Shareholders' pact between families flouted: Usha Martin's Basant Jhawar

The wrangling in the Jhawar family continued with Basant Jhawar — a founder of Usha Martin who was voted out by shareholders on Saturday — alleging that the shareholders' agreement between the two families has been flouted with Rajeev Jhawar voting against his continuation on the company's board.

“It is an unfortunate event and short sighted that Rajeev Jhawar along with persons acting in concert with him got me removed. Though the management headed by Rajeev Jhawar had sent the resolution for my continuation to the board for consideration and approval, they voted against my continuation at the shareholders’ meeting. By voting against, they have flouted the shareholders’ agreement between the two families,” said Basant Jhawar in a statement.

The shareholder agreement was executed in 2009, which provides for executive role in Usha Martin by both the groups and restricts transfer of shares by either group.

The resolution for continuation of Basant Jhawar was defeated at the company’s extraordinary general meeting on Saturday with 67.34 per cent of the votes polled against it. 

But as it has now come to light that the Basant Jhawar faction had voted against Rajeev Jhawar's reappointment. But the resolution went through as it was an ordinary resolution and required a simple majority. Rajeev Jhawar is the managing director of the company.

The resolution for Basant Jhawar's continuation was a special resolution that required 75 per cent of the votes cast in its favour for it go through. According to the Securities and Exchange Board of India (Sebi) regulations, a non-executive director above 75 years of age can continue his term beyond March 31, 2019, subject to shareholders’ approval. 

Both Basant Jhawar, 83, and the continuation of his brother Brij Jhawar, 81, on the board was put to vote. But Basant and Prashant Jhawar abstained from voting on the resolution, which thereby went through with 99.84 per cent of the votes polled in its favour. 

Basant Jhawar said that the passing of the resolution for his removal was being depicted as being done by institutional shareholders, even though Indian institutions, insurance companies and mutual funds hold only 3.167 million shares (around 1.05 per cent of the equity of the company). Foreign portfolio investors hold 11.7 per cent and public shareholding is at 37.2 per cent. 

“The shareholders, depicted as institutional shareholders, are principally controlled/owned by Rajeev Jhawar family, which in fact is part of the complaint to judiciary and government authorities,” said Basant Jhawar. He has been raising several issues against Rajeev Jhawar with regulatory authorities for a while now. 

In his statement on Monday, Basant Jhawar also said that Prashant and he had repeatedly asked the chairman of the board and management of the company about utilisation of proceeds from sale of steel business for reducing the debt of the company. “In doing so, we have intended to prevent any diversion of funds for personal enrichment of anyone,” he said. 

Both Basant and Prashant Jhawar had voted in favour of the sale of steel business to Tata Steel. The transaction of around Rs 4,500 crore was aimed at paring the debt of Usha Martin. The deal is expected to be closed shortly. On Monday, Usha Martin said: “The decisions of the board and shareholders for sale of steel business to the Tatas is on track. The company is unable to comment on any aspects especially related to matters which are sub-judice.”

The family feud escalated when Prashant Jhawar was removed as the non-executive chairman of the company in 2017 by the board. Prashant Jhawar, subsequently, had filed a petition in the Calcutta High Court and also moved National Company Law Tribunal against his ouster.