CLB directs govt to issue notices to Maytas firms

February 19, 2009


The Company Law Board (CLB) today directed the government to issue notices to Maytas Infra and Maytas Properties to present their cases in response to the caveat the two firms had filed last week against any ex parte decision by the government.

Yesterday, the government had moved the CLB to supersede their boards but the CLB could take no action due to the ex parte (that is, a decision after hearing the plea of just one party) caveat. The two companies, which said they have decided to contest the decision, will get a chance to present their views on February 24, after which the principal bench of the CLB will take a decision.

Both firms (Maytas is Satyam spelt backward) are owned by the family of the disgraced former chairman of Satyam Computer Services, B Ramalinga Raju, who admitted to a Rs 7,800 crore financial fraud in January. Maytas Infrastructure is listed on the stock markets.

"The CLB has directed the government to issue notices to the caveators along with a copy of petition," a CLB official told Business Standard. Unlike the Satyam case, where the CLB took an ex parte decision based on the confessional letter of Ramalinga Raju, there are more people involved with the overall operations of the company. So, an ex parte decision cannot be taken, said the official.

Both these companies will have the option of filing an appeal to the high court under Section 10F of the Companies Act, the official added. Any person aggrieved by any CLB decision may file an appeal in the high court within 60 days from the date of communication of the decision or the order.

If the CLB favours the government move to supersede the board of Maytas Infrastructure, it will help a potential acquirer to avail of the exemption given by market regulator Securities and Exchange Board of India (Sebi) to takeover a distressed company, said a banker.

Last week, Sebi had made it mandatory that any company’s board — which seeks an exemption from the average of last six month’s price to issue fresh shares on a private placement basis — first needs to be superseded by the government.

According to a leading firm which has significant exposure in the company, the move will help them protect the company. “Without superseding the board, it would be difficult to find a suitor for the company, which in turn would have affected the prospect of all the projects that need fresh funds,” the banker said, adding “the company is implementing many important infrastructure projects and has also borrowed over Rs 5,000 crore from banks”.

Meanwhile, the Andhra Pradesh government today said it would not hesitate to terminate projects awarded to Maytas Infra if the need arises. It, however, would also not act in haste and the effort would be to protect the interests of the state, according to state finance minister K Rosaiah.

“The government will not cancel the projects given to Maytas just because the management is changing. The government has signed the agreement with the company and it would be responsible for carrying forward the projects,’’ he told reporters in Hyderabad today.

The government has awarded over Rs 36,000 crore infrastructure projects to Maytas Infra either individually or through joint ventures and consortiums. The company is supposed to achieve financial closure for the Rs 12,000-crore Hyderabad Metro Rail project on March 17. The state finance minister, however, did not respond to a query on whether the government would extend the financial closure deadline in view of the latest developments.

The change in the management at the company might delay the implementation of various projects but would not jeopardise them, the minister said. “There would be costs that the government would have to pay if it was the first one to terminate the contracts, which have been awarded following due procedures,” he pointed out.

Satyam developments: Meanwhile, the sixth additional chief metropolitan magistrate today dismissed the bail plea of Satyam founder B Ramalinga Raju, his brother B Rama Raju and former chief financial officer Srinivas Vadlamani. The court also allowed the Income-Tax department to question Ramalinga Raju on February 21. The I-T department said it would confront Ramalinga Raju with the documents already submitted to the department. It would try to establish the veracity of the various documents.

Earlier in the day, the court allowed Sebi to record the statements of Srinivas Vadlamani today and Price Waterhouse auditors S Gopalakrishnan and Srinivas Talluri on February 19. Following this, the Sebi counsel filed a petition saying that half day had lapsed when the court pronounced its orders and that it required more time to question the former CFO. Later, the court said SEBI could question Vadlamani on February 20.

Meanwhile, the counsel for Price Waterhouse auditors filed a fresh bail petitionfor them.