Ness Wadia given jail term in Japan on drug charges

MUMBAI | NEW DELHI: The Wadia Group said Ness Wadia’s position as a director on the boards of its companies won’t be affected by his conviction in Japan on drug charges because the sentence had been suspended. Investors appeared to disagree, with stocks of Bombay Dyeing and other group companies dropping sharply before recouping some of their losses.

A Japanese court sentenced the elder son of industrialist Nusli Wadia to two years in jail for possession of 25 gm of cannabis resin last month. The Sapporo court suspended the sentence for five years, which typically means that it won’t be implemented unless he breaks the law again in Japan. Indian courts don’t suspend sentences. The Financial Times was the first to report the matter.

“Ness Wadia is in India. The judgment is clear,” said a Wadia Group spokesperson in an email. “It is a suspended sentence. Hence it will not impact Ness Wadia in the discharge of any of his responsibilities and he will continue to play the role that he has done hitherto, both within the group and outside.”


Wadia is the MD of Bombay Burmah and a director of Bombay Dyeing, Britannia Industries and National Peroxide. Bombay Dyeing fell 17.6% intraday while Bombay Burmah dropped 6.4%. National Peroxide fell 6.7% and Britannia by 3.1%.

INTERPRETATION OF RULES
Wadia, according to sources, spent a period in detention before and after his indictment on March 20, pending the court hearing. Drug laws in Japan are strict and offenders can face jail of up to seven years. However, first-time offenders are usually given a suspended sentence, diplomatic sources said. Wadia had admitted to possession of cannabis and said that it was for his own use, they said. He said he was traveling to Hokkaido for a skiing holiday.

The issue will likely be discussed at Britannia’s annual results board meeting on Wednesday, a top executive close to the development said.

“Tough questions will hopefully be asked. The fact is it is a conviction and he has not been absolved from any crime whatsoever,” he said. “Ness may not be conducting any major executive roles in the companies that he has a berth on but it is a serious corporate governance issue to ignore.”

Another top official said Ness Wadia should step down and the Wadia Group companies should seek approval from shareholders on whether he should be reinstated.

Lawyers said Wadia’s business role will depend on the interpretation of the rules, especially as it pertains to fulfilling the “fit and proper” criteria as applied to board members, given that the conviction took place overseas.

The view of the Securities and Exchange Board of India on the matter isn’t known. Stock exchanges have sought clarifications from all listed Wadia companies.

Section 164 and 167 of the Companies Act covers the conditions that disqualify a person from being a director. Anyone sentenced by a court to jail for six months or more is ineligible for five years.

“Under the Companies Act, any person convicted of an offence and sentenced to not less than six months cannot be a director for five years after his or her release,” said a corporate lawyer. “The Act clearly restricts filing of an appeal as not being a ground for not leaving office. However, the bar starts only from the date of the sentencing and not from the date of the conviction.”

According to Ashish Kumar Singh, founder of law firm Capstone Legal, the definition of ‘court’ in the Companies Act doesn’t include those overseas.

“In the present case, the order of conviction has been passed by a Japanese court,” Singh said. “It will not be a bar for Ness Wadia to continue as director of an Indian company.”

“Only the sentence has been suspended, however, the conviction remains,” a top criminal lawyer told ET.

Another lawyer said he doesn’t see any barrier to Wadia’s continuation as director since the sentence has been suspended. The group’s units include Bombay Dyeing, Bombay Burmah Trading, Britannia Industries and GoAir. It also has a stake in IPL franchise Kings XI Punjab.

According to Japan’s Narcotics Control Department, “No person shall import or export any forms of cannabis. Any person who intends to enter Japan carrying narcotics for his/her own medical use is required to obtain an advance permission from the Director-General of one of the eight Regional Bureaus of Health and Welfare, JAPAN based on the Narcotics and Psychotropic Control Act, the NCD website states.