The Company Law Board (CLB) has held the transfer of unsubscribed shares of news agency UNI to Media West, a firm promoted by Subhash Chandra’s Essel Group, as ‘null and void’ on the grounds that the deal lacked transparency. The Principal bench of CLB declared this on January 21, 2008. A copy of the order is with exchange4media.
In his order, S Balasubramanian, Chairman, CLB, said, “In view of my findings that the Board had not specifically considered the eligibility of Media West to become a member in terms of Article 4, that relying on Article 47, the Board could not have allotted the impugned shares to Media West, that the impugned acts have changed the character of the company (UNI) and the entire exercise suffers from lack of transparency that the entire exercise suffers from lack of transparency, I declare the allotment of impugned shares to Media West as null and void.”
The Board also declared that Media West ceased to be a member and its nominees should cease to be additional directors with immediate effect. “The company shall forthwith rectify its register of Members by deleting the name Media West and reduce its share capital and shall also refund the consideration paid by Media Vest,” the CLB added.
The CLB has asked the management of UNI to refund the Rs 27 crore immediately and also repay the Rs 5 crore, which has been already utilised, to Media West at the earliest.
The CLB also directed the ABP Group, the main petitioner, to assist the UNI Board to raise funds to repay Media West. It, however, did not give any conclusive finding over the alleged ineligibility of Media West to become a member of UNI following its Article 4 (which says no shares shall be allotted or transferred to any person other than the owner or owners of newspapers published in the Union of India).
“It is for the Board of Directors of UNI to decide the eligibility,” the order said.
Balasubramanian spelled out the reasons for declaring the transaction null and void and said, “I would only attribute lack of transparency on their part (committee) and not malafide.”
Observing that UNI was in financial distress, the CLB Chairman said, “I would not have declared the allotment as null and void, as while considering a petition under Section 397 (Mismanagement), this Board has to give utmost importance to the interests of the company.”
“Now that the allotment has been declared as null and void, consequent to which the company (UNI) would be deprived of funds raised by impugned allotment, it is now the responsibility of the board (UNI management), more particularly that of the petitioners (ABP) who have prosecuted this petition, to find ways and means to mobilise funds,” the CLB Chairman said in the order.