The government has accused Premier Automobiles Ltd Managing Director MV Doshi of far out stepping his authority and selling the company's assets, besides embezzling funds and cheating shareholders.
The government contended before the Company Law Board that Doshi did not have the authority to sell the company's assets without the approval of Mumbai High Court.
Appearing for the Central government, counsel Sanjay Aggarwal said Doshi acted ultra vires (beyond the power granted to him by the Premier board) and entered into an alliance with Italian auto giant Fiat to manufacture its worldwide hit model Uno.
"The Board had authorised the MD only to enter into an MoU with Fiat and despite that he not only signed the agreement for co-production but also to market Uno from Premier's dealers network," contended Aggarwal.
"Doshi and Premier's board cannot sell, dispose or transfer the company's assets at their own wish without the approval of the Mumbai High Court under the Companies Act," Aggarwal said, adding they also did not seek approval of financial institutions or shareholders.
And to cover it up, Doshi falsely argued that the board had authorised him to take such decisions in 1994 through a power of attorney.
"That power of attorney was for other purpose and not to dispose company's assets," Aggarwal said, adding that Doshi also tried to get backdated permission from shareholders.
Under the Companies Act, 1956, a listed company has to take approval from the High Court to dispose its assets.
Doshi also manipulated Rs 610 crore collected from booking and sales of Uno and did not bother to render the exact numbers in the company's annual accounts, Aggarwal claimed.
However, asking both parties to appear before it on October 17, CLB Chairman N Balasubramanian ordered that status quo be maintained on the properties of the company.
In its petition filed in February 2004, under Section 388B of the Companies Act (reference to CLB of cases against managerial personnel), the government had requested the CLB to remove the entire board of directors including its Managing Director Doshi, for their financial mismanagement on various counts.
The government had alleged that Doshi borrowed money in the name of the company from Citibank, exceeding the prescribed limits. Later, he channelised the funds illegally to different sources keeping the board of directors in dark, the government further alleged.
According to the government, Premier also disposed lands of two plants of the company having astronomical values at Kurla and Kalyan in Mumbai, without taking required approval from the high court.
Premier sold its Kalyan plant to PAL Peugeot, another joint venture partner, while the Kurla unit was transferred to old ally Fiat.
Earlier, Premier had maintained that it had submitted particulars regarding the use of the booking money for Fiat Uno, including bank statements and cancellation requests, to the registrar of companies.