The Hindu Business Line : Alleged breach of Company Law

WITH a settlement process between the Ambani brothers yielding little results and allegations of violations of company law resurfacing, the Ministry of Company Affairs said it was keeping a close watch on the developments in the Reliance Group.

"As of now, we have not initiated any investigations against the Reliance Group. Any future course of action against the entities will depend on what kind of information we gather from our field offices," sources said.

The Government has been examining whether any law had been violated by Reliance Infocomm in allocating one crore shares to three unlisted firms at the rate of Rs 1 per share.

The Ministry is understood to have received queries from more than a dozen Members of Parliament, whether unlisted companies can quote different prices to different people for its shares.

As the Company Law stands today, the Directors and General Body of an unlisted company are free to allocate shares to anyone as long as appropriate resolutions are passed.

According to the information available with the Ministry, three unlisted companies held shares in Reliance Infocomm Ltd, which was also unlisted. These shares were acquired in September 2002 by Prerna Auto Private Ltd (33,00,000 shares), Softnet Traders and Consultants Private Ltd (33,00,000 shares), and Fairever Traders and Consultants Private Ltd (34,00,000 shares) from a trust, and subsequently sold back to the same trust.

The three companies have filed their balance sheets and they are working companies, sources stated.

On whether the Ministry would be taking a view on the allegations of undervaluation or overvaluation, sources said, "The price is governed by the market."

The cause of current dispute, according to market speculations, is the worth of Reliance Industries Ltd and Reliance Infocomm.

Regarding the circumstances under which the Company Law Board (CLB) can give any directions, the sources said, "Only if an application is moved by an investor or Government can CLB give any orders, including that of investigations."

In March 2005, the Finance Minister, Mr P. Chidambaram, had informed the Rajya Sabha that the Government was examining if any law has been violated in the allocation of shares.

"The inquiry is not over. We will continue to look into it. From the available balance sheets of the three companies as of March 31, 2004, the price at which the three companies acquired shares in the erstwhile Reliance Infocomm Ltd appears to be at Rs 1 per share."

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