Pentamedia board to get govt directors

Centre appointed directors will ensure corrective steps are taken to end anomalies.

The Company Law Board (CLB), Chennai, today said it found various irregularities and non-compliances by Chennai-based Pentamedia Graphics Ltd and asked the central government to appoint two directors on its board for three years to take "corrective steps". The order by the additional principal Bench of

CLB said the two central government directors, along with the existing directors, take "corrective steps and manage effectively the affairs of the company, removing the prejudices being faced by the company and its shareholders".

The CLB order follows a petition filed by the Centre seeking the appointment of government directors on the board of Pentamedia Graphics.

This was on account of irregularities in relation to the sale of its software division Pentasoft Technologies in February 2000.

The central government petition also alleged that the company made investments in several other companies to the tune of Rs 175.96 crore at a time when it had already borrowed huge funds from banks and financial institutions.

The 12-page order by K K Balu, vice-chairman, CLB, said the company, which is into animation films and graphics, also failed to disclose various information to the shareholders including the balance sheet of its subsidiary Penta Media Corporation, USA, as on March 31, 2000.

The CLB order said it did not see any yardstick or material for the huge premium of Rs 788 per share at which the Pentasoft Technologies shares were allotted towards the consideration of the software division.

Pentamedia Graphics had sold off its software division to Pentasoft Technologies for Rs 894.21 crore. The sale consideration was received in the form of shares worth Rs 530.21 crore and balance by cash, of which the company already owed Rs 122.67 crore to its bankers and financial institutions.

Accordingly, Pentasoft Technologies had alloted equity shares at a premium of Rs 788 per share, which worked out to Rs 530.21 crore and paid the balance of Rs 364 crore by cash.

"It shall be borne in mind that the premium amount of Rs 788 per share was never approved by the shareholders at the extraordinary general meeting held on October, 2000, while approving sale of software division by the company," CLB said.

"The interests of shareholders were at peril, more so, when the price of Pentasoft shares came down to a meagre Rs 22 per share. Thus, the board of directors failed to act prudently in determining the value of shares of PSTL, which constituted 70 per cent of consideration of the software division of the company," the order said.