The National Company Law Appellant Tribunal (NCLAT) on Friday directed Finolex Cables to disclose shareholder voting outcome related to the reappointment of the executive chairman in the meeting held on 29 September. The directive is based on an earlier order of the Supreme Court regarding the issue.
The tribunal has also allowed the current chief executive officer of Finolex Cables to continue in the post until the case is finally decided upon by the NCLAT.
“We note that Deepak Kishan Chhabria may continue as chairman of Finolex Cables Ltd. on account of the Articles of Association as they existed prior to EGM dated 3.5.2019, Trust Deed and the MoU entered into between FCL,” NCLAT observed.
After the demise of Finolex patriarch Prahlad Chhabria in 2016, a legal dispute has persisted within the company’s promoter group. Orbit Electricals, a promoter entity in the company led by Prakash Chhabria, initiated the present appeal demanding transparency on the shareholder vote concerning the reappointment of Deepak Chhabria as executive chairman.
Following the demise of its patriarch Prahlad Chhabria in 2016, the promoter group of Finolex has been embroiled in a legal battle. The current appeal was filed by Prakash Chhabria led Orbit Electricals which is a promoter entity in FCL. The appeal sought disclosure of outcome of voting by shareholders on the agenda item pertaining to reappointment of Deepak Chhabria as executive chairman.
Following Orbit’s plea, the Supreme Court had granted permission for the disclosure but noted the results will be subject to the outcome of the succession battle, currently pending before the NCLAT.
Based on the top court’s order, NCLAT has now allowed the disclosure of AGM voting results.
“…Any action which is taken on proposed resolution No 4 pertaining to the appointment of the Executive Chairperson shall be subject to the outcome of the appeal which is pending before the NCLAT,” the apex court order had said, as cited by the NCLAT.
Prahlad Chhabria had drafted a succession plan in 2012, designating his daughter Aruna Katara, son Prakash Chhabria, and nephew Deepak Chhabria as successive trust chairpersons. The deed also envisaged a structure ensuring each trust beneficiary chaired a company within the Finolex Group.
However, before his death, Prahlad transferred over 80% of his share portion to son Prakash and also nominated him to the board, bypassing the 2012 trust deed. These changes were carried out through a board meeting of the company in 2016. Deepak and Vinni Chhabria had moved then moved the company tribunal challenging the legality of the 2016 board meeting.
The NCLAT is also reviewing the outcomes of a separate 2019 EGM held by Orbit. The central legal issue revolves around the legitimacy of Prakash’s 2016 share transfer. The legality of subsequent decisions depends on this transfer’s validity. Livemint