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M. Ramesh

Chennai , Nov. 17

STUNG by complaints against an earlier scheme that converted equity shares into preference `by negative consent mechanism', the Chairman and Managing Director of Triveni Engineering & Industries Ltd, Mr Dhruv Sawhney, said he had told the Bombay Stock Exchange `never again'.

The company had in a 2003 scheme told shareholders that their shares would be converted to preference shares unless they opted for non-conversion. Of the 70,000-odd shareholders at that time, only less than 400 opted for non-conversion. The promoters, bound by their agreements with lenders, did not participate in the scheme and consequently, their holding in the company increased.

However, complaints began to surface later, especially after Triveni Engineering announced a public issue. As of November 5, the company received 404 complaints relating to the scheme. Some shareholders said they had not received the intimation of the scheme, and as such they could not opt for non-conversion.

According to Triveni Engineering's Red Herring Prospectus, some complaints said, "the promoters had taken undue advantage of the small shareholders of the company by not participating in the scheme", and that the "scheme was devised to the promoters to defraud small investors in the light of subsequent decisions of the company such as to sub-divide the Rs 10 equity shares into shares of Re 1 each and bonus issue". Other complaints said: "the redemption price of the preference shares converted from equity shares under the scheme was too low."

Speaking to Business Line, Mr Sawhney, a former President of the Confederation of Indian Industry, stressed that the promoters had neither done anything wrong nor had any mala fide intent. He said that at the time the scheme was devised, over 90 per cent of the shareholders had odd lots of shares (which itself was a consequence of a merger of a group company). The promoters decided that the `negative consent mechanism' was the best way to help the shareholders.

Stressing that the company were never legally or morally wrong, Mr Sawhney said that he was prepared to give a public commitment that the company would never again opt for the `negative mechanism'. In fact, the BSE had asked for such a commitment, and he had given one, he said.

Asked if it was not bad in law that any consent should be inferred by silence, Mr Sawhney pointed out that the scheme had been approved by the High Court of Allahabad. Also, the Government of India had given an affidavit in the court saying it had no objections to the scheme, he said.

A Chennai-based shareholder of the company, Mr V. Rangan, said that he had complained to the SEBI in July, but had "not even received the courtesy of a response from the regulator." In fact, Business Line had taken up the matter with SEBI in August along with other investors' complaints against another company, but there has been no response from the regulator.

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