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Maruti shareholders hopeful as Sebi steps in

To approach Company Law Board as well if LIC lends support

Samie Modak & M Saraswathy  |  Mumbai 

Domestic institutional investors’ drive against Suzuki India’s proposal for its has received a shot in the arm, with the Securities and Exchange Board of India (Sebi) seeking to resolve the tussle.

Sebi’s move to seek the details of Maruti’s proposal has sparked hopes among minority shareholders the regulator might take steps to protect their interests. Last week, several mutual fund houses had jointly approached Sebi, saying the deal was detrimental to Maruti’s shareholders.


Though the deal doesn’t violate norms, investors are hopeful might exercise its powers under of the Act, which empowers the regulator to act in the interests of investors.

A GLIMMER OF HOPE
  • asks MSIL to explain proposal
  • Public shareholders hope will take action against MSIL to safeguard investors’ interest
  • can take action under of the Act
  • Approaching another option before MSIL’s public shareholders
  • Will need LIC backing to go to CLB

Lawyers believe will act if it is satisfied the deal will hurt investors. “The moot question is whether will interfere in this matter if the proposal is not on the wrong side of law and unless it is proved to its satisfaction that the interest of investors at large is affected by the management’s decision such that it is imperative for it to intervene,” said Lalit Kumar, partner, J Sagar Associates.

Jay Parikh, partner, Verus, said, “of the Act is the main provision under which might consider proceeding in the instant case...it will be interesting to see the path takes in this case because prima facie, there doesn’t appear to be any violation of extant Indian laws.”

Another option for institutional shareholders is to approach the Company Law Board (CLB) by filing a case of ‘oppression and mismanagement’ against the company and its management. “Those constituting a tenth of the total number of members, or 100 members, whichever is less, might consider approaching the under Section 397-398 of the Companies Act, 1956, claiming the affairs of the company are being conducted in a manner prejudicial to their interests,” said Parikh.

A fund manager said shareholders weren’t ruling out approaching the CLB, but they would need Life Corporation (LIC)’s backing. Currently, domestic institutional investors own just seven per cent stake in Suzuki India (excluding LIC’s stake of about seven per cent stake.

Separately, the life insurer has sought details on the proposal from An LIC official said the company’s action would depend on Maruti’s reply.

Experts believe should voluntarily seek an approval from its public shareholders by way of a special resolution. “While the existing law may not require approval from shareholders, good governance requires approval of the transaction by shareholders, considering its huge impact on the company. Also, the soon-to-be-implemented company law provision requires such approval,” said JN Gupta, managing director, SES.

Maruti’s institutional shareholders said that they would await the outcome of the car maker’s board meeting slated for March 15.

First Published: Wed, March 12 2014. 22:49 IST
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