CBI files charge-sheet against JSW Steel officials, Sajjan Jindal needs to come clean

These are difficult times for Sajjan Jindal, the Chairman and Managing Director of JSW Steel Ltd. The company has been named in a case of bribery related to illegal mining in Karnataka, and Jindal is now facing an acid test to his credibility.

On Tuesday, the Central Bureau of Investigation (CBI) filed charges before a special CBI court in Bangalore arraigning JSW Steel executives of carrying out transactions that benefited former Karnataka Chief Minister B.S. Yeddyurappa and his family. Yeddyurappa, his two sons and a son-in-law have also been named in the CBI charge-sheet. The JSW Steel executives mentioned in the charge-sheet include CEO Vinod Nowal and Vikas Sharma, a senior vice president who quit recently to pursue his career outside JSW.

The charge-sheet comes barely a month after the name of Naveen Jindal, Sajjan Jindal's younger brother and a Congress member of Parliament, figured in reports related to benefiting from captive coal mine allotments.

In a statement, JSW Steel denied the allegations and said it had fully cooperated with the CBI in the investigation. "The conclusions drawn by the said authorities leading to the charge-sheet are without basis. The company always abides by law of the country and would present its case before the court. The Company has full faith in the judiciary that justice will be done," the company said.

At the July 25 annual general meeting of JSW Steel, Sajjan Jindal said his company "has been a victim in the illegal mining matter. Even after a presence of more than two decades in Karnataka, investing more than Rs 35,000 crore and creating thousands of jobs, JSW Steel remains the only major Indian steel company with no captive mines."

Things were going on smoothly for JSW until June 2011. But all hell broke loose when, in July 2011, the then Karnataka Lokayukta, Justice N. Santosh Hegde, came up with a damning report which, among other things, exposed Yeddyurappa's alleged wrong-doings, and revealed a series of transactions between the then chief minister's family members and JSW Steel executives. These included payment of Rs 20 crore as donation to a trust run by the kin of Yeddyurappa in his native district of Shimoga in Karnataka.

JSW Steel runs a 10 million tonnes per annum (MTPA) plant at Bellary in Karnataka and, another plant of one million tonnes capacity at Salem in Tamil Nadu. It has been battling a shortage of raw material since August 2011 when the Supreme Court banned mining in Karnataka following reports of unlawful mining on a large scale. That led to a shortage of iron ore and prompted JSW to operate its furnaces at lower capacity. The company produced 7.82 million tonnes of steel in 2011/12 and had a turnover of Rs 34,658 crore. The situation slightly improved after the Supreme Court facilitated e-auctioning of iron ore available at yards. But buying at auctions has led to higher raw material costs for JSW. Mining in Bellary has yet to resume.

Shares of JSW Steel were about three per cent lower at Rs 723.00 on the Bombay Stock Exchange on Wednesday afternoon. The stock closed down 2.5 per cent at Rs 745.75 on Tuesday.