In a violation of corporate governance norms, Mumbai-based Raj Oil Mills failed to inform the stock exchanges that two of its top officials, including the chairman, were recently arrested by the city police on allegations of cheating and forgery.
Shares of Raj Oil Mills were trading down 0.4% on Friday at R2.35. The scrip has plunged more than 80% since the highs of R14.55 achieved in August last year. Interestingly, the share price has never closed above its listing price of R125 on the BSE.
In March, officers from the MIDC (Mumbai) police station arrested Raj Oil Mills CMD Shaukat Tharadara and director/company secretary Abdulla Musla on charges of cheating, forgery and criminal breach of trust in a property scam. According to police officials probing the matter, the duo are currently out on bail even though the investigations are still on.
The company, however, did not make any disclosures related to this incident on the stock exchanges even though it is listed on both the BSE and the NSE. The last announcement by the company was made on Febuary 14 regarding its financial results for the quarter ended December 31, 2012. Repeated attempts to get in touch with the management and the registrar proved futile. Several email queries sent to the company also remained unanswered till the time of going to press.
Experts say that this is a clear case of a company violating the listing agreement and puts a question mark on the corporate governance levels in the listed entity.
?It is very important that shareholders know about any such development related to the top brass of the company,? says JN Gupta, MD, Stakeholders Empowerment Services (SES), a proxy advisory firm. ?It is important from the perspective of corporate governance also. While the law will take its course, silence does not give the right kind of information to the public. This obviously is a material information and shareholders have the right to be informed,? says the former executive director of the Securities and Exchange Board of India (Sebi).
In a separate development, a group of investors of Raj Oil Mills have also alleged that the promoters manipulated the share price of the company using the global depository receipts route (GDR).
According to sources, investors are in the process of filing a formal complaint with Sebi. The shareholders allege that the company allotted depository receipts (using the structured GDR route) to an FII/sub-account, who, in collusion with the promoters, converted the receipts into equity shares and sold them in the domestic market by creating artificial volumes.
?The company has breached multiple regulations. It should have intimated the stock exchange and the regulator. Sebi must investigate the matter and take strong action,? said Ashok Bakliwal, president, Bombay Shareholders’ Association.