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CHENNAI, India: Church of South India Embroiled in Ongoing Corruption Scandal

CHENNAI, India: Church of South India Embroiled in Ongoing Corruption Scandal
Church of South India Trust Assoc. (CSITA) is being investigated by a Government Agency and will have a new administrator not appointed by the Church
Only six of 24 bishops are above suspicion of corruption and should be invited to Lambeth 2020, says scholar

By Joseph G. Muthuraj
Special to VIRTUEONLINE
www.virtueonline.org
July 22, 2018

We in the Church of South India are in a crisis situation over the affairs of the CSI Trust Association (CSITA) as it has now become clear that only through litigation can the church be saved from the alleged charges of corruption and fraud.

The best efforts for dialogue with the leaders have not worked as they are constantly in a mood of indignant denial. The efforts to bring pressures from the partner churches and organisations overseas did not materialise as they continue to financially support foreign visits made by the corrupt bishops and award scholarships to bishops' children to study abroad.

Two significant verdicts that came from the courts in the month of June 2018 promise to offer the necessary remedy for the crisis. I shall take you through the vagaries of the arcane Indian legal system! Fasten your seat belt!!

The massive properties of land and buildings accumulated by the churches in South India during the missionary era of 250 years were handed over to the Church of South India in the form of a corporate arrangement. The Church of South India Trust Association (CSITA), an incorporated body under the Indian Companies Act, 1913, was formed a day before the united church was formed on 27 September 1947. The property and financial management of the church were vested on the CSITA, an incorporated company licensed by the Government of India. It meant that the property and financial management had to be carried out in accordance with the statutory laws of the Indian Companies Act. The CSITA was registered as a limited company by guarantee in 1947, and since then the Companies Act has been fully revised twice (in 1956 & 2013). The new Act was promulgated in 2013 and the CSITA Company now has to administer itself under the statutes and provisions of the new Companies Act of 2013. The new Act has introduced strict vigilant mechanisms over the activities of the companies and set up punishment with fines and imprisonment for serious non-compliance to the Act.

The Ministry of Corporate Affairs, a Ministry of the Government of India, is primarily concerned with the administration of the Companies Act 2013. Its local extension Registrar of Companies (RoC) oversees company affairs in a given region by receiving annual reports, financial statements and approving borrowing, sale/mortgaging of properties from companies.

In the last five years, the RoC, Madras has been inspecting the CSITA's operations and found them in breach of Company laws and that the company is run for a fraudulent and unlawful purpose. Hence through its various Reports, it strongly recommended to the MCA (particularly through a comprehensive Report filed on 12 January 2016 which ran to 45 pages) to order an investigation by its statutory body, the Serious Fraud Investigation Office (SFIO) which, on behalf of the Government, conducts major fraud probes with power to arrest and prosecute the offenders.

On 8 July 2016, the SFIO wrote to the CSITA hierarchy (i.e. the CSI office-bearers) under the mandate of the Ministry of Corporate Affairs ordering them to submit copies of documents/information of the following to the Inspector and Investigating Officer:

i) The Memorandum and Articles of the Association of the CSITA;

ii) Copies of Books of Accounts for the last seven years including Ledgers and Trial Balances;

iii) Copies of minutes of the Board of Directors meetings and Annual General Meetings;

iv) Copies of Disclosures of interest given by the Directors to the Trust if any; v) Details of Bank Accounts (operational and closed) i.e. name of the Bank and Branch, Account no., Nature of Account, and Dates of Opening;

vi) Copies of Income-Tax returns of the CSITA for the last seven years;

vii) Copies of financial statements [Balance Sheets, Income and Expenditure Statements along with schedules] and Annual Returns filed with RoC for the last seven years; viii) Copies of service Tax Returns and Customs duty paid by the Trust for the last seven years; ix) Copy of the Register of Fixed Assets/Immovable Properties; x) Copies of Lease Agreements entered by the Trust on immovable properties and Charge creation/Modification of Trust immovable properties; and xi) Details of on-going court cases of the Trust and copy judgements of the court cases. The order was ploughing deeply through the financial and property transactions in the past seven years. The CSI/CSITA hierarchy started to make efforts to impede the investigation by filing cases against it in the court.

Church Leaders use Courts to Stall the SFIO Investigation

No one in the CSI wanted to face such a terrible situation of having to answer to the investigating agency as to how and why the administration sold properties and spent money. The immediate instinct is to jump over the wall and run away from the scene. The only weapon for it is to go to court and file petitions to stop the SFIO probing the illegal activities of the CSITA.

This official mandate to investigate the external and internal management affairs by the SFIO dated 8 July 2016 was 'stayed' by the Andhra Pradesh High Court by a suit (case no. WP 38841/2016) filed by the administrators of the CSITA. It was a see-saw struggle at the court for one and a half years. The 'stay' prevented the investigation getting closer to exposing the corrupt financial activities of the church leadership that was weakening the church and damaging its witness.

The case proceedings continued in a fluctuating manner and came to an end with the court ruling on 16 November 2017 that the Ministry of Corporate Affairs should issue a fresh order to the SFIO so that it could restart its investigation on the CSITA. The merit of the investigation by the SFIO as to its purpose, however, was not questioned by the court. Following this verdict, in the High Court of Madras, a prayer (WP 32457/2017 & WMP 35754/2017) was submitted to quash the order by the petitioner R. Sadanandha, Secretary, CSITA and to further quash the comprehensive Report mentioned above produced by the RoC, Madras dated 12 January 2016 which recommended the investigation by the SFIO. It was argued that the Report of the Registrar was not enough to order an investigation and the Central Government ought to have formed its own opinion before ordering such an investigations by the SFIO [sec. 212(1)].

