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Dispute over inheritance worth Rs 1,500-cr flares up family feud at Finolex

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“Finolex gets people together” — says the tag line on the corporate letterhead of Finolex, the largest maker of telecom cables, which would be an inspiring note, except, of late, its doing anything but that.


Its promoters are taking up cudgels in what has turned out to be another family feud for control of a group in India Inc. At the immediate heart of the dispute is an inheritance that involves Rs 1,500 crore of shares that were bequeathed on a gift deed on a Rs 500 non-judicial stamp paper, claims one cousin, and an inheritor. The other questions its validity.



During the AGM in 2018, where the re-appointment of Deepak Chhabria came up, his cousin Prakash Chhabria alleged that Deepak, as an authorised representative of Orbit Electricals, was instructed to vote against his re-appointment, but did the opposite, thereby allegedly acting contrary to instructions.


According to PTI reports, the two have been engaged in a series of accusations and counters with a view to getting control of what each sees as their rightful place in the firm. With a 78 per cent stake, Prakash is the biggest shareholder of Orbit Electricals, the promoter entity of Finolex Cables, while Deepak is the latter company’s executive chairman, owning 8 per cent stake in it.


According to company filings, the firm was originally promoted by two brothers Pralhad Chhabria and Kishan Chhabria; both brothers being equal partners in the business. That arrangement continued in Finolex Cables, in which the entire equity of the firms was held on equal basis by the two, their relatives and investment companies.


Over the years, a number of firms including Finolex Industries (formerly known as Finolex Pipes Limited) were formed on an equal ownership basis by the two brothers and the company, and various associate companies came to be known in as the “Finolex Group”.


The group grew and there were eventually fifteen investment firms created for tax planning purposes and legal provisions.


With laws including restrictions and controls being relaxed and to avoid the unnecessary burden of compliance issues due to having fifteen investment companies, the company decided to amalgamate the fifteen investment companies into one investment company namely called Orbit Electrical Private Limited which was a closely held private firm.


It was when these investment companies were amalgamated into Orbit, and when the shares were being calculated that founder Pralhad Chhabria informed his younger brother Kishan that due to certain past accounting entries done by him in the books of the 14 amalgamating companies, his shareholding in Orbit would become 88.10% and that his brothers’ share would be 7.30% post amalgamation.


Often its been a standard operating procedure for promoters to merge and join companies almost on an ad hoc basis and to increase their shareholding but of late SEBI has guidelines preventing entities to do the same especially for listed companies,”says Mohit Saraf, senior partner of L&L Partners.


His elder brother’s proposal shocked Kishan Chhabria and he raised objections as the business had started out being owned on an equal basis between the two families and no dividends were ever declared by any of these fourteen investment companies nor any buy back of shares ever done by them, so he declined to give consent for the amalgamation.


However, in due course it was generally agreed upon by both brothers that even as the elder brother would control the dominant entity, ownership would actually be equal between the two families.


The filing goes on to state that Pralhad Chhabria agreed that he would remedy the situation by putting his entire shareholding of 82.07% held in Orbit into a private trust. In effect that Pralhad Chhabria Trust that would be settled by him for the benefit of both families and in consideration his brother and family should give their consent as shareholders of the fourteen amalgamating investment companies into Orbit.


However, as is the case in industrial families where there are disputes, after Pralhad Chhabria died in 2016, the next generation’s bone of contention emerged stronger than ever. Prakash Chhabria, son of Prahlad Chhabria claimed that before his death his father gifted 70.4% shareholding in Orbit out of a 82.07% shareholding to him by a gift deed dated 28th March, 2016. The gift deed is not a registered document as is required under the provisions of law in order to be a legally binding document, according to the filing.


Filings by Finolex say that the transfer under the alleged gift deed has been challenged before the appropriate Courts by members of Kishan Chhabria’s family to include Deepak Chhabria, who is executive chairman of Finolex Cables did not return telephone calls made to him.


Prakash Chhabria couldn’t be reached as of press time.


A known source familiar with the matter said that the group’s founders are “both Kishan Chhabria and Pralhad Chhabria not Pralhad Chhabria alone.”


The source says that Deepak and his father Kishan Chhabria have challenged the gift deed in the Pune Civil Court and that the agreement between the two founding brothers, the trust deeds, the articles of association of Orbit, transcript of recordings, reports of forensic experts and Pralhad’s last and final will are all part of the Court proceedings.


The matter is being heard in the Bombay High Court. “The bottom-line is that all promoters need to follow governance amongst themselves at the family level before they can extend the same to their stakeholders and investors “Saraf adds.”These sort of legal doubts cast doubt on any company’s longevity and throw a cloud over the firms future operations.” Its also a risk globally for Indian promoters who hope to receive foreign investments.



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Final approvals for Adani coal mine to be decided within 3 weeks: Australia

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The process to obtain final approvals for Indian energy gaint Adani’s Carmichael coal mine in Australia will be settled within three weeks, the leader of the country’s Queensland state said on Friday as she sought to expedite the controversy-hit project.


If given the green light, Adani could begin breaking ground at its Carmichael mine site within weeks, after more than eight years of planning.



