Date:22/08/2008 URL: http://www.thehindu.com/2008/08/22/stories/2008082254190600.htm

Tamil Nadu - Chennai

Coimbatore firm asked to refund money

Special Correspondent

CHENNAI: The Additional Principal Bench, Company Law Board, Chennai, directed Cheran Enterprises Private Limited (CEPL), a Coimbatore-based company in which K.C. Palanisamy, an ex-MLA and ex-MP holds 45 per cent stake, to refund Rs.75 crore contributed by ORE Holdings Limited, a Mauritius company (45% partner) and Rs.4 crore contributed by Ramaswamy Athappan (10% partner), a Singapore-based NRI businessman.

The order was issued recently by vice-chairman K.K. Balu. The monies in question will carry a simple interest of 8 per cent a year from the date of investment till the date of repayment within 12 months, beginning November this year. In case the company is unable to refund the amounts, its subsidiary Vasantha Mills Limited (VML) should convey 17.15 acres in favour of ORE Holdings Limited and 7.80 acres in favour of Mr. Athappan as consideration for reduction of capital in the holding company, CEPL.

The Board also directed that CG Holdings, a company controlled by K.C. Palanisamy, to restore to the account of CEPL Rs. 25.57 crore and Rs. 6.86 crore , which were earlier “appropriated towards income tax liabilities of CG Holdings without the approval of the Board of Directors of CEPL, and not for the purpose of CEPL.”

“The conduct of K.C. Palanisamy in having regarded CEPL’s funds as his own is burdensome, harsh and wrongful,” it said. In a 61-page order, the Board disposed of two petitions filed by K.C. Palanisamy, along with CG Holdings Private Limited and ORE Holdings Limited of Mauritius.

The Mauritian company held an equal stake of 45 per cent in CEPL, with the balance 10 per cent being held by Mr. Athappan. A joint venture agreement entered into by the respective parties in January 2004 led to ORE Holdings picking up stake in CEPL. The Board was ruling on a set of complaints of ‘oppression and mismanagement’ made by rival parties over the CEPL affairs.

The Board observed that the amount contributed by the overseas joint venture partners was not employed for the business of the joint venture company, but was diverted to other companies connected with K. C. Palanisamy, without the board’s approval, and in contravention of the joint venture agreements.

In light of the facts, the Board said: “The affairs of the holding company, namely CEPL, would necessarily include the affairs of the subsidiary companies, namely CPL (Cherraan Properties Limited) and VML (Vasantha Mills Limited), for the purpose of inquiring into allegations of oppression of minority shareholder rights and mismanagement under the Companies Act. The joint venture agreement would establish that CPL and VML are to be treated as branches of CEPL.”