Manpasand Boardroom Drama Pitches Promoter Against ‘Independent’ Directors

Allegations of fraud, an auditor resignation, the arrest of the promoter and chief financial officer in a tax case, independent director resignations, a SEBI caution regarding incorrect and late disclosures and now a boardroom drama…recent events at Manpasand Beverages Ltd. speak of a company caught in a downward spiral.

Its share price has fallen close to 90 percent since the beginning of the year and over 20 percent in the last one week as the boardroom battle became a matter of public record. A BloombergQuint investigation also reveals doubts regarding the independence of certain directors.

What Happened On Sept. 6

The company’s board was to meet on Sept. 6 at 1.30 p.m. in Mumbai to consider postal ballot approval for the appointment of a new auditor, an AGM extension, reappointment of promoter Dhirendra Singh as chairman and managing director and his son Abhishek Singh as a wholetime director, the appointment of a company secretary and the reappointment of an independent director.

The board was also to be updated on the pending GST case which had led to the arrest of Abhishek Singh and other officials, and SEBI and NCLT cases besides other 138 cases filed, according to the company’s filing with stock exchanges.

MEETING STARTS
In a filing made on Sept. 9, Bipin Rathod, an independent director of the company, informed the National Stock Exchange:

• The board meeting was rescheduled to 2.13 p.m. on the request of an independent director.
• It was attended by all board members except Abhishek Singh.
• The board decided to appoint Shallika Soni as company secretary and compliance officer.
• The board also decided on appointing an independent forensic auditor to audit the last three financial years.

MEETING ADJOURNED
The forensic audit decision was taken as the new statutory auditor had found several discrepancies in the books of accounts and suspected “fraudulent” transactions, the filing said. It noted that, at that juncture, Dhirendra Singh refused to continue as part of the meeting and walked out.

MEETING RECONVENED
The meeting was reconvened at 5.28 p.m. that day and attended by all board members except the two Singhs and independent director Bharti Naik. The board was then informed by Finquest Financial Solutions Pvt. Ltd. that the finance company had entered into a call option agreement with Dhirendra Singh and Manpasand under which Singh had agreed to irrevocably grant a call option on 22.16 percent of the company’s shares to sell them to Finquest. The meeting concluded at 06.02 p.m.

PROMOTER CONTESTS MEETING ACCOUNT
On Sept. 12, Manpasand filed an objection note by Dhirendra Singh with the stock exchanges. In the note, Singh contested the events of Sept 6. In contrast to the filing made by independent director Rathod, Singh said:

• The majority of the board was not able to attend the board meeting convened at 1.30 p.m. on Sept. 6 due to heavy rain.
• The meeting was reconvened at 02.13 p.m. and agenda items were discussed.
• The board approved the reappointment of the two Singhs but referred their remuneration to the board committee.
• Due to some differences with “new directors”, Dhirendra Singh left the meeting.

Singh claims the forensic audit was first brought up in the original meeting by Ajay Agarwal, an invitee of Finquest. Not just Agarwal, but Bharat Patel, Hardik Patel, BSP Murthy and Vishal Sood of Finquest were present in the board meeting. Singh claims he “vehemently disagreed with the new issues raised in the meeting” and subsequently left. He says he was unaware of the meeting being reconvened that evening and has questioned how the issue of the forensic audit and the call option on his stake could be discussed when they were not on the original board meeting agenda.

Not only has Singh contested the validity of the reconvened portion of the board meeting, he also stated that he had no intention to sell his stake via such a call option.

Singh Vs Finquest

With the boardroom battle now a matter of record, BloombergQuint checked Manpasand’s filings with the exchanges and the Registrar of Companies for details of its relationship with Finquest.

On July 4, 2019, according to an exchange disclosure, Dhirendra Kumar pledged his entire Manpasand shareholding of 44.32 percent in favour of Finquest to avail a working capital loan for the company. More importantly, Manpasand has mortgaged land parcels in Vadodara, Gujarat with Finquest. The share pledge and asset hypothecation were to avail a working capital loan of Rs 100 crore at an interest rate of 24 percent per annum.

Independent? Directors

Around the same time, Manpasand appointed three independent directors on its board—Bipin Rathod (July), Jitendra Dhivare (July) and Uday Kamath (August). Rathod was described in the exchange filings as a financial expert, Dhivare as a legal expert and Kamath as a sales expert.

While the company’s website remains to be updated with their information, a BloombergQuint check revealed that in the filings with the registrar, the email addresses for all three independent directors ended with finquestonline.com.

That suggests that the Finquest funding may have come with strings attached. It raises the question whether these directors can be considered independent or whether their interests are aligned with the lender.

These three directors would be interested directors on that part of the agenda but that would not compromise their independence, said Sanjay Asher, partner at law firm Crawford Bayley. There is a difference between “independence” and “interest” in law, he explained. “One may be interested but that would not compromise independence.”

And yet, given the dispute over the events at the board meetings, if these directors are connected to Finquest, their actions would come under scrutiny. Except, on the other side stands a promoter tainted by allegations of fraud and tax evasion.

Meanwhile one news agency has reported a third account of what transpired in the Sept. 6 board meeting. It’s not clear where the truth lies.

Bloomberg Quint tried to contact Bharat Patel, Hardik Patel of Finquest but the calls went unanswered. Multiple calls to Bipin Rathod, Uday Kamath, Jitendra Dhivare also went unanswered.

Bharti Naik declined to comment saying she will get back once she consults all the stakeholders involved.