Dca May Contest Ruling On Swc

The Department of Company Affairs (DCA) is considering challenging the recent Company Law Board (CLB) ruling regarding appointment of directors on the board of Manu Chabbria-owned Shaw Wallace and Company (SWC).

The CLB had recently appointed four government directors on the company's board in addition to the existing five directors while deciding on charges of gross financial mismanagement and oppression by the company. In arriving at this decision, the CLB had rejected the DCA's plea of appointing five government directors on the SWC board, and hence retained Manu Chabbria's majority control over the board.

Now the DCA is considering filing a petition challenging the CLB order in the high court. "The department is seriously thinking of taking such a step, as the CLB order does not bring about a material change in the composition of the SWC board. The majority control is still with Manu Chabbria," said a government official.

 

"If the government directors are to constitute the majority on the Board, it means indirect supersession of the Board, which in facts and circumstances of the case is not warranted," CLB chairman P K Majumdar and vice-chairman S Balasubramanian had said in their final order on separate petitions filed by the All India Shaw Wallace Employees Federation and the government.

Interestingly, the company management too is thinking of challenging the CLB order. "The company's legal think tank is examining all facets of the order," said a source close to the company. "The point is that if the CLB has not found the management guilty beyond reasonable doubt on any of the alleged charges, why should it even appoint four government directors on the board? This is tantamount to interfering with corporate freedom, and the company may well challenge the order," he added. CLB had also directed the liquor company to appoint committees to look into investments, accounting, audit and management of the company by the reconstituted board. No investment/disinvestment or borrowing/lending shall be conducted except in the ordinary course of business, without the prior approval of the Board.