New Delhi, Sep 17 (IANS): Even as allegations of gross corporate misgovernance have cropped up against the promoters of Garware Polyester Ltd, the 85-year-old Chairman and MD of the company, Shashikant Bhalchandra Garware has sought reappointment for another five-year term.
According to sources, in the annual general meeting to be held on September 25, the company is likely to decide on the reappointment of the CMD.
The promoters of the company, including the CMD have been accused of several norm violations including oppressive behaviour towards minority shareholders and transfer of profits to a subsidiary company.
In a petition filed at the Mumbai bench of the National Company Law Tribunal (NCLT), few minority shareholders said: "The oppressive acts of the respondents include and are not limited to paying excessive and exorbitant remuneration to responded numbers 2 and 3 to 5 which is incommensurate with the services they rendered to respondent number 1 company (Garware Polyester)...
"...and divert profit of the respondent number 1 company to related party where promoters holds 100 per cent shareholding which in turn leaves lesser profits available for distribution to the shareholders and reduced or no dividend to the shareholders and diminished value of shares."
As per the petition, "excessive" remuneration is being paid to the promoter-directors. It showed that the CMD S.B. Garware was paid Rs 4.12 crore during the financial year 2017-18, while other members of his family including Monika Garware, Sarita Garware and Sonia S. Garware received Rs 2.60 crore, Rs 2.37 crore and Rs 2.75 crore, respectively.
"The act of paying such exorbitant and excessive remuneration is harsh and burdensome, unfair and prejudicial to the minority shareholders and hence oppressive," said the petition.
It further said that the reason for high remuneration is not due to any extraordinary effort by them or the value derived by the business due to them but for the reason that they belong to the promoter family.
"The whole time director who has contributed more to the business is paid less while promoters and their family members are paid disproportionately more," it said.
The board of the company is filled with members from the Garware family. Sheela Shashikant Garware, the 84-year old wife of the CMD was a non-executive and non-independent director of Garware Polyester and continued at the post til August 10, 2017. As on March 31, 2019, Sheela holds 1,75,465 equity shares of the company. Monika Garware Modi, Sarita Garware Ramsay and Sonia Garware, the daughters of Shashikant and Sheela are also members of the board.
Referring to CMD Shashikant Bhalchandra Garware, his wife and daughters, the petition said: "Respondent number 2 to 6 are members of the Garware family who, either individually or through private trusts formed for their benefit and other companies of the Garware Group, hold majority shareholding of Garware Polyester of about 60.64 per cent."
According to the petition, the promoters formed Garware Industries Ltd (GIL), a family-owned entity to divert profits from Garware Polyester, which is a listed company.
"GIL is an entity formed by the Garware family to divert profits from Garware Polyester, which is a listed company with about 20,000 shareholders, to GIL, whose 100 per cent shares are held in a private trust formed solely for the benefit of the member of the Garware family."
It observed that the Garware family has in a systematic and calculated manner diverted profits from Garware Polyester so that benefits thereof ensure only to the members of the Garware family.
Further, it noted that a petitioner also found that profits of the company were diverted to GIL by way of rental charges to entity related to them.
It also said that the analysis of profit and loss and other factors establish that the independent directors have failed in their duty to protect interest of minority shareholders of abusive acts by controlling shareholders and acted in interest of controlling shareholders.