Srinivasan has to pass several tests to overcome conflict of interest

Chennai, Feb 12 (IANS) Sidelined BCCI president N.Srinivasan can pass the conflict of interest test if he is not a shareholder or a director in the board of Chennai Super Kings Cricket Ltd (CSKC), now a subsidiary of The India Cements Ltd, said a Supreme Court lawyer.

"Srinivasan cannot be said to be having conflict of interest in CSKC, provided he is not a shareholder of CSKC and/or is not a director on the board of CSKC," D. Varadarajan, a Supreme Court lawyer specialising in company, insurance and competition laws, told IANS over phone from New Delhi.

However, he added that there are other conditions that Srinivasan and the CSKC have to comply with to answer the conflict of interest question raised by the Supreme Court.

On Wednesday, the India Cements decided to reorganise its wholly-owned subsidiary that owns the controversial Indian Premier League (IPL) cricket team. Under the proposal, the shareholders will own the CSKC and not the cement company.

Last month, the Supreme Court said Srinivasan cannot contest any election to a board post (BCCI post) as long as he was involved in a "conflict of interest" situation as an owner of IPL franchise Chennai Super Kings (CSK).

Srinivasan is the vice chairman and managing director of The India Cements that owned the CSK team.

Earlier the company had decided to hive off the CSK division of the cement company into a wholly-owned subsidiary.

The decision to house the ownership of CSKC with the shareholders of the cement company is the latest twist.

According to Varadarajan, there are several tests that Srinivasan and the proposed CSKC have to pass to address satisfactorily the issue of conflict of interest vis-a-vis BCCI.

"The Companies Act, 2013 defines 'control' to include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting rights or in any other manner," Varadarajan said.

This definition of "control" has also to be examined further in the context of the definition of "subsidiary company" or "subsidiary" in relation to holding company, as defined in the said Act, he added.

"Accordingly, for construing no holding-subsidiary relationship in the context of CSKC being owned by the shareholders, India Cements should not be in a position to control the composition of board of directors of the CSKC," Varadarajan said.

"Therefore, if the ownership of CSKC is confined to its shareholders (excluding Srinivasan), and if there is no 'control' or 'holding-subsidiary relationship' within the meaning of the Companies Act, 2013, the owning of CSK by its shareholders cannot be said to be a veil or stratagem or subterfuge by India Cements to hide the real controlling interest," he added.

According to him, so long as the arrangement is bona fide, without playing foul with the law, one should shun any temptation to doubt genuine attempts to devise strategies as per law.

It will be interesting to see whether the top management of CSKC would comprise of board members of The India Cements or its senior officials or those close to the cement company or its promoters.