Bombay Leaks Desk
Mumbai:A PIL is filed by Loyal Tigers Association, a legal entity registered under Maharashtra Public Trust act to espouse interest of employees of Larsen & Toubro Ltd Company regarding inaction on the part of various Government authorities to take action u/s 206 of Companies Act 2013 in to the various wrongs and illegalities committed by the L&T Foundation/Trust, Larsen & Toubro Ltd and its MD/chairman, Mr. A. M. Naik which was reported in a confidential report received by the Secretary of Dept of Financial Services, Ministry of Finance, Govt of India dated 28-03-2014 which are of serious and gross nature. The said authorities have ignored these wrongs and illegalities and have continued to allow it.
Summary of wrongs and illegalities mentioned in the said confidential report is as under:-
1) Employees Benefit Foundation-how the company is controlled through the trust:- (a) The employees Benefit Foundation of Larsen & Toubro Ltd holds 12.5% equity in Larsen & Toubro Ltd , the largest shareholder in Larsen & Toubro Ltd after the Government owned financial institutions( about 30% of which LIC is 16% or more than half). (b) These shares were received from Grasim by Larsen & Toubro Ltd directly in to the foundation in 2004-5 during the Larsen & Toubro Ltd Cement business sale. (c) These should have been with the company as a treasury stock which would have benefited all the shareholders. (d) A bogey of hostile takeover was created and the government was told that this has been done to prevent future takeovers. (e) This amounted to a virtual takeover by AMN. (f) The foundation has a Board of Trustees that practically elects itself through collegiums system-most of them are ex L&T employees close to AMN. There is no employee representation on this Trust. (g) One seat on the Board has been kept vacant to accommodate AMN when he retires so that he can continue to call the shots in the company. (h) the purchase of these shares from Grasim by the foundation has been entirely financed by way of interest free loan from L&T (and commercial loan from banks) and the loan to L&T has been repaid out of dividends declared by L&T. (i) AMN has therefore used L&T’s funds to acquire control over a large chunk of the company.
2) Issue of ESOPs to AMN and enrichment of a few at the cost of shareholders:- (a) around this time, stock options were issued to various employees of L&T in the senior and top management of which AMN was the biggest beneficiary. (b) These options were issued at a ridiculously low price of Rs.7 per share using clever and devious means. This has made AMN richer by over Rs. 600 crores. (c) The options were issued at market value of the share at that time (Rs.185) reduced by the value paid by Grasim for the Cement business (Rs.178). This is dubious and questionable as at the time of the Cement business ale the company was valued at Rs. 360 of which the Cement business was at Rs. 178. This was conveniently overlooked and full advantage was taken of the mispricing of the stock in the market due to confusion over the demerger and sale.
On the basis of this report, a letter was sent by the Joint Director of Ministry of Corporate Affairs, Govt of India to the Regional Director, (Western Region), Min of Corporate Affairs to direct ROC Mumbai to examine allegations and to take action u/s 206 of Companies Act, 2013. In continuation to this, the Dy Director, Office of the Western Region wrote to Mumbai ROC to act u/s 206 of Companies act 2013. But till this date there is no action which is confirmed by the office of the Regional Director by its reply dated 30-01-2017 that reply from ROC, Mumbai is awaited.
Hence the Petitioners have prayed for:-
1) directing the concerned authorities to immediately and forthwith take action against all concerned under Section 206 of the Companies Act, 2013, as per its earlier directives dated 3.4.2014 and 16.4.2014 and place the action taken report before this Hon’ble Court within a fixed time frame for further appropriate directions as this Hon’ble Court may deem fit and proper;
2) for a writ or an order in the nature of a writ, directing a time bound detailed and thorough investigation and legal action by any appropriate investigating agency, this Hon’ble Court may deem fit and proper upon the confidential report dated 28.3.2014 received by the Secretary, Department of Financial Services, Ministry of Finance, Government of India;
3) An order to restrain Mr. A. M. Naik from leaving country during pendency of this matter.
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