement Directorate (ED). The result appears to be a tie, but the balance may actually be tilted slightly in favour of BAT. The meeting gave BAT what it has been wanting for long—a restructuring of management. When the resolutions passed by the board take effect, the ITC board will end up with as many as 10 non-executive members and only four executive directors, including Deveshwar.

The jubilant smile on Deveshwar’s tired face as he came out of Virginia House could not hide the fact his victory may turn out to be pyrrhic. He may also have reflected on his isolation: almost all familiar faces on the board have gone, soon to be replaced by as-yet-unnamed managers. Only BAT and the FIs remain.

 For when the 10-hour-long meeting ended late in the evening, the body count was high. The Committee of Directors (CoD), the elite body which runs ITC, had been dissolved. Of ITC’s seven executive directors, three had been suspended pending the outcome of investigations by a Board Committee: Deputy Chairmen Saurabh Mishra and Feroze Vevaina, and R.K. Kutty, chairman, International Business Division (IBD). Mishra and Kutty are currently in jail. Vevaina has been summoned by the ED but is lying ill at Mum-bai’s Breach Candy Hospital. The suspension of another director, Revati Prasad Agarwal, seems only a matter of time. That leaves only three who have escaped the slaughter: Deveshwar, Legal Affairs Chief Narayanswami Sitaraman and Finance Chief Biswadev Mitter.

In a drastic face-saving exercise, the board has also taken away the executive powers of all officers of the company arrested or charged by the ED. (The exception is Vevaina, who has only been summoned for interrogation. Agarwal, who is in the same boat, has escaped unscathed for the time being.)  Significantly, the board has decided to appoint three independent non-executive directors within the next few weeks to "manage all issues related to the current crisis." Said Deveshwar, who seemed satisfied with the result of his frequent visits to Delhi between enforcement interrogations: "No names have been finalised. But they would be recognised and successful professionals, management leaders, legal luminaries or financial wizards. I’m very happy and a party to the decision." 

One of the three will almost definitely be Susim Mukul Datta, who recently retired as chairman of Unilever’s India operations. Another could be Dhruba Narayan Ghosh, former chairman of the State Bank of India, and Larsen & Toubro, and currently non-executive chairman of Philips India and credit rating agency ICRA. Both had been approached by BAT early in 1995 to take charge as chairman of ITC, when BAT was gunning to bisect the company’s top job into a non-executive chairman and a managing director. Both had, at that time, refused.

 Till the board is restructured, the interim management committee will not only look after the company’s working but also set up a subcommittee to deal with the FERA violation charges against the firm. However, in its efforts, the committee will "have to follow a different, transparent course in managing financial and other crucial areas of the firm’s business." The board also committed to "extend support to the authorities for ensuing expeditious resolution of enquiries." The meeting, in which non-executive members outnumbered executive directors six to four, also resolved not to investigate non-executive directors.

With the majority of the ITC top brass decimated, the British parent will now have a big say in the formation of the new committees, selection of their members and in influencing their decisions. The new-look ITC board meets again on November 25, ostensibly to discuss the company’s half-yearly results. All in all, BAT nominee directors present at the meeting, Simon J.R. Smith and Timothy Lord (standing in for Richard Pilbeam), surely carried happy tidings back to Windsor House, BAT’s London headquarters.

Except for one little fly in the ointment. During his grilling by the ED on the day before the board met, Malcolm Fry, BAT’s India man during the alleged FERA violations, and currently managing director, VST Industries, answered every question with the plea that Pilbeam was in possession of all the facts. Said ED Deputy Director Kamal Kishore Kabir Panthi: "It’s prima facie clear from the inter rogations that BAT was aware of the financial irregularities." Fry and Pilbeam have been called by the ED for further questioning on November 21.

Even as ITC affairs get closer to some kind of order, panic reigns in group company ITC Classic Finance, which is facing a minor run on its fixed deposits. So far it has met all refund claims, but sources claim that if the run persists, the company could be in for a financial crisis, for fresh deposit inflow has stopped completely. Biswadev Mitter, who was appointed the firm’s chairman in a panic move on November 14 in place of Vevaina, had a lot of explaining to do at the ITC board meeting. These, reportedly, were not to the satisfaction of the FI nominees present: Basudev Sen of UTI, S. Mukerjee of ICICI, K.P. Narasimhan of IDBI and GIC and P.V. Narasimhan of LIC (IFCI representative Tapan Ganguly was absent).

As Deveshwar rode back to his apartment at Fountain Court, a stone’s throw from the most common address on Indian cigarette packs, 37, Chowringhee, and Lord and Smith headed for Dum Dum Airport to board the next flight to London, all three may have felt like the heroes of some high-budget slam-bang Hollywood movie. Ruins all around, but battered and bloodied, they were still on their feet. The rest: awaiting the sequel coming soon.

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