Maruti investors eye legal recourse

Maruti Suzuki’s angry investors are looking at alegal challenge to the company’s plan to hand over the proposed Gujarat plant to parent Suzuki and may approach the Company Law Board (CLB) soon, a section of the institutional investors said.

The investors are not satisfied with the response of the company management to their queries. “We are studying how many of our schemes own Maruti shares and after completing this exercise, we will look at the option of approaching the CLB,” said a senior executive at one of the fund houses that have questioned the decision.

The Companies Act allows three scenarios — either those holding 10% of the issued capital (by value), or onetenth of the shareholders, or at least 100 shareholders — to challenge a decision in CLB.

UK Chaudhury, a senior advocate specializing in corporate law, said either the fund houses will have to cobble together 10% shareholding or will have to get the consent of at least 100 investors, who own shares through their schemes. In addition, the executive at a fund house said the issue needs to be cleared by the boards of the asset management companies as well as the trustees.

While questioning the role of independent directors, who have also raised the alarm, fund managers said that the Maruti board did not maintain the highest levels of corporate governance. A fund manager complained that the company has not responded to six of the seven questions and turned down suggestions.

The legal battle may not be a long-drawn one, Kalia said, but added that it will have an effect on the goodwill and reputation of the management. Suzuki coming to India for board meet.

News Source: Times of India