Corporate governance: MCA probe finds no merit in complaints against L&T
Mumbai, Oct 12, 2022
The probe by the ministry of corporate affairs (MCA) on a complaint over corporate governance raised by a former employee of Larsen & Toubro (L&T) has not found any substance in the allegations, sources told ET.
The former employee who raised the complaint had alleged that between November 2003 and March 2008, the company deducted salaries of around 30,000 employees with the assurance of issuing them shares of L&T but instead, according to the complaint, it issued them redeemable preference shares of L&T Welfare Co, a unit of L&T, the official said.
"There were four major concern areas raised in the complaint. Each of these were probed at length and no merit has been found in the complaint. A detailed report has been submitted with the government with recommendations for a final decision," these sources further added.
Earlier in March, the MCA had issued a notice to the company under Section 206 of the Companies Act and conducted an inspection at its registered office.
According to sources, the probe concluded that the case qualifies for a civil litigation, if any, and did not merit any action under the Companies Act.
"The move was part of its expansion exercise, but the allegations by the whistle blower was that the company issued redeemable preference shares instead of equity shares, thereby defrauding them. However, the probe found that the company didn't deliberately do so with the intention to dupe its employees, rather it was an arrangement to execute the expansion exercise," explained a source privy to the development.
"The employees made profit on the shares issued to them and if they wanted, they could have invested in the shares of the parent company," the official added.
"The same issue was raised before the Bombay High court which disposed of the petition and ruled in favour of the company, therefore the question of the same issue being probed under the Companies Act doesn't arise," the official further added.
[The Economic Times]