Co law violation by Escorts Fin

The rationale for the violation by is disagreement between managing director Jayant Dang and some directors on his board, who have objected to the "irregularities" in the accounts. The managing director is believed to be on a 3 per cent profit-sharing arrangement with the company, and for thisreason some of the unwilling directors have alleged that the profits have been "increased" to help the managing director personally.

The unwilling directors are understood to have alleged that losses amounting to about Rs 3.24 crore have been deliberately parked in Escorts Finance’s subsidiaries. This goes against shareholder interest as, at some future date, these entries will be reversed, which will, at that date, bring down the profits.

For 1996-97, the company announced a net profit of Rs 18.34 crore. The "rebel" directors are reported to have told the managing director that they "do agree with this figure, which is grossly high and incorrect".

Chairman Rajan Nanda did not respond to a faxed questionnaire asking him about the alleged violations in the company’s accounts.

There is another twist to the tale: The company is believed to have huge non-performing assets of Rs 50 crore, and that is the reason why it is scouting around for a foreign partner. The foreign partner is being wooed with theexpectation that fresh equity will improve its cash flow. In this context, the directors are understood to have alleged that Bracknell Investments, an investment company owned by Jayant Dang, has been buying up Escorts Finance shares.

They allege that the managing director has mopped up close to 4 lakh shares of Escorts Finance. The managing director, they say, is doing this mop-up operation to off-load the shares to the foreign partner as and when the agreement is signed. As of now, Escorts Finance has not finalised a joint-venture agreement.