ALL INDIA SHAW WALLACE EMPLOYEES FEDERATION AND CENTRAL GOVERNMENT Vs. SHAW WALLACE AND CO LTD

JUDGEMENT

(1.) THE affairs of Shaw Wallace Ltd. (SWC), a blue chip company, with a history of over hundred years, presently under the control of an NRI M.R. Chhabria, (MRC), holding about 39 per cent. shares in the company for nearly a decade and under whose management this company was doing well for some time, have unfortunately become the subject-matter of two petitions-one filed under Sections 235, 237, 397, 398, 399, 402, 403, 406 and 408 of the Companies Act, 1956 (Act) by some of the employee shareholders (first petition) and another, under Section 408 of the Act, by the Central Government (second petition). Both the petitions were heard together, as most of the allegations in both the petitions are founded on certain alleged acts of financial mismanagement and there were quite a few common allegations. To avoid repetition and overlapping, we are disposing of these two petitions by this single common order.

(2.) There are 61 respondents in the first petition of whom replies have been filed only by respondents "Nos. 1, 2, 4, 5, 6, 8, 45 and 46. Respondents Nos. 12 to 29 and 47, 49 and 51 were represented by their counsel even though they have not filed any replies. In the second petition, there are ten respondents--SWC and nine directors of the company. Only the company, namely, SWC has filed its reply and no other respondents, perhaps since no personal allegations have been made against them in this petition, have filed any reply nor were they represented during the hearing. While multifarious reliefs including supersession of the board of directors have been sought for in the first petition, the relief sought for in the second petition is for appointment of eight Government directors on the board of the company. The Central Government has also, in addition, supported the first petition, through an affidavit. The allegations in both the petitions are mostly based on certain complaints made by the employees of the company on which the Central Government had earlier conducted an inspection under Section 209A of the Act. Most of the allegations relate to financial transactions of various nature transacted by SWC from 1990 onwards. These financial transactions, while according to the Central Government in the second petition, indicate gross financial mismanagement of the company requiring appointment of Government directors to safeguard the interest of the company/shareholders/public, according to the petitioners in the first petition, the financial transactions reflect siphoning off of the funds of the company requiring supersession of the board and further remedial steps through grant of various other reliefs sought for in that petition.

(3.) A summary of the main allegations in the first petition is as follows :