State-owned Power Finance Corporation (PFC) has been pulled up by the National Company Law Tribunal (NCLT) in Ahmedabad for filing a case against Shree Maheshwar Hydel Power Corporation, earlier promoted by Mukul Kasliwal. The judge said in his order that PFC, and other nominee directors, sought protection from the tribunal as they were wary of being prosecuted by government agencies.
The case was filed under section 241-242 of the Companies Act which states that a person can seek relief from the NCLT if affairs of a company have been or are being conducted “in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company”.
“On scanning of the prayers it goes to show that there is any amount of apprehension in the mind of PFC and other nominee directors that they will be prosecuted by one or the other agency of the government and therefore they must seek protection of the tribunal which they thought can be achieved by making allegations of oppression and mismanagement against the respondents,” the judge wrote in his order. He added that, “PFC, in order to escape penal actions under the Companies Act, intends to use this tribunal in the guise of oppression and mismanagement”.
It was reported that the government had ordered an inquiry into the project after lenders took management control in January, 2016. The judge said the failure to repay debt or to infuse equity does not amount to acts of oppression. He added that the allegation of siphoning funds is “vague and there is no material to substantiate the same”. The consortium of lenders led by PFC has invested close to Rs 2,560 crore in the firm in the form of debt and equity. Lenders to the project had issued a loan recall notice dated January 5, 2016, and a notice for invocation of pledge was issued on May 19 the same year.
Maheshwar dam was planned as part of the Narmada Valley Development Project and the Madhya Pradesh State Electricity Board was assigned the responsibility of building the dam in 1989. The Narmada Valley Development Project entails construction of 30 large and 135 medium-sized dams in the Narmada Valley. The estimated project cost has escalated from Rs 1,565 crore in December, 1996 to Rs 4,400 crore in March, 2012.
Subsequently, on May 2, 2015, a report of the high-level committee constituted by the Madhya Pradesh government suggested a couple of possible scenarios to revive the project. Scenario one involved the promoters arranging additional equity of Rs 600 crore and debt of Rs 1,100 crore,while another scenario sought cancellation of the existing power purchasing agreement (PPA).