The capital markets regulator Securities and Exchange Board of India (SEBI) has pulled up fruit juice maker Manpasand Beverages Ltd for corporate governance lapses.
The company, which last year was at the centre of an alleged tax fraud, has courted controversy after renaming Dhirendra Singh as managing director even after its shareholders rejected the appointment.
Singh had offered to consider the possibility of stepping down in June last year after the company faced allegations of a Goods and Services Tax (GST) fraud. But he didn’t actually resign.
In December last year, the company proposed to reappoint Dhirendra Singh as MD for another five years and Abhishek Singh as a whole-time director. Its shareholders rejected the proposals on December 30.
On January 3, 2020, the company again appointed Dhirendra Singh as MD and Abhishek Singh as a director subject to shareholders’ approval. It hasn’t sought shareholders’ approval thus far, SEBI noted in a letter sent to Manpasand.
Manpasand Beverages had earlier told SEBI that it would seek shareholders’ approval after appointing another director. It also said that Dhirendra and Abhishek would return the excessive remuneration paid to them.
The shareholders complained that the company didn’t seek their approval for the reappointments nor did it inform them of the two executives’ commitment to repay the extra remuneration.
SEBI hit out at the company for not taking shareholders’ approval for these decisions. “This is a serious lapse in governance as persons whose appointments as directors were rejected by the shareholders continue to operate in key positions,” the regulator said.
SEBI also said that this inaction by the board violates its listing norms. “This is viewed very seriously and the board of directors of the company are warned for this serious lapse in governance,” it said.
The regulator also criticised the appointment of Shikha Jain as a new director without knowledge of shareholders. It asked the company to seek the shareholders’ approval for the appointments by September 30.
SAIF Partners is the company’s biggest institutional shareholder with a stake of 17.57% at the end of March 2020. The venture capital and growth-stage investor had first invested in Manpasand in 2011 and put more money in 2014. The company floated its initial public offering in 2015.
Shares of Manpasand have been badly impacted ever since the tax authorities conducted searches last year. The company is now suspended from trading.
The company's performance on the bourses was also majorly impacted after Deloitte Haskins and Sells LLP resigned as its auditor in May 2018.
Deloitte had said in its resignation letter that it was resigning because Manpasand had not provided it with “significant information”, which it had requested several times for the purposes of auditing the financial results and that it would not be able to audit the company’s books. Manpasand had denied any such inaction on its part.