Oswal scion drags Jindals into succession battle, Pankaj Oswal moves NCLT alleging mismanagement

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Pankaj Oswal, the eldest son of late industrialist Abhey Oswal, has dragged Naveen Jindal and some of his group companies to the National Company Law Tribunal (NCLT). Jindal is married to Pankaj Oswal’s younger sister Shallu.

The allegation

In a petition filed before NCLT’s Chandigarh bench, Pankaj has alleged that he is being denied his “rightful share in Oswal Agro Mills (OAML)”, the group’s flagship and holding company. According to him, his mother Aruna Oswal, who is now the chairman of OAML, and her associates are allegedly mismanaging the group and stripping it of assets and value.

Aruna, her confidant Anil Bhalla, who is on the boards of group companies, Naveen Jindal, and some companies associated with Jindal have been named respondents in the petition. The NCLT is likely to hear the case later this week. The petition, which has sought a probe by the Serious Fraud Investigation Office (SFIO), has cited certain alleged dubious transactions, including related-party deals and diversion of funds. It has also alleged that loans are being given to companies and entities closely linked to the directors.

The Jindal connection
Jagran Developers, Minerals Management Services (India), Gagan Infraenergy, and Opelina Finance Investment are among the companies named in the petition with some Jindal connection. “In the financial year 2015-16, these companies received hundreds of crores of funds; most of these companies are inoperative or (have) negligible cash flow. Further, the management of OAML is acting in concert and connivance with them to the detriment of the company, its minority and public shareholders,” the petition alleged.

In response to an e-mail seeking comments on Pankaj’s petition, a Jindal Steel and Power Ltd (the Jindal group flagship firm) spokesperson said, “We are shocked to hear the baseless and frivolous allegations, all of which are devoid of an iota of truth. We would like to categorically state that any, and all transactions between the Oswal group and JSPL group entities/associates are in strict adherence to best corporate governance practices. We abhor the nefarious and motivated attempts being made by vested interests to sensationalise and project a distorted picture of genuine transactions conducted between two corporate entities at an arm’s length.”

The Bhalla link
Arr Ess Industries, a company associated with Anil Bhalla, has benefitted from real estate development contracts given out by the Oswal group firms, the petition alleged. OAML’s associate firm Oswal Greentech is developing a residential real estate project in Ludhiana called Centra Greens. Arr Ess has allegedly been appointed as primary contractor for this project.

Stock prices of both Oswal Agro and Oswal Greentech have come off recent highs. Oswal Agro was trading at around Rs 12 levels, while Oswal Greentech was Rs 28, both down about 30% from their peaks in January.

Bhalla, who is the director of Oswal Agro Mills, said, “We don’t comment on any matter filed in tribunal or, (which is), sub judice.”

Related-party deals as such do not amount to any illegality. However, regulators have mandated stringent disclosures for such deals due to their propensity to get abused.

The succession battle
The senior Oswal was known as a leading corporate financier and was in his heyday even compared to Dhirubhai Ambani for his penchant for deals. He had started out as a trader in Ludhiana and had quickly expanded his interests in agro, fertilizer, and petrochemical industries through a series of acquisitions beginning in the 1980s. In 2011, he had shot back into prominence after picking a 14% stake in listed broadcaster NDTV. Following his sudden demise while on a visit to Russia in 2016, his heirs, including his wife Aruna and children Pankaj, Shailender (Shael), and Shallu, are engaged in a bitter succession battle.

Pankaj, who was based in Australia before his father’s demise and has no love lost for his mother and siblings, said, “I am sure with my petition before the company law tribunal. Truth will prevail. I have filed this petition in the interest of OAML’s shareholders, who have never received their rightful dividend payouts, and (the aim of this petition is to) prevent the company from further mismanagement and to investigate the financial irregularities and fraudulent conduct of management of these companies left behind by my late father.”

The Taj-on-Swan episode
Sources close to the rival camp have said that Pankaj had fallen out with his father during his lifetime and had moved base to Australia. They also cite his run-ins with authorities Down Under and say his attempts to get back won’t bear fruition. Pankaj had set up world’s largest ammonia plant under Burrup Fertilizers in 2006. He and his wife Radhika began to build their dream house, Taj-on-Swan, in suburban Perth, then billed to be the most expensive residence in Australia. In 2010 Burrup Fertilizers was put under receivership after a loan default to ANZ Bank. The receiver alleged that Pankaj had taken large sums of money out of the company. The Australian Tax Office got involved. In September 2016, ANZ reached a commercial settlement with Pankaj.


Points of contention

*Within a year after the demise of Abhey Oswal, the present management turned OAML into a loss-making entity

*Significant amount of funds has been moved from OAML and OGL to related parties and companies held and controlled by Naveen Jindal’s family and Anil Bhalla’s family

*Anil Bhalla’s family company — Arr Ess Industries — has been appointed as an exclusive contractor/developer for real estate projects, including Centra Green at Ludhiana

* OAML’s Dubai-based wholly owned subsidiary, Oswal Overseas, has been suspiciously taken to voluntarily wind up by OAML

Source: NCLT petition

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