More than two years since Textiles Minister Smriti Irani gave the go-ahead to supersede the Apparel Export Promotion Council (AEPC), the Ministry of Corporate Affairs (MCA) is yet to appoint a government administrator to take over its management.
Keeping in view the allegations of large scale fraud of government grants by the AEPC, the then Textiles Secretary Rashmi Verma wrote in July 2016 to MCA that the government appoint an administrator to take over its management.
Current Textiles Secretary Raghvendra Singh proposed last October names of five of his officials who would work as a group to be known as “government administrator”.
This, Singh wrote on October 9, would “facilitate the suspension of executive committee of AEPC”. Going by the Companies Act, MCA has asked the National Company Law Tribunal (NCLT) to suspend AEPC’s executive committee and appoint 15 directors who would report directly to the tribunal.
However, the NCLT is yet to take a call even though an interlocutory application by the MCA on August 8 requested it to supersede the executive committee of the AEPC and appoint 15 directors who would directly report to the tribunal. The application pointed out that MCA’s inspecting officer had found two “serious irregularities”: Loss of revenue because of letting out property at reduced rent to a private party and disobeying the instructions of the Textiles Ministry in violation of the company’s Articles of Association (AoA).
Working on the findings of the Comptroller and Auditor General of India (CAG), the officer found that the “initially original rent was fixed for Rs 270 per square feet plus service tax, which has been reduced to Rs 165 per square feet as a result of which there is a loss of revenue due to extending (un)due benefit to a private party”. CAG had reported that AEPC rented its furnished office space at Bhikaji Cama Place in New Delhi to Teesta Urja Limited at a reduced rate which led to a loss of revenue of Rs 17.42 crore to the AEPC. The property was purchased by AEPC from the bank guarantees and earnest money forfeiture funds given by the government to AEPC.
The inspecting officer’s report said that premises of Apparel International Mart (AIM), which were built with the help of government grant, were used for “non-bonafide” activities such as leasing out the site to Sector Skill Council, India Brand Equity Foundation, IGEP Foundation, Methods Apparel Consultancy India Private Limited etc.
“The leasing or renting of the premises is an activity which is not authorised to be undertaken. Further, Textile Ministry has repeatedly directed the company (AEPC) to get the premises vacated which have not been complied with…In view of that regulatory action for disobedience of government directions by the company and officer in default may be considered,” the inspecting officer’s report noted.
The AIM was built to provide a world-class permanent display facility for any apparel exporter who wants to display his products. It was built to serve as “one stop-shop” for international buyers. The officer’s report also said that as per the Articles of Association, the Ministry has the power to give specific directions to the AEPC in “public interest”. Singh and MCA Secretary Injeti Srinivas did not respond to the queries sent by The Indian Express.
AEPC’s spokesperson told The Indian Express: “Please note that the questions raised by your esteemed newspaper pertain to matters prior to the year 2004. The alleged allegations are being robustly contested by the Council. As the matter is sub-judice, we are unable to comment on specifics.” “The Council’s Governing Board not only comprises of exporters from all over the country representing various segments of the industry, but also three nominees of the Ministry of Textiles…The day to day administration of the Council is being looked after by the Secretary General, who is Officer of the rank of Joint Secretary,” the spokesperson said.
Verma’s letter of July 2016 had said that the “AEPC, despite clear directives from the Ministry under Article 101 (i) has shown disobedience and not willing to improve its corporate governance.” Under Article 101 (i) of the AoA of the AEPC, the central government can give explicit directions to AEPC and ensure that they are followed.