In an interesting twist to the ongoing tussle between Chhabria cousins, the Supreme Court has ordered an enquiry on the conduct of the National Company Law Appellate Tribunal (NCLAT) Bench consisting of Rakesh Kumar and Alok Srivastava in delivering its verdict in the Finolex Cables case.
The NCLAT had in September passed an order directing status quo on conduct of the Finolex Cables AGM, till they adjudicate on the dispute between Chhabria cousins Prakash and Deepak.
However, the Supreme Court on September 26 vacated this status quo and directed the scrutiniser of the meeting to publish the results immediately. Furthermore, it asked the NCLAT to not pronounce the order till the results of the AGM were published.
Act of defiance?
However, the NCLAT pronounced the order at 2 pm on Friday, while the scrutiniser uploaded the result at 2.40 pm. The SC has thus ordered an enquiry into the issue by Justice (retd) Ashok Bhushan, the chairperson of NCLAT and submit a report by 5 pm on October 16.
SC has asked the Chairperson to verify and apprise them as to whether the Apex Court’s order of October 13, passed in the morning session was drawn to the attention of the two Judges. If yes, the circumstances in which the Judges proceeded to pronounce the judgment despite the clear mandate of the SC order passed in the morning session.
SC noted, “If what is stated is correct, this will clearly constitute the defiance.”
Meanwhile, the NCLAT has allowed Deepak Chhabria to continue as Chairman of Finolex Cables.
In an order passed on Friday, NCLAT said in accordance with the Articles of Association, as they existed prior to the EGM held in May 2019, Deepak Chhabria was the Authorised Representative (AR) of Orbit Electricals in the Board of Finolex Cables and he continued to be so till the time this article was amended.
Green signal to Deepak
“We note that while Deepak Chhabria may continue as Chairman of Finolex Cables on account of the Articles of Association as they existed prior to EGM dated May 2019, Trust Deed and the MoU entered into between Finolex Cables and Finolex Industries. Amendment and deletion of Articles 59 and 60, respectively, would not only tilt the balance of convenience against Deepak Chhabria but it may also cause irreparable loss to him upon his removal as Chairman of Finolex Cables, it said.
“We are of the clear opinion that the NCLT has not been able to appreciate the facts insofar as they relate to the reliefs claimed and therefore, have arrived at an incorrect conclusion by allowing the holding of EGM in 2019 resulting in the decisions taken therein,” said NCLAT.
Meanwhile, Finolex Cables has announced that the proposal to re-appoint Deepak Chhabria as a whole-time director designated as Executive Chairman of the company for five years was defeated as 72.34 per cent of the vote cast was against the proposal.
Finolex Industries, holding 2.22 crore shares, has voted against the resolution which is in contravention to the term and intent of the Memorandum of Understanding executed between Finolex Industries and Finolex Cables. The litigations over the MoU are pending before various fora.
Cousins Prakash Chhabria and Deepak Chhabria have earlier accused each other of scheming to gain control of Finolex Cables.
Orbit Electricals holds about 31 per cent stake in Finolex Cables, according to BSE data. Prakash Chhabria, son of late Prahlad Chhabria, founder of the Pune-based Finolex Group, owns 20 per cent in Finolex Cables. Orbit Electricals holding 4.69 crore equity shares has also voted against the resolution.
However, per the Supreme Court order in September any action which is taken on the proposed resolution shall be subject to the outcome of the appeal pending in NCLAT.
Prakash is the biggest shareholder of Orbit Electricals, the promoter entity of Finolex Cables, while Deepak is the latter company’s executive chairman. Prakash Chhabria controls about 78 per cent of Orbit Electricals while KP Chhabria faction (father of Deepak Chhabria) along with his children owns about 7 per cent stake.