Companies

Shareholders of McDowell Holdings call for EGM to save company from liquidation

PALAK SHAH | | Updated on: Mar 23, 2022
The notice for the EGM was sent by the shareholders holding more than 15.5 per cent

The notice for the EGM was sent by the shareholders holding more than 15.5 per cent

Company has assets worth around ₹1,000 crore, as against debt of ₹15 crore

Minority shareholders of the erstwhile Vijay Mallya-promoted company McDowell Holdings (MHL) have sought an extraordinary general meeting (EGM) to save the company from going into liquidation. MHL has a debt of a mere ₹15 crore but assets worth around ₹1,000 crore, which the shareholders say they stand to lose if the company went into liquidation. A creditor of MHL has dragged the company to NCLT and shareholders fear the company would be pushed into liquidation.

Investors led by foreign fund Acacia Partners, Equity Intelligence India and a few other HNIs are seeking the EGM to induct five professional directors on the board of MHL to run the company. MHL has 47,000 shareholders and those who are seeking the EGM say all of them are losing value since there is no professional board in place.

The notice for the EGM was sent by the shareholders holding more than 15.5 per cent on March 4 and the company is yet to reply to them. Shareholders say that a mere rights issue can solve the problem of ₹15 crore debt and hence it was not necessary to liquidate the entire company for such small liability, which will destroy shareholder value.

‘Company being misguided’

The shareholders have proposed appointment of PS Jayakumar (Ex MD, Bank Of Baroda), advocate VM Doiphode IRS (a leading lawyer in Mumbai), C S Zibi Jose (Ex Central Council Member Of ICSI), advocate Bobby J Arakunnel (Kerala High Court) and Nirej V Paul, an HNI investor. Most of the previous MHL board members have resigned.

In 2018, the Enforcement Directorate attached 15.73 per cent of promoter holding in MHL to recover Mallya’s dues. MHL was Mallya’s holding company and still has stake in a lot of companies, which makes it hugely valuable.

MHL has been dragged to the Bangalore National Company Law Tribunal (NCLT) under insolvency proceedings by a creditor, Sunstar Hotels and Estates, who has a claim of around ₹15 crore against the company. Shareholders say that Zuari Agro-Chemicals was original creditor but MHL entered into a tripartite agreement with Sunstar Hotels on November 19, 2021, to pay off Zuari. In just two months, in January 2022, MHL’s new creditor Sunstar dragged the company to NCLT to recover its dues.

Shareholders told BusinessLine that the company was being misguided by those linked to the erstwhile promoters and management to undergo liquidation in order to pay just ₹15 crore to the creditor even while the company has assets, comprising mainly equity holdings in listed companies, to the tune of around ₹1,000 crore.

“MHL can easily pay ₹15 crore to the creditor if there is a professional board in place. Market regulator SEBI needs to take notice of the dubious conspiracy to defraud 47,000 shareholders of the company. Without a professional board, the company has been suspended from trading by the stock exchanges since the company failed to adhere to listing norms and corporate governance. All this is deliberate to take the company towards liquidation. Big foreign shareholders also tried to join NCLT case but were opposed by the company itself in the court,” said a shareholder who has signed the letter to call the EGM.

“MHL requires a board that can serve the shareholders and underscore the need for a proper corporate governance structure. Currently, the collusion of board members acting in concert with the creditors seems apparent and even the courts will see through it,” said Jayakumar, former MD, BOB.

An email sent to MHL remained unanswered.

Published on March 22, 2022

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

COMMENTS
  1. Comments will be moderated by The Hindu editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.

You May Also Like

Recommended for you