The Institute of Chartered Accountants of India (ICAI) plans to scrutinise the books of companies that have seen independent directors resign in the last two months, after the role of such directors came under intense scrutiny in the wake of the major financial fraud at Satyam.

Some of the companies where the independent directors quit include Ballarpur Industries, Power Grid, Power Finance Corporation, CMC, Essar Oil, Technocraft Industries, Jindal Drilling & Industries, Maharashtra Seamless, Pyramid Saimira and MIRC Electronics.

Uttam Prakash Agarwal, President, ICAI, said he will scrutinise the books of companies where independent directors resigned in the past two months. He added that around 181 independent directors have resigned in the last three months. However, Jain asserted that there is no suggestion of any financial wrongdoing by any of these companies.

Here is a verbatim transcript of the exclusive interview with Uttam Prakash Agarwal on CNBC-TV18. Also watch the accompanying video. 

Q: What is the concern at ICAI? Are you all getting a feedback from independent directors that they dont want to go through all the mess and all the problems or is it that you are worried that certain companies are more the cause of concern than the entire lot?

A: I think the whole issue of ICAI has been treated totally in a wrong direction. After the Satyam episode this is the remedial action ICAI is taking. Let me tell you that our Institute of Chartered Accountants of India is proactive in taking these types of action. Three years back we started a new board to examine and review the financial statements signed by our Chartered Accountants. For the last three years we have selected a few companies which are listed on stock exchange and we have different criteria and we decide from situation to situation. So far we were going on the basis of the listed company but after the Satyam case, we are thinking to go for selective companies.

Q: Have you all written to companies where you have seen independent directors resigning? Is it true that these 181 independent directors who resigned in the last three months, their companies are under the scrutiny of ICAI? Are you scrutinising them, have you found anything yet?

A: We are not examining the books of account of any company. We have taken up the criteria of visiting the Bombay Stock Exchange (BSE) site instead of going for the listed company and reviewing the financial statements. We have not mentioned any name of any company neither in media nor in any press release.

On the BSE site there is a link that independent director has resigned. Out of that, we will see if there is no personal reason or due to some reason if someone has resigned, we will pick up their financial statement and send it for the review only, not any books of accounts.

Q: Have you already sat with any of these independent directors or are you going to start asking them?

A: That is a decision we have taken in our Financial Review Reporting Board (FRRB) that we should focus on these types of companies also. So, we are in that process to final the list on the BSE link, and then, we will examine the reasons of resignations because in SeptemberOctober one circular has come from the Securities and Exchange Board of India (SEBI) to see that all the independent directors would be appointed.

Q: Do you think the reason these independent directors are resigning is after Satyam they are afraid people are going to come after them? Do you think that is the reason you see these mass resignations?

A: We havent yet known the reason for the resignations. So we are not seeing in why the independent director has resigned or something is wrong in all these thingsthat is only for the selection criteria of what type of companys financial statement should be reviewed by our reviewers so that in future no case like Satyam is taken.

Q: My concern is you have the same independent director on multiple companieswhat is the ICAI doing to say you cannot sit on more than three companies, you possibly cannot be on seven audit committees because you dont get to look at anything? Are you doing something to limit the number of directorships they sit on; have you looked at that they have conflicts of interest because a lot of lawyers, a lot of CAs sit on a lot of boards as an independent directors, are you doing something to stop these two things?

A: We are not taking any action for the appointment of independent directors or auditors. This is only one criteria that we have selected to decide which company we have to take to review.