HC orders status quo on Kvaerner Power Gas directors’ share transfer

Suresh Nair

Mumbai, June 6: THE division bench of the Bombay High Court has passed an order asking status quo to be maintained with reference to a case filed by the ex-chairman of Kvaerner Power Gas (KPG), Mr MR Menon, over the transfer of shares from the directors trust of KPG, in the personal names of the KPG chairman Dr Rama Iyer and KPG director K Rajamani.

The bench, comprising Justice Shree Krishna and Justice Bhosle, has said that status quo should be maintained until the appeal against Justice Rebello’s ruling is heard and decided on. The appeal against Justice Rebello’s judgement will be considered for admission on June 18, 2001.

The transfer of shares, according to the company, was done to facilitate the company’s decision to go public in 1999, which was in accordance with the parent company’s plans for diversification.

The order of the division bench has stayed the appointment of a receiver for the shares of the extinguished trust, as per Justice Rebello’s earlier judgement. The order also stops the present holders of the shares — the chairman and three directors of KPG — from transferring the shares or creating any third party charge on it.
The case also deals with the controversy on whether the retired directors of the company are entitled to the benefits of the trust. The board of directors of KPG extinguished the trust by a resolution passed at a board meeting on December 17, 1999.

Justice Rebello, in his earlier judgement, passed on April 26, 2001 had said: “By clarification, it is noted that any beneficiary hereunder may continue to be a beneficiary notwithstanding his retirement from service of the company.”

Justice Rebello’s order further stated that “To my mind, the construction sought to be given by the defendant prima facie is not in tune with the objects of the trust.” It also adds that “once a beneficiary, he continues to
be beneficiary till the dissolution or the extinguishment of the trust.”

KPG chairman, Dr Rama Iyer, when contacted, said that the trust was extinguished by the board in accordance to the laws of the trust, which under certain circumstances allowed its extinguishment.

Dr Iyer also said that the company was not listed, making the shares non-saleable in the market, adding that only the parent company can buy the shares.

At present, Kvaerner, the parent company, holds 44 per cent in the KPG while the rest of the shares are held by employee trusts and directors’ trust. The directors’ trust holds an aggregate of 53,063 shares of KPG, worth Rs 11.66 crore.

The trust were formed in 1985 when Mr Menon was the CEO and were discretionary trusts. The object of the trust, among others, were to provide financial assistance to the employee directors in permanent employment and to cultivate a sense of belonging and loyalty to the company.

Being discretionary trusts, the trustees could exercise their discretion to give benefits to their retired directors.