Our Corporate Bureau

Kolkata, Nov 5: The Supreme Court has dismissed three special leave petitions filed by various parties on the induction of four government nominees to the board of Shaw Wallace & Co Ltd, as ordered by the Company Law Board in July 1998.

The Calcutta High Court had upheld the CLB order on May 18 last year, following which Shaw Wallace and its chairman MR Chhabria filed separate SLPs calling for status quo on the board, while the employees’ federation had sought supersession of the board. All SLPs were filed in August last year.

Justices BN Kirpal and KG Balakrishnan of the Supreme Court on Monday granted all the three parties liberty to approach the CLB for variation of its order. The bench felt that it had no reason to interfere with the order passed by the high court.

The Supreme Court order comes 38 months after the two-member CLB bench of Justices PK Majumdar and S Balasubramanium ordered the induction of four government nominees and froze the board strength to nine for two years to give continuity and prevent high turnover.

Shaw Wallace’s media consultant confirmed the development and said that the company now can approach the CLB for modification of their July 1998 order.

“They have given us the liberty to approach the CLB to modify its order,” the media consultant said. “We feel the CLB order is not required,” he said.

“The company’s contention is that none of the grounds on which the original order was passed by the CLB, exist today,” he said.

The media consultant said there are no winding up petitions against the company and the financial crisis experienced during the mid-1990s has been successfully resolved,” he said. Legal experts opined that all the parties can file applications before the CLB, but the July 1998 order comes into effect immediately.

The CLB bench had ordered the induction of one nominee director of the CLB and two Central government directors, in addition to the CLB’s nominee at that time, Mr CK Hazari.

The order had said that, of the nine directors, four should be appointed by the majority shareholder and four nominated by the government, apart from Mr Chhabria himself. It also said that none of the directors will be “liable for retirement by rotation during this period”.

However, while the case before the CLB was going on, the majority shareholder voted out Mr PK Pandit, who represented the financial institutions and also the Government. Later, the other CLB nominee, Mr CK Hazari, was also voted out.

The CLB had also directed that the board appoint two committees of directors to look into the borrowings and investments made in various companies including that in certain Guwahati companies.

The board was directed to form one audit committee and one management committee, with suitable mandate and responsibilities.
In addition to the nine directors, the board was authorised to appoint executive directors from time to time as necessary.
However, CLB directed that these additional directors will participate in meetings without any voting rights.

The Government directors were responsible for sending collective quarterly reports to the CLB and to the Centre on the performance of the company.