Suspended chief heads Bhushan Steel’s AGM
Last week, Brij Bhushan Singal, 81, chaired the annual general meeting (AGM) of the company he founded, Bhushan Steel. Not a cause for concern in the normal course but this event assumes significance because this is one of the 12 large accounts that have been referred to the insolvency process, by the Reserve Bank of India order. The National Company Law Tribunal (NCLT) admitted the plea on July 26.
One of the key implications of admission of an insolvency plea is that the board of directors gets suspended and a committee of creditors (CoC) takes over. Further, day-to- day affairs come under a resolution professional (RP), answerable to the CoC. An e-mail seeking comments sent to the RP of Bhushan Steel remained unanswered.
However, statements made by the company to the stock exchanges state that apart from Singal, Nitin Johari and P K Aggarwal, erstwhile wholetime directors of the company, were present at the AGM on September 16. Present were 158 shareholders, including the directors who were members.
“After ascertaining the requisite quorum, the chairman called the meeting to order and started conducting the proceedings,” the company stated to the exchanges.
Singal, father of ousted promoter Neeraj Singal, then addressed the gathering, giving a brief review of operations during the financial year ended March 2017 and the future outlook. “The chairman also stated that the company is passing through a difficult phase and expressed that he is hopeful that the company will sail through” with the cooperation and support of banks and other stakeholders such as customers, dealers, shareholders and other business associates.
Deloitte’s Vijaykumar V Iyer, the RP appointed by NCLT, also addressed the meeting. “I am honoured to attend the AGM,” the statement quoted Iyer as saying, adding that he “exchanged pleasantries with the shareholders”.
The AGM went on to conduct other business such as reappointment of some directors and appointment of a new independent woman director.
Regulators and legal experts feel the way these proceedings were conducted was incorrect, as the board gets suspended once the NCLT admits insolvency proceedings. “It could be because the professionals are also learning on the job. They are making these erroneous interpretations,” said a senior official.
Bhushan Steel is among the rare cases where the board had issued an AGM notice before its powers were suspended by the NCLT. Notice for the AGM was issued on July 5, when the board was firmly in its place and functioning; hence, the issue of notice was in accordance with law.
But, the NCLT on July 26 suspended the board’s powers and appointed the RP, under the Insolvency and Bankruptcy Code. Further, the professional assumes all powers of the board and will be responsible for all activities of the company, including statutory compliance. This should mean the AGM must be called by the RP and a chairperson selected in line with company law, say experts.
“While the powers of the board are suspended, they shall still be responsible for carrying out their duties as required under the law. The question is how and what duty the board is left with. Ideally, all compliance must still remain with the board but how can the board carry out compliance without any power?” asked J N Gupta, managing director, Stakeholders Empowerment Services.
Experts feel only indispensable resolutions such as adoption of financial statements and appointment or ratification of statutory or cost auditors should be approved at such an AGM. “Any AGM resolution pertaining to any extraordinary activities such as appointment of retiring director, appointment of new director, matters relating to merger and amalgamation, borrowing power, creation of charge, issue of securities, etc, logically should not be undertaken,” said Gupta.