 "Post-arrests, focus shifts to SFIO petition against DC management")
A petition filed before the Company Law Board (CLB) by the Serious Fraud Investigation Office (SFIO) seeking a change of management at DCHL is coming up for hearing on March 9 after a couple of adjournments granted by the principal bench since November, 2014.
In the Satyam case too, the SFIO had first secured the CLB nod for the change of management of the company following the arrest of its founder and chairman B Ramalinga Raju and his associates by the CBI after which the Centre stepped in to auction the company.
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While no one as yet knows what the future holds for the DCHL promoters or its lenders at this point, a clear picture in this regard is expected to unfold only when the Ministry of Corporate Affairs initiates the next step after the CLB takes a view on the SFIO petition, according to legal observers.
One major difference between the two, though, is the lenders are at a risk of losing a huge money in the alleged fraud committed by the DCHL management while the latter was involved in an alleged accounting fraud.
The recovery of loans —more than Rs 4,000 crore owed to the lenders by DCHL promoters — is linked to the future ownership of the company as the sale of properties alone are not expected to be sufficient to recover the whole debt, according to some lenders. Some of the private institutions had moved to convert part of the debt into equity holding in a bid to strengthen their position for recovering the loan.
“We are still not sure what lies ahead and that is the reason why we have been pursuing every available option to somehow get our money back. There is also no single common track for all the lenders to come together and discuss the way out as the banks and the NBFCs have initiated multiple legal acts to recover the money,” Hemanth Kanoria, chairman of Srei Infrastructure Finance Limited, told Business Standard.
It is the loan recovery and not the management control that matters even for the biggest shareholders. “We had made our first and the last mistake by stepping out of our brief to lend to a media company. It would be one more mistake if we think of management control about which we do not know anything,” Kanoria said.
The lenders consortium led by Canara Bank was apparently trying to reactivate its efforts to secure the common interests as had been done by it in the past when it discussed an offer given by AP-based businessman Srini Raju. However, it did not work out as the offer was not acceptable to the promoters, according to informed sources.
Like Srei Infra there are other lenders, including public sector Andhra Bank and the largest private sector player ICICI Bank, who have been continuing their efforts under various legal provisions to recover the money outside the lenders’ consortium.
“As the Andhra Bank is a standalone lender for the DCHL, we were not being made a part in what the consortium of lenders was trying to do. But our recovery efforts are on. There is progress as far as the sale of Chennai property is concerned but we are facing some issues with regard to the Bengaluru property, also mortgaged with us by the company promoters,” CV R Rajendran, chairman and managing director of Andhra Bank, said in response to a question on the latest developments pertaining to the case.
As there were alleged discrepancies found in the loan transactions pertaining to the company, Andhra Bank had filed a separate complaint with the Central Bureau of Investigation (CBI) against the DCHL promoters. Likewise, there had been a couple of other separate complaints lodged with the CBI against the company, according to reports.
The latest move of the ICICI Bank to acquire additional shares, however, questions the tenability of the present management even before the CLB decides on the issue.
ICICI Bank, which had lent close to Rs 500 crore to the DCHL, had increased its equity holding in the company by acquiring an additional 32 million shares besides raising the dispute against the issue and preferential allotment of 66 million shares of the expanded capital to Srei by the company promoters.
Post this acquisition, the shareholding of DCHL promoters, T Venkattram Reddy and T Vinayaka Ravi Reddy, is expected to have come down to 0.05 per cent from the earlier 15.31 per cent as the bank had simply invoked the pledge of these shares, according to the sources in the know. However, neither the bank nor the promoters were available for comment on this development.
The company’s filings to the stock exchanges show that exactly 32 million shares were under pledge with ICICI Bank. Excluding these shares, the entire promoters group now owns just 151,523 (0.05 per cent) shares out of the little over 275 million shares of the company.
In the ongoing loan defaults episode, the banks were also held responsible for non-compliance norms leading to indiscriminate sanction of loans to the company. It may be recalled the Reserve Bank of India (RBI) had imposed penalties on some of the lenders of Deccan Chronicle for not conforming to the standard procedures.
“After considering the facts of each case and the individual bank's reply, as also, the personal submissions etc, by some of the banks...the RBI came to conclusion that some of the violations were substantiated and warranted imposition of monetary penalty,” the RBI said in a release issued in this connection in July last year.