Siddharth Shriram-promoted Usha International Ltd (UIL), minority shareholder in Honda Siel Cars India (HSCI), may petition the Company Law Board (CLB) and other regulatory bodies on alleged lapses in corporate governance norms by Honda.
Sources said negotiations had begun between the partners to resolve differences, but the CLB move was likely to highlight anomalies in the management of board affairs in the joint venture. Shriram Industrial Enterprises Ltd (Siel), through UIL, holds five per cent stake in the JV company, HSCI. The rest is with the Japanese auto maker.
UIL, it is understood, may approach other regulators to address issues over the alleged opaqueness in the transfer of resources to Honda Motor Company (HMC). The company has alleged it has received neither dividend nor return on investment through its 17-year association with HMC, while the Japanese auto maker received income in various ways from the Indian subsidiary.
A spokesperson at HSCI said, “We do not comment on speculation. We also reiterate that HSCI has always complied with all regulations and corporate governance norms. As a company, we have been very committed to all our stakeholders and society where we operate.”
It is also alleged the Indian partner is never taken into confidence in decision-making, despite Siddharth Shriram chairing the board of directors in HSCI. Crucial issues related to the investment plans and a serious financial crisis in Honda Siel were not communicated till the last minute to the Indian partner, sources said.
In fact, the prospect of the JV car company having to take recourse to the Sick Industrial Companies Act was communicated to Shriram only through a circular resolution on March 16. No mention of the issue was made in previous board meetings. Instead, the management had earlier told him a fresh infusion of Rs 3,200 crore was needed to advance the establishment of a diesel engine plant in India by a year and to finance its aggressive plans to introduce small cars and diesel variants in the domestic market.
A request by Shriram for a board meeting to discuss the financial position of the company was ignored by the HSCI board. The board passed a resolution on March 17 for the issuance of fresh equity and filed it with the registrar of companies. It is understood the request for the meeting is still pending with HSCI.