McDowell Holdings shareholders call for EGM to save company from liquidation


Minority shareholders of the former company promoted by Vijay Mallya, McDowell Holdings (MHL), have requested an