Srei convenes Deccan Chronicle EGM on March 20, proposes 5 new directors

It's Srei second try at taking control of DCHL; 2016 meeting foiled by Tata Capital and Indiabulls

In an apparent move to take over the management of debt-ridden Deccan Chronicle Holdings Private Limited (DCHL), Kolkata-based Srei Infra Finance Limited (SIFL), which is one of its lenders and also claims to be the single largest shareholder, has convened an Extraordinary General Meeting on March 20, 2017 for the appointment of five new directors on the board of DCHL, besides proposing other agenda.

Srei has asserted its right to hold the EGM under Section 100(4) of the Companies Act, 2013, stating that the DCHL board has not been able to convene an EGM even though it had sent a valid requisition dated December 20, 2016, within the statutorily prescribed time.

This is the second attempt of Srei to take control of the management of the beleaguered media company, whose original promoters had been facing a host of civil and criminal charges after they defaulted on repayment of loans amounting to about Rs 4,000 crore, taken from dozens of banks and financial institutions, including Srei.

In 2015 Srei had part converted its loan of Rs 220 crore into equity, thereby raising its shareholding to 24 per cent in the stock-exchange listed media firm.

In 2016 Srei mooted the idea of lenders' meeting to settle the claims through a formula wherein it had suggested that each lender will have to give up claim on 75 per cent of the debt while and take equity in the revamped company in proportion to the remaining 25 per cent claim. The meeting did not take place due to an interim stay granted by Hyderabad High Court after Indiabulls and Tata Capital challenged Srei's move.

In its notice given on Monday (February 27, 2017) under section 100(2) (a) of the Companies Act, 2013, Srei proposed an eight point agenda for the approval of the EGM, including the appointment of Manoj Mohanka, former chairman of Network18 Media Investments and TV18 Broadcast Limited, former journalist and Press Council member Sabina Indrajit, besides Shamik Roy, Prashant Mushtii and Dipen Chatterjee as directors on the board of DCHL. Among other nominees, Shamik Roy was president and group CFO of Punj Lloyd Limited while Prashant comes from a financial services background. Dipen Chatterjee is a Principal Associate of law firm, Khaitan and Co.

While the present board, which consists of 5 members including the three promoters, namely T Venkattram Reddy (chairman), T Vinayak Ravi Reddy (vice chairman cum managing director) and P K Iyer, remains unchanged ever since the status quo order was issued by the Principal Bench of the Company Law Board, New Delhi in September, 2014, the SIFL in its notice indicated that it would approach the National Company Law Tribunal (NCLT) for a prior approval for the appointment of new directors after the EGM's decision over their appointment. The alleged loan default cases against DCHL management had first came to light in the year 2012 when couple of companies sought legal means to recover their loans from the company.

In September, 2014 the Serious Fraud Investigation Organisation (SFIO) had filed a petition against the DCHL promoters alleging fraud, mismanagement while conducting and managing the affairs of the company among other charges. The CLB had issued interim orders directing the company and its promoters not to open any new bank account in any bank without prior approval of CLB, not to hold any board meetings, maintain status quo on the constitution of the board of directors of the company, and maintain status quo on the assets of the company except in ordinary course of business.

Later the Central Bureau of Investigation(CBI) had filed a charge sheet against DCHL promoters based on a complaint given by the Canara Bank management.

"As the shareholders of the company may be aware, the company's operations have been adversely affected over the past few years because of various reasons. The last audited financial statements of the company are available only as on September 2012(for a period of 18 months ending on September 30, 2012) and no authenticated information regarding the financial status of the company has been made available to the shareholders after this date. In the absence of any authentic information it is difficult for the shareholders and creditors to ascertain the true financial health of the company," Srei said in the notice.

Justifying its move on EGM, Srei further said: "In these circumstances, SIFL understands that the company's operations have been adversely affected. If the existing state of affairs continue unchecked, there is a real and imminent threat of the company going into liquidation. This would affect the employment of almost 1,400 direct and indirect employees of the company and jeopardise the interests of the company's other stakeholders such as creditors and shareholders... In order to ensure that the business of the company continues to remain as a going concern, and to afford protection to creditors, members, and employees of the company, and to infuse confidence in the general public, it is imperative for the shareholders to seek information from the company to discuss the financial and operational situation of the company and the performance of its management, the company's long term viability and to pass appropriate resolutions as they see fit."

It is not clear as to how the other lenders would react to Srei's move. It may be noted that ICICI Bank, which lent Rs 500 crore to the debt-trapped company, had challenged Srei's claim of being the single largest shareholder in DCHL.