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Garware Polyester company creditors filed a case against the Chief Managing Director (CMD) Shashikant Balchandra Garware and several of its promoters.
The petition was filed by the creditors to the Mumbai Bench of the NLCT (National Company Law Tribunal). This petition comes during a time when the CMD Shashikant Garware is seeking re appointment.
Some of the Key allegations submitted by the petitioners in the instant case are
The relevant part of the petition is shown
“The oppressive acts of the respondents include and are not limited to paying excessive and exorbitant remuneration to responded numbers 2 and 3 to 5 which is incommensurate with the services they rendered to respondent number 1 company (Garware Polyester) and divert profit of the respondent number 1 company to related party where promoters holds 100 per cent shareholding which in turn leaves lesser profits available for distribution to the shareholders and reduced or no dividend to the shareholders and diminished value of shares.”
The petition submitted that GIL is an entity formed by the CMD only for diversion of profits to his wife and other family members
In the instant case, the role of corporate governance comes into play. Corporate Governance is essential for prevention such misuse of power as in the instant case. The role of independent directors is crucial for good corporate governance. The independent directors are chosen from a list generated by the Ministry of Corporate Affairs and this is done to ensure the role of a neutral third party that is unbiased. They act as a link between the majority and minority shareholders.
In the instant case the very allegations that the independent directors were complicit for the diversion of profits casts a grave shadow upon the transparent nature of the Company and will affect its shares.
To prevent the occurrence of such events the Government has to further amend the Companies Act and hold awareness programmess in Companies to ensure employees, and the stakeholders know the provisions of the law and the penalty for breach.
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