New Delhi, July 3
THE Company Law Board (CLB) has directed the Union Government to appoint two Government directors on the board of Morepen Laboratories Ltd for a period of three years to safeguard the interest of depositors, particularly small depositors, who have invested in the company.
The CLB bench was of the view that the appointment of Government directors would help build "public confidence in a company which due to its unsatisfactory financial position is unable to meet its liabilities towards its creditors, more so towards general public having deposits in the company."
It also said that the appointment of Government directors would be advantageous to the company in pursuing the case before the High Court, the Corporate Debt Restructuring cell and the Debt Recovery Tribunal (DRT).
While considering a Union Government petition for appointment of six Government directors on the company's board, the CLB Principal Bench, chaired by Mr S. Balasubramanian, said: "Appointment of two Government directors would suffice to monitor and assist the company."
The Bench added that the company's board, which consists of six directors, already has two nominees of financial institutions.
The Union Government had sought appointment of six directors with the view of having majority on the company's board, the CLB Bench said.
In its petition, the Union Government had alleged that the company had raised deposits of Rs 156.19 crore from the public to fund its long-term capital requirements, but from October 2002 has failed to repay the matured deposits.
After receiving a large number of complaints the CLB had framed a scheme for repayment of all the deposits.
But since the company had not been adhering to the repayment scheme, the Government had been inundated with fresh complaints from small depositors.
Subsequently, Morepen had failed to redeem cumulative redeemable preference shares and had also defaulted in redemption of non-convertible debentures.
Instead, it had diverted over Rs 67 crore as investment in associate companies.
While the company had filed applications before the Himachal Pradesh High Court on rescheduling of payments to its creditors, the DRT had restrained it from utilising the $15.25 million raised through a GDR issue.
Instead of repaying the matured public deposits, the company passed a resolution to issue equity shares to depositors and "by this means the depositors' interest had been affected."
Morepen, on its part, has argued that there has been no financial mismanagement in the company even though there is financial mismatch and default in repayment of deposits.
"This occurred due to reasons beyond the control of the company.
"With a view to improving the financial position, it had raised Rs 72 crore by way of GDR but the proceeds could not be utilised due to the DRT injunction," its counsel said.