Zee-supported NBFC aiding Amar Ujala's Aggarwals

The Subhash Chandra-promoted Essel Group today said it was helping the Aggarwal faction of the Hindi daily Amar Ujala to buy out its partner by assisting it in raising a loan from a non-banking finance company (NBFC) in line with the order of the Company Law Board (CLB).

"An NBFC supported by the Essel Group has extended a loan to one of the Amar Ujala family members to facilitate a takeover in consensus with CLB," Ashish Kaul, senior vice-president of Zee, said. He, however, said that Zee network or Essel Group had not acquired Amar Ujala. The Aggarwals could not be reached for comments.

In the prolonged battle for control over the management of the leading Hindi daily that has been valued at Rs 390 crore, the CLB has ordered that status quo be maintained in the shareholding pattern. Also, it has said that the shares be placed in an escrow account.

The families of the two Aggarwal brothers, represented by Ajay Aggarwal, had approached the CLB under section 397 (relief for oppression) and 398 (relief for mismanagement), accusing the Maheswari brothers, who are the current majority shareholders, of mismanagement.

As per an agreement worked out by the CLB, the Aggarwals are now supposed to buy-out the stake of the Maheshwaris over the next nine months, and make the payments in five installments - the first two being for five per cent stake while the rest for 30 per cent.

However, the CLB warned that the Aggarwals shall not either directly or
indirectly facilitate or negotiate or shop around with any third party for a
period of three years to either acquire the ownership or control of the
company.

More importantly, it had said that if the Aggarwals failed to pay the
installments as per the agreed format, they will "not only cease to have
the management control and the control shall automatically rest in the
respondent group."

The controversy cropped up in 2003 when the company passed a resolution that henceforth all editorial posts would be merit-based - a departure from its previous practice of appointing only family members.

Meanwhile, Arvind Gupta, a minority shareholder in Zee Telefilims, has questioned the company's move to assist the Aggarwals in buying out the majority shareholders.