McLeod Russel seeks shareholders' nod on chairman's pay, recovery waiver

The move comes at a time when the company is facing severe financial stress and is approaching the banks for loan restructuring

McLeod Russel, at its coming annual general meeting (AGM), will seek shareholder approval to waive off the recovery of Rs 2.66 crore, which it had paid to then managing director Aditya Khaitan during 2016-17. 

The tea company is facing severe financial stress and is approaching its banks for restructuring of loan repayments. Aditya Khaitan is presently chairman of the firm, after B M Khaitan, patriarch of the Williamson Magor Group (WMG), passed away. A notice to the shareholders says in view of the inadequacy of profits during 2016-17, McLeod had applied to the Union ministry of corporate affairs (MCA) for approving waiver of the excess remuneration paid to Khaitan and, that MCA had asked the company for a certified copy of a special resolution passed by the members, which was done at the 19th AGM.  According to this WMG company, the remuneration to which Khaitan was entitled to becomes double the normal entitlement approved by ordinary resolution. 

In view of this, the amount to which Khaitan became entitled to was increased to more than Rs 2.5 crore. 

"A certified copy of the special resolution was furnished to MCA for its consideration. MCA however issued a letter dated May 15, 2018, approving a remuneration of only Rs 13,388,100, a little above his entitlement under ordinary resolution. It seems that the approval of the remuneration and waiver of the excess remuneration by the members by way of a special resolution might have escaped the notice of the MCA,” the notice from the company stated.

The company petitioned MCA to reconsider. However, legal provisions underwent a change in this period, namely, that any application made to the central government under sub-section 17 of section 197 of the Companies Act, which was pending with the government, shall abate. And, the company shall within one year of such abatement obtain the approval in accordance with legal provisions. 

"The application/representation which was pending with the central government had abated and it is now necessary to obtain approval of the members afresh by way of a special resolution approving the remuneration paid to Aditya Khaitan during  2016-17," the notice reads.

McLeod is also seeking approval from the shareholders over Khaitan's remuneration irrespective of the company's financial condition. The same notice to the shareholders states that apart from various perquisites and allowances, including accommodation, car, travel, medical care and others, a monthly salary of Rs 15 lakh and a bonus of an amount not exceeding six months' salary in a year as may be approved by the board, based on the company's performance, apart from retirement benefits, needs to be given as minimum salary to Khaitan.

McLeod reasoned that as it was not doing well, Khaitan did not draw bonus during 2017-18 and 2018-19 and also forwent a special allowance of Rs 4 lakh per month from November 2018. 

"Accordingly, the effective remuneration of the managing director will be considerably lower than what he is entitled to under the terms of his appointment," says the notice.

McLeod is also seeking approval from the shareholders to enhance its borrowing. Which, it has proposed, may exceed the aggregate of the paid-up capital of the company, its free reserves and securities premium, provided that the total outstanding amount borrowed in excess of the aggregate of the paid-up capital, free reserves and securities premium shall not at any time exceed the limit by Rs 1,000 crore.

It reasons that the company is in the process of restructuring its debt and discussing with the bankers to refinance its existing debt structure. It is aiming at converting its short-term debts into long-term ones and extend the maturities, as well as interest payment schedules. If its debt restructuring proposal is accepted, McLeod would need to borrow in excess of the limits prescribed under section 180(1)(c) of the Companies Act.