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KIAL is under a cloud
KIAL is under a cloud
Governance

CAG Can Audit KIAL, says Corporate Affairs Ministry

The Kerala chief minister though is loath to allow a CAG audit of the Kannur International Airport Limited

Rejimon Kuttappan

Rejimon Kuttappan

In a major setback to the Kerala government, the Ministry of Corporate Affairs has sent a letter (in possession with The Lede) to the managing director of the Kannur International Airport Limited (KIAL) stating that a Comptroller of Auditor and General (CAG) audit in the company is possible, hence it should be allowed and if not, the government will be prosecuted.

Even though, the Kerala government had allowed a CAG audit till 2015-16, later on, it had denied the same.

Demanding a CAG audit in KIAL, the Opposition parties had disrupted the Assembly several times and even had approached Kerala governor for the same.

Earlier, chief minister Pinarayi Vijayan had said that KIAL fell outside the ambit of the CAG from 01 April 2014, when the Companies Act, 2013, came into being.

He said the new Act had taken out Section 619 (B) of the original Companies Act, 1956. Section 619 (B) had stated that the CAG would audit a company if 51% or more of its shares are held by the government or government-controlled companies or corporations.

“Though the Section was taken out, the new Act did not insert a similar clause,” the chief minister had said.

“Now, only the government shares matter. So as per the 2013 Act, a CAG audit needs to be done only if the government holds more than 51% of the shares in a company,” he had said.

63% Share

The Kerala government holds 32.86% of KIAL shares. Interestingly, in KIAL, public sector undertakings also have stakes of 31.93% shares.

Hence the total shareholding by government and government-controlled agencies would amount to 63%, which CAG says is enough to give them power to audit the company.

The letter addressed to V Thulasidas, MD of KIAL, and dated 25 November 2019, from the Ministry of Corporate Affairs, states that KIAL is required to comply with Companies Act of Section 139 (5) and (7) provisions because government and government-controlled agencies are holding 63% shares in KIAL.

Sections (5) and (7) of section 139 under the Act provide for power of the Comptroller and Auditor—General (CAG) to appoint an auditor in a government company.

The letter adds that KIAL is violating the Companies Act Sections 139 (5) and (7) already and if the violation continues, then the company as well as its officers in default will be prosecuted under Section 147 of Companies Act.

While Kerala chief minister Pinarayi Vijayan is the Chairman of KIAL, ministers E Chandrasekharan, EP Jayarajan, AK Saseendran, Ramachandran Kadannappally, KK Shylaja Teacher are the directors.

MA Yusuffali, CMD at Lulu Group International, Dr Shamsheer VP MD at VPS Health Care, Abdul Qadir Theruvath, Chairman of Express Printing Services and Dr MP Hassan Kunhi, Chairman and CEO at Medtech Corporation, are also directors.

Violations And Punishments

Under Section 147, if any of the provisions of sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than Rs 25,000 but which may extend to Rs 5 lakh and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than Rs 10,000 but which may extend to Rs 1 lakh, or both.

And if an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with fine which shall not be less than Rs 25,000 but which may extend to Rs 5 lakh, provided that if an auditor has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or creditors or tax authorities, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than Rs 1 lakh but which may extend to Rs 25 lakh.

Aerodrome License

In a letter (in possession with The Lede), signed by Namita Sekhon, Additional Deputy, CAG, the KIAL fulfils Aerodrome licensing criteria by virtue of its paid up capital being held by Kerala government, central and state government PSUs, thus making it a deemed government company and hence it cannot escape the CAG audit.

Commissioned on 09 December 2018, Kannur International Airport Ltd (KIAL) is an Unlisted Public Company promoted by Kerala government.

KIAL is the second greenfield airport in Kerala, built on Public Private Partnership model in an area of about 2300 acres.

Land has been acquired by the Kerala government through KINFRA, the Nodal Agency, and is being transferred to the company in a phased manner.

This year in January, the 9th Adjourned General meeting (AGM) of KIAL, had approved the annual report for Financial Year (FY) 17-18 and appointed Deloitte as statutory auditor FY 2018-19.

As per the Information Memorandum prepared by SBI CAPS, the airport is expected to have an approximate annual traffic of 1.65 million international and 0.16 million domestic passengers in FY 2018-19.