A whistle-blower has flagged off related party transactions (RPTs) carried out by the promoters of Asian Paints Ltd. (APL) that allegedly benefited them at the cost of company’s shareholders.

The whistle-blower informed SEBI that money to buy a company called Paladin Paints and Chemicals (PPC) went from APL but its promoters Ashwin Dani and son Malav now control it in their personal capacity. SEBI has sought further details from the whistle-blower.

Ashwin Dani, who was at the helm of APL for over three decades, stepped down in June and currently is on the board as non-executive shareholder director.

Sources told BusinessLine that the Mumbai-based whistle-blower wrote two letters to SEBI between May and July and one of them provides details of the unlisted PPC’s shareholding. It shows how Dani controls the company with majority shareholding in it. Email queries sent to SEBI, APL MD, CEO and CFO on October 20 remained unanswered.

How did APL pay for PPC?

The whistle-blower’s letter says APL paid a special one-time amount and long-term monthly instalments to Jayram Nadkarni, who had worked with the company for 56 years as chief of technology. The payments, over and above the salary and remuneration to Nadkarni, were for providing technical advice on the manufacturing process, design, improvement, usage and other technical know-how.

“When Nadkarni was paid, he was 80 years old. Nobody could question Dani whether APL, the largest paint maker, required such a normal course of technical know-how and what was Nadkarni doing all these years if APL had no knowledge of the normal course of business even after 60-70 years of existence? But this payment, which was also flagged by the income tax department in one of their probes, was actually linked to the acquisition of PPC,” the whistle-blower says. The letter says that 49 per cent stake in PPC is owned by Ria Enterprises in association with Rituh Holding and Trading Company, which is registered at the same Worli address as scores of other Dani family companies. APL mentions Ria Enterprises as an entity controlled by directors and relatives of directors in its annual regulatory filings.

“Ria Enterprises is directly controlled by Ashwin Dani and people close to him. Rituh Holding is 100 per cent owned by Ashwin and his wife Ina Dani and the company in turn is a partner in Ria Enterprises, which is a majority shareholder of PPC. APL shows Ria Enterprises controlled by its directors, relatives. After APL paid Nadkarni, a large stake in PPC was parked with Ravindra Shah, a close friend of the Danis. Shah and his family members’ names can be found in the large shareholders list of APL. They are also associated with Malav in other companies,” the whistle-blower told SEBI.

“PPC was founded and 100 per cent owned by Nadkarni before money went from APL. So how did Danis and their associates own a large stake in it? PPC today has crores worth of transactions with APL and those linked to it, hence it benefits from APL but is controlled by the Dani family. APL shareholders have paid for this enrichment,” the whistleblower has alleged.