Godfrey Phillips board to meet today as KK Modi family fight intensifies

The board meeting of tobacco company Godfrey Phillips India on Tuesday is expected to discuss a crucial report of the independent directors at a time when a board director, Ruchir Modi, has raised serious allegations about “mismanagement” by his relatives.

Modi has complained to the Ministry of Corporate Affairs about various matters, including the appointment of his grandmother, Bina Modi, as president and managing director in what he says is a flagrant violation of statutory provisions. He has also alleged that the board failed to disclose material events under the Sebi regulations.

Ruchir Modi is the son of Lalit Modi who is famous, among other things, for being the progenitor of the Indian Premier League and who is a fugitive in England. Lalit Modi took on his mother Bina, brother Samir and sister Charu after the death of his father K K Modi in late 2019.

Lalit Modi alleged that his mother was not capable of running the business. He said that K K Modi’s trust deed stipulated that in case of no unanimity among family members on continuing the business, shares of the key companies in the group, which include the flagship Godfrey Phillips, had to be sold. However, others in the family, led by Bina Modi, opposed the move. According to sources, the report of the independent directors on the board has not been circulated among the members ahead of Tuesday’s meeting, at which the quarterly results will be announced.

One director said that, earlier, it had been expected that the report would be circulated on November 13 but there had been another development, namely an attempt by some members to restructure the board. The nine-member Godrey Phillips board has four independent directors: Lalit Bhasin, Anup N Kothari, Atul Kumar Gupta, and Nirmal Bagri.

R A Shah is the chairman of the company while Ruchir Modi is a non-executive and non-independent director. Bina Modi and Lalit’s younger brother Samir are executive directors.

Queries sent to Godfrey Phillips and to Samir Modi did not get any response.

Ruchir Modi has also sent a letter to the Sebi alleging various violations of the listing rules. One violation, he alleges, is the continuance of Bina Modi as MD, despite the fact that a resolution for her appointment has been defeated by the shareholders, by showing that it had been passed. He has also complained that the trust deed through which Godfrey Phillips’ shareholding is controlled by the family was never disclosed to the stock exchange or the shareholders of what is a public limited company.

Ruchir Modi has also argued that the agreement between the Modi family and Phillip Morris Holdings — its joint venture partner — provides disproportionate voting rights to the family for controlling the management, appointing the MD and also appointing directors.

Phillip Morris holds a 25.1 per cent stake in Godfrey Phillips India while the Modi family has over 47 per cent through various companies and trusts. Apart from the tobacco business, the company also runs a retail business, 24Seven, which has seen phenomenal growth under Samir Modi.  

The K K Modi empire, worth over Rs 10,000 crore, also includes the Rs 350 crore cosmetics company Colorbar, the direct marketing company Modicare, and chemical company Indofil Industries. Despite competition from ITC, Godfrey Phillips has held firm through its Four Square brand and has an over 13-14 per cent market share in north and west India.