At least a dozen objections have been filed till Monday before the Ministry of Corporate Affairs by vendors and stakeholders, including employees’ union and former employees of Shipping Corporation of India Ltd (SCI), to the proposed demerger of the core and non-core assets of the national carrier ahead of privatisation.
The Ministry of Corporate Affairs has called a final hearing on the demerger scheme on Thursday (29 December). The Shipping Corporation of India Officers’Association (SCIOA) and the Shipping Corporation of India Staff Union (SCISU) have sought protection of employees’ interest during privatisation in a submission to the Ministry of Corporate Affairs. The Unions reiterated their views during a 16 December meeting
convened by the Ministry of Corporate Affairs, multiple sources briefed on the discussions, said.
Separately, the SCI Officers’Association filed a writ petition in the Bombay High Court a few months ago, seeking “injunction/ad interim reliefs and protection with regards to numerous employee related issues and legitimate benefits”. The petition is yet to be decided.
Those who have filed the objections have urged the Ministry of Corporate Affairs to put the demerger scheme on “hold”, “re-look and review” the demerger process and “refrain” from passing orders until the issues raised by them are settled.
The Unions have also flayed the government’s move to transfer Rs1,000 crores to the non-core company – which doesn’t have operational requirement like SCI for running any business – in the revised demerger scheme from the Rs450 crores agreed in the original scheme which they allege was computed in a “suspicious” manner without any justification or basis, pushing SCI into a “financial crisis”.
Besides, the Unions allege that a huge amount is being transferred to the non-core company “in blatant disregard to corporate governance policies”.
The Unions said they should be consulted on employee related clauses while preparing the Share Purchase Agreement (SPA) on SCI privatisation, which according to the government is in the “draft stage” and is a “confidential document”.
“The terms of the SPA will drastically affect the service conditions of all SCI employees and their dependent hundreds of family members post disinvestment as there is no job security or any assurance towards voluntary retirement scheme. Further, there is no clarity/assurance on whether the various corpus funded out of the salaries of employees
towards post retirement social security benefits are duly accounted for and secured or whether the transfer of Rs1,000 crores will have a detrimental impact on them,” the SCI Officers’Association said in a representation to the Ministry of Corporate Affairs.
“A no objection certificate (NOC) from the SCIOA for the demerger scheme, therefore, is not only desirable but also a must. The supposedly surplus cash being demarcated/siphoned off under the garb of ‘Scheme of Arrangement for Demerger of Non-Core Assets’ through Board approval is not only jeopardising the interests of SCI and its working capital requirements but will also adversely affecting the interests and livelihood of SCI employees and their dependent family members,” the Unions said.
“It is the concerted view of the employees that the surplus cash may be divided and disbursed to all the employees of SCI towards their gratuitous services and be utilised for an attractive/equitable golden handshake or VRS for interested employees,” the SCIOA stated.
Objections have also been filed relating to retired employees who have paid 4 percent of their salary while in service for availing the benefit of post retirement medical scheme (PRMS) provided by the company to its exemployees and their dependents.
“The corpus of the trust (that oversees the PRMS) is lying with SCI’s bank accounts (probably as fixed deposit) and when the demerger takes place followed by the transfer of Rs1,000 crores from the demerged company (SCI) to the resultant company (SCILAL), the demerged company will not have financial resources to meet this obligation,” Dipankar Haldar, who was the Company Secretary at SCI till 31 January this year, said in an affidavit.
Haldar further stated that there is a shortfall in contribution to the PRMS trust formed exclusively for those employees who retired prior to 2007. Guidelines issued by the Department of Public Enterprises stipulate that 1.5 percent of the company’s profit before tax should be deposited in the PRMS trust.
“Those employees who retired prior to 2007 are of 75 years plus age and are not in any active employment. The SCI management has only deposited Rs15.8 crore in 2017 and had withdrawn Rs12 crore illegally in the same year. The matter was referred to the Institute of Chartered Accountants and there is a disciplinary enquiry going on against the then chartered accountants for auditing of this trust fund during FY 2017-2018.
Therefore, it is pertinent to set aside an adequate amount for the beneficiaries of the trust,” Haldar submitted.
The Unions have also expressed concern over the future of the PRMS and the trust that runs the scheme post privatisation of SCI. Haldar has also flagged issues such as nonpayment of full performance related pay (PRP) to employees who have retired post 2017.
“SCI is utilising this money in their normal business activities; neither SCI gives any interest to its retired employees on this amount kept/being utilised, nor SCI is following the provisions of Indian Accounting Standards where debtor-creditor confirmation is required. Therefore, this money should be kept separate from the corpus of SCI, so that, if and when the COPU (Committee on Public Undertakings) recommendations comes,
SCI will be in a position to return/refund this money to the retired employees”, he wrote in the affidavit.
SCI has paid only 60 percent of the PRP for FY21, Haldar said, adding that the company should pay the full amount to all the eligible employees, whether retired or serving, prior to making the scheme of demerger effective.
Following the demerger and after receiving surplus cash of Rs1,000 crores, the noncore company will not be able to pay dividend to the government because it can only be paid out of profits earned from operations, per Section 123 of the Companies Act, 2013.
The new company SCILAL does not have any operation presently and the Rs1,000 cores only appear as reserves from which the company cannot pay dividend to the government. “Thus, the government is a loser by this count too,” Haldar added.
Referring to the cyclical nature of the shipping business, Haldar said that there are years when SCI runs the company on low cash accruals. The company has to repay loans taken for buying ships per the amortisation schedule. There will be times when the shipping cycle goes down and SCI will then have to dip into the surplus cash as it had done in the past.
Haldar added that “any attempt to make a wrongful transfer of Rs1,000 crores from SCI to SCILAL will certainly lead to financial chaos, pushing SCI into the throes of probable bankruptcy in the present financial scenario. There were not only several employee issues and payments outstanding, but also huge contingent liabilities and vendor payments are outstanding apart from hundreds of court cases/litigations pending in various courts/tribunals across the globe with claims running into crores, that becomes critical in the unforeseen eventualities unless the same are adequately addressed and covered”.
Naresh Birwadkar, General Secretary, Forward Seamen’s Union of India (FUSI), has filed objections to the demerger scheme on the grounds that many seafarers employed with SCI have not been paid pay revision arrears on which cases are pending in the Supreme Court and the Bombay High Court as well as non-payment of funds collected for the welfare of seafarers and claims relating to Seamen’s Provident Fund, gratuity and death compensation.
Source: Indian Shipping News
