Dse Inquiry Unravels Two Sets Of Mideast India Agm Minutes

Investigations by the Delhi Stock Exchange (DSE) have led it to believe that the Rita Singh-promoted Mideast India Ltd -- which is facing charges of default on dividend payment -- prepared two sets of minutes of the same annual general meeting held in September 1996.

In the minutes filed with DSE, duly certified by the company secretary, Mideast has clearly stated that the resolution pertaining to declaration of dividend was unanimously passed by the shareholders and was not subject to approval by financial institutions.

However, in the copy of the minutes provided to Bennett, Coleman & Co -- a shareholder -- the resolution for payment of dividend was modified to incorporate a clause relating to receipt of approval of financial institutions, says the investigation report.

 

"It appears that the company has two sets of minutes of the same AGM," DSE executive director S S Sodhi told Business Standard.

He said the company informed DSE on October 16, 1997, through a letter dated November 1, 1996, that the dividend stood cancelled on account of non-receipt of approval from financial institutions. A similar letter was submitted by Mesco Pharmaceuticals.

Sodhi further revealed that DSE has already suspended trading in the shares of Mideast as well as Mesco Pharmaceuticals Ltd, which belongs to the same group and is also facing charges of non-payment of declared dividend. DSE has also written to the department of companies affairs to investigate the matter regarding the two companies.

The DSE investigation was triggered by a large number of complaints from investors regarding non-receipt of dividend for 1994-95 and 1995-96 from Mideast India and Mesco Pharmaceuticals. According to the DSE report, the dividend for 1995-96 was initially paid by the two companies to the shareholders, but they later stopped paying the dividend on the pretext it had been cancelled due to non-receipt of approval from financial institutions.

"This makes it obvious that the cancellation of dividend was an after-thought on the part of the company although some of the shareholders had already been paid the dividend amount," says the investigation report.

As on date, 83 complaints have been received from investors against Mideast India, 30 of which relate to non-receipt of dividend, while 45 have been received against Mesco Pharmaceuticals, 15 of which relate to non-payment of dividend. There is also a case going on in the court of Additional Chief Metropolitan Magistrate M K Gupta against Mideast, filed by Rajeev Maheshwari, a shareholder, over non-payment of dividend declared by the company at its AGMs in September 1995 (20 per cent) and September 1996 (12.5 per cent).

Under Section 205-A(B) of the Companies Act, if a company fails to comply with any of the requirements of this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs 500 for every day during which the failure continues.

Similarly, Section 207 provides that every director of the company shall, if he is knowingly a party to the default, be punishable with simple imprisonment with term which may extend to seven days and will also be liable to fine.

Under the Companies Act, the dividend approved at the AGM has to be disbursed within 42 days. Unpaid dividend has to be transferred to a special account to be opened by the company within seven days. If payment is not made within the stipulated period, the company has to pay it with interest charged at 12 per cent per annum.