Adani group entered Australia in 2010 with the purchase of the greenfield Carmichael coal mine in the Galilee Basin in central Queensland, and the Abbot Point port near Bowen in the north. The massive coal mine in Queensland state has been a controversial topic, with the project expected to produce 2.3 billion tonnes of low-quality coal.


In addition to its impact on climate change, environmentalists have argued the mine could do serious damage to Great Barrier Reef World Heritage Area. Another major concern about the environmental impacts of the proposed mine has been that it would wipe out the most important habitat of the threatened black-throated finch.


Queensland’s Premier Annastacia Palaszczuk announced that the two last final approvals involving groundwater and endangered black-throat finch will be settled within the next three weeks.



According to media reports, Palaszczuk said the black-throated finch plan decision is due by the May 31, the groundwater management plan decision is due by the June 13th this year.


“I know initially people thought this was months, and what I’m announcing today is it’s in a matter of weeks,” she said in Cairns.


“Everybody needs to have these issues resolved. That’s the timeframe the Coordinator General has set,” she added.


Earlier this week, Palascczuk ordered the state’s Coordinator-General to bring Adani and the state environmental authority together for discussions stating that she was ‘fed up’ with the ongoing delays.


While the post the final approval, the mining giant could start the work on the mine within weeks the coal exports could take up to two years.


“Now it’s really a case for the independent regulator to work through their internal processes and then they can make a determination and then we will be in a position to then start construction,” ABC news quoted Chief Executive of Adani Australia Lucas Dow as saying.



“We’re not expecting any significant surprises. Our construction activity will start as almost immediately as we’ve got these approvals,” he said.


Dow said over the past 18 months the company had so far produced 11 versions of its groundwater plan and seven for the black-throated finch.


The groundwater management plan has failed to meet key environmental requirements, including identifying the source of protected desert springs.


Last month, the Federal Government granted its final environmental approvals for the project days before the election was called.


While construction at the mine could begin with approvals, Adani’s proposed railway line plan is yet to be finalised.


Dow said the state’s Coordinator-General would also be publishing dates for other key activities, including the deadline of completion for the rail line’s deed of access and required sublease.


“That will also give us certainty and will also give the folks of central Queensland certainty of our project being able to proceed and deliver those jobs,” he said.



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EY working on govt’s Air India disinvestment, to issue EoI soon

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The government has put top consultancy firm EY to work for divesting its stake in flag carrier Air India and “quickly” issue expression of interest (EoI).


“EY continues to be the transaction advisor for the sale of Air India. We have been directed to close the accounts for FY19 and provide updated data for EoI to take the disinvestment process forward,” said a senior Air India official.



“Until the transaction gets completed EY is our advisor. They will be paid their fees after disinvestment process is complete. The instruction now is immediately start the process for EoI. Of course, approval of the Union Cabinet will be required for it,” he added.


The development comes close on the heels of Prime Minister’s Office (PMO) directing the Aviation Ministry to speed up the process of strategic disinvestment of Air India and three of its subsidiaries.


In a letter to Air India Chairman Ashwani Lohani, Civil Aviation Secretary Pradeep Singh Kharola had advised to finalise the financials of Air India and its subsidiaries by end of June, 2019.


“Also, the accounts for FY19 would form the basis of bidding. Therefore, it is necessary that they are prepared with utmost caution so as to reflect the correct financial status,” Kharola had written in the letter which has been reviewed by IANS.


The Aviation Secretary directed the airline to get contingent liabilities and account receivables verified thoroughly besides a physical verification of the inventories. A list of pending litigations is also required to be drawn up.


The government had last year initiated the process to sell majority 74 per cent stake in the national carrier but the plan proved a damp squib with no private investor turning up for the offer.


In view of rising fuel price and weak investment environment, the government had put the process on hold maintaining that it would be taken up after Lok Sabha elections 2019.



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Grasim Industries plans to invest additional Rs 6,400 crore to add capacity

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Aditya Birla Group’s Grasim Industries plans to invest an additional Rs 6,400 crore in expanding its capacity as its existing plants are unable to meet growing demand from the local customers.


Dilip Gaur, managing director of Grasim, said the investment would be made in the speciality fiber business, which would increase its capacity by about 40 per cent in the next two years as the company.



“We have invested Rs 7,000 crore in the last 10 years and will invest a similar amount in the next two years as demand is fast picking up. We have to divert our exports consignments to the domestic market to cater to the demand,” he said.


The additional capacity will be commissioned at Vilayat plant in Gujarat in two years. Grasim also holds stakes in Ultratech and Aditya Birla Financial Services.


ALSO READ: I-T dept slaps Rs 5,872-crore tax demand notice on Grasim Industries



Sushil Agarwal, Grasim’s outgoing chief financial officer, said as Grasim mirrors the trend in the economy, they are expecting the government’s thrust on the infrastructure sector will help it to boost demand for cement and financial services business in the coming quarters.


“With the government planning to invest heavily in building infrastructure, it would boost all our business.”


“The government’s thrust on infrastructure development like construction of cement concrete roads, metro rail networks, airports, irrigation projects and increase in the pace of execution under the low cost housing program supported strong volume off-take of cement,” the company said in a statement. “All of these are expected to result in sustained demand growth for cement going forward. This augurs well for the industry,” it said.



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