Calcutta HC issues notice to SBI, officers in Usha Martin case
The move is the latest episode in the ongoing feud between the two factions of the Jhawar family and complicates the debt recovery efforts of SBI and other lenders.
The move is the latest episode in the ongoing feud between the two factions of the Jhawar family and complicates the debt recovery efforts of SBI and other lenders who are pushing a plan to sell the profit-making wire ropes business of the company. London resident Prashant Jhawar, who was in Delhi this week, told the Economic Times, “There was collusion between some officers of the lenders and Rajeev to get me out of the company.” He alleged that he was thrown out because he had raised concerns over various irregularities, including misuse of funds.
The petition alleged that the two SBI officials, one of whom is the bank’s nominee on the company’s board, had “acted in collusion and conspiracy with some of the directors and/or the persons in the management and control of the company” for “self aggrandisement and with ulterior motive and mala fide intention”. It cited quotes by bank officials, some unnamed and some on record, from newspaper articles to point out SBI’s efforts to defame his branch of the family.
Reacting to the allegation, an SBI spokesperson said, “It is a policy of the bank not to comment on Individual accounts and their treatment.”
Dismissing the allegations as “baseless”, a senior Usha Martin executive said the company would respond to them in the court. “SBI deals with such large accounts. Why would it collude with a promoter of a small company?”
Prashant Jhawar and his associates, including his father Basant Kumar Jhawar, have pleaded before the court to declare the board meeting of April 2017, in which the decision to remove him was taken, as illegal. He has sought all actions flowing from it to be reversed, his reinstatement as chairman, and damages of Rs 50 crore from SBI.
Company sources said Prashant Jhawar’s move had come to negate the bank’s attempt to implead itself in the proceedings between the two factions at the National Company Law Tribunal (NCLT). He is likely to contest SBI’s impleadment attempt, saying that the case is already before the High Court, they added. In a hearing last week, the NCLT had ordered a status quo on the shareholding of Usha Martin, stopping any potential move by lenders to take control of equity through conversion.
Usha Martin was set up by Basant Kumar Jhawar and his younger brother Brij Kishore in the 1960s in collaboration with Scottish wire ropes maker Martin Black & Co. The brothers and their families ran the company over the next four decades, when it became a world leader. Prashant Jhawar moved to London in the late 1990s, leaving management to professionals. P Bhattacharya, a senior industry hand, ran the company under the guidance of the senior Jhawar between 1998 and 2010.
Following a family agreement, Rajeev Jhawar took over the day-to-day affairs of the company in 2010 while Prashant continued as non-executive chairman.
The company’s troubles with lenders can be traced to an expansion plan for its steel business. Delay in execution resulted in the project’s cost zooming from around Rs 1,000 crore to over Rs 2,500 crore. As this coincided with a slump in steel prices, the company struggled to service its loans. Prashant Jhawar claimed that the board was kept in the dark, but Rajeev Jhawar’s faction claims he was aware of the goings-on.
As part of a restructuring plan, both promoter sides were asked to pledge a part of their holdings and an adviser was to be appointed to execute the sale of the wire ropes business. “A sales pitch from the Royal Bank of Canada talking of an indicative valuation was used as if they had offers at that price. The advisers were appointed on February 10, 2017. One year down the line, where’s the cheque?” Prashant asked.
At this week’s board meet, where Rajeev Jhawar was re-appointed as managing director, the management said the sale process was on.