Financial Daily from THE HINDU group of publications
Thursday, May 05, 2005
Financial Daily from THE HINDU group of publications Thursday, May 05, 2005 |
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Corporate
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Regulatory Bodies & Rulings CLB orders inspection of Kowa Spinning accounts Richa Mishra
New Delhi , May 4 THE Company Law Board (CLB) has directed the Central Government to inspect books of accounts of Kowa Spinning Ltd for the years 1994 to 2000. While ordering an inspection, the Board also directed the Central Government to take further actions, if need be, on the basis of its inspection report. The Board was considering a petition filed by Khandwala Securities Ltd alleging that the promoters of Kowa Spinning, Mr Shyam Sunder Choudhari, and Mr Ravindra Choudhari, have misutilised and diverted funds raised by issue of shares in the company. Khandwala Securities was to act as sponsors for raising funds for expansion plans of the company. The promoters had entered into an agreement with Khandwala Securities in October 1994. As per the sponsorship agreement, Khandwala Securities, acting as sponsors purchased 20.8 lakh equity shares of the company at Rs 20 per share including a premium of Rs 10 per share for a total consideration of Rs 4.16 crore which constituted 48.87 per cent of the shares in the company. In terms of the agreement, Khandwala Securities were to offer the said shares to general public. To enable them to do so, the agreement stipulated various responsibilities on the company and its promoters. According to Khandwala Securities, the company and its promoters failed to comply with various terms of agreement. Besides, the money invested by Khandwala Securities had been diverted to other companies controlled by the promoters of Kowa Spinning either by way of loan or by way of investment in market securities. Khandwala Securities also said that the a review of the audited accounts of the company by an independent professional accountancy firm, RSM & Co, has clearly brought out that the company had not utilised the funds for the purpose for which it was raised. The report also highlighted the violations of the various provisions of the Companies Act. In addition, the promoters and the company were guilty of holding AGMs or EOGMs without any notice to the stakeholders including co-investors. "I am of the opinion that a deeper probe is necessary to find the relevant facts. Even though the petitioners (Khandwala Securities & Others) have sought an investigation into the affairs of the company, I am of the view that an inspection in terms of Section 209A of the Companies Act would suffice. Accordingly, I direct the Central Government to conduct an inspection of the books of accounts... " the CLB Principal Bench, comprising the Chairman, Mr S. Balasubramanian, said.
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