The National Company Law Appellate Tribunal (NCLAT) principal bench, New Delhi, on Friday passed orders in favour of Deepak Chhabria continuing as the chairman of Finolex Cables.
Deepak Chhabria, who serves as Finolex Cables’ executive chairman, has been at loggerheads with his cousin, Prakash Chhabaria, over gaining control of Finolex Cables.
Orbit Electricals and Finolex Industries, controlled by Prakash Chhabria, had voted against the re-appointment of his cousin, Deepak Chhabria, as the executive chairman of Finolex Cables. Orbit and Finolex Industries voted to oust Deepak Chhabria with 72.34% of the votes cast against the resolution of his re-appointment. Only 27.66% of the votes were cast in favour of Deepak Chhabria’s re-appointment.
The NCLAT order, which will now prevail, said, “the extraordinary general meeting held in May 2019 and the resolutions passed at the EGM may not be acted upon and such an interim order should continue till the time the case is finally decided.”
“Amendment and deletion of articles 59 and 60 (of Orbit Electricals) respectively would not only tilt the balance of convenience against Deepak Chhabria but it may also cause irreparable loss to him upon his removal as Chairman of FCL. Thus the amended Articles of Association of Orbit Electricals Ltd. have the potential to change the entire scenario by pushing him out from the management of Finolex Cables Ltd.,” NCLAT said.
Deepak Chhabria would be the chairman of Finolex Cables as per the Articles of Association that existed before the EGM held in May 2019 and as per the Trust Deed and Memorandum of Understanding (MoU) between Finolex Cables (FCL) and Finolex Industries (FI), the order said.
Orbit Electricals is a promoter of Finolex Cables and holds a 30.7% stake in Finolex Cables, while Finolex Industries holds 14.51% in Finolex Cables. Both these companies are controlled by Prakash Chhabria, the son of the late Prahlad Chhabria. Prakash Chhabria owns 78% of Orbit Electricals, while KP Chhabria (father of Deepak Chhabria) and his children own 7%.
Deepak Chhabria-controlled Finolex Cables maintained that Finolex Industries voted against the resolution in contravention to the Memorandum of Understanding (MoU) executed between Finolex Industries and Finolex Cables on October 11, 2011. The litigations over this MOU are pending before various fora, Finolex Cables said.
Orbit Electricals voted against the re-appointment resolution but as per the Supreme Court’s order of September 26, any action taken on the proposed resolution about the appointment of the executive chairperson was subject to the outcome of the appeal pending before the NCLAT.
Finolex Cables shareholders had voted on the resolutions at the Finolex Cables AGM on September 28 but Finolex Cables had kept the voting results in abeyance. The company disclosed voting results in an exchange filing on Friday.