After hearing the arguments, the Order of the Honourable Justice Shri. M.S. Ramesh issued on 22 February 2018 said, 'So any suit to quash the order of 22 February 2018 before the Government Order is premature.' The Judge adds, 'In view of the same, I am not inclined to pass any order on the various grounds raised by the petitioner R. Sadananda.' So the petitioner's prayer was turned down and the SFIO probe could not be blocked.

The matter was then taken to the Madras High Court (WP 32457/2017) to block the SFIO investigation without making the Madras HC aware of the verdict given by the AP High Court. Eventually, that case also ended up in support of the judgement issued on 22 February 2018 and the 'stay' stood cleared. It was greatly welcomed by the public that the investigation is now open and that many instances of corruption and money-laundering will be traced for the benefit of the public.

As the next step, writ Appeals from two persons were filed against the order dated 22.02.2018 made in WP32457/2017 by a learned Single Judge. The Judge who heard the petition to quash the order of 22 February 2018 issued an Order against the writ petition and writ appeals that they are not at all maintainable. At this stage, the consequential order passed by the Joint Director, Ministry of Corporate Affairs, New Delhi dated 07.05.2018 to relaunch the investigation by the SFIO is still effective and permissible under law. But it has been learned that the CSI hierarchy is bent on keeping the SFIO away from its premises because many devils will be chased out of the account books and illegal property sales would be brought to light. The SFIO investigation is officially on and will proceed if the orders above from the High Courts are not challenged in the Supreme Court. The CSI/CSITA cannot hope to win their case even at the highest level by relying on their millions of rupees to throw away for court expenses.

A New Administrator for the CSITA Appointed by the Court

The second significant development in eradicating corruption from the CSITA is that the CSITA will have a new Administrator appointed by the Companies Court called the National Company Law Tribunal (NCLT). The government regulators and the courts such as the National Company Law Tribunal have assessed the realities of the situation and have clear knowledge of the real state of affairs in the CSITA. The NCLT is a quasi-judicial body in India that adjudicates issues relating to Indian companies.

The National Company Law Tribunal has already removed the Directors and the office-bearers of the CSITA and has appointed a retired judge to be the Chairman to look into the day-to-day affairs of the company and manage it until further orders from the Tribunal (case no. CP 2/2016).

Sec. 18 (CP 2/2016) in the Judge's declaration states, 'Since the company petition is held maintainable and in the given circumstances there is an urgent need to regulate the affairs of the (CSITA) company, Therefore, I proceed to remove all the directors and managing committee including the office-bearers by appointing Hon'ble Justice X as the Chairman who is authorised to nominate four suitable persons to be chosen from the sub-units/Dioceses of Churches and three office-bearers. The Chairman will recommend the names of the persons to this Tribunal for appointment as Director and as office-bearers respectively ... they must be independent persons to be chosen from the sub-units/Dioceses of the Churches ... The erstwhile management committee is directed to hand over all the documents and books of accounts and other records of (CSITA) company to the Registry of this Bench in a sealed cover within a week from the date of pronouncement of this order, so that the record could be handed over to the Chairman for regulating the day to day affairs and running the management of (CSITA) company till further order.' (pp. 12-13)

This Sec. 18 of this verdict was challenged at the High Court of Chennai (CRP 3739/2016) by the CSITA Honorary Secretary and Hon. Treasurer and the court issued an order on 28 November 2016 to stay the appointment of a retired Judge as a new Chairman. It was nevertheless a conditional stay that 'The Church of South India Association and others in Management of the Company shall not assign, alienate or encumber any of the properties of the company in any manner until further orders.' (CRP 3739/2016 dated 28 November 2016 at the Chennai High Court).

While this case has been unsettled for the last 20 months and shrouded by mystery, the Tribunal made another ruling on 29 June 2018 on a separate petition with complaints against the CSITA that it has been DECIDED TO SUPERSEDE the Board Directors/Administrators of the CSITA. 'And, therefore, the locus standi of the petitioner (Mr. Premkumar) and his consenters as well as that of the persons representing CSITA (Office-bearers: The Moderator, the Deputy-Moderator, This Secretary and the Hon. Treasurer) COULD NOT BE ASCERTAINED.' It clearly means that nobody can claim to be representing the CSITA in any official capacity because all of them have been superseded by the new Chairman already appointed by the NCLT. Therefore, their operations both here and overseas will not have basis of law and will be counted as illegal. If the office-bearers, directors and members of the CSITA claim to act on behalf of the CSITA, they would be liable for criminal offences in accordance with law. The verdict also directed that the petitioner along with his consenters may place their claims BEFORE THE ADMINISTRATOR appointed by the Order of the single bench of this Tribunal dated 18.11.2016 in CA 12/2016. The petitioner along with his consenters can submit all 2,500 documents of complaints, for taking necessary measure and action, to the Administrator when he/she is in place.

This simple but firm ruling is that there is no management committee operating for the CSITA at present, and the appointment of the Administrator by the NCLT still stands. It will be a good sense and a mark of moral wisdom if not all the CSI bishops are invited to the next Lambeth Conference. As in previous practice, only a half a dozen among the 24 bishops should be invited. There should a session on 'Corruption in churches' debated in the Conference and a suitable code be formulated to stop corrupt practices in the churches.

The Rev. Dr. Joseph G. Muthuraj is Student, Master of Corporate Law Dr. Ambedkar Law University (Distance Education)in Chennai. He is a frequent contributor to Virtueonline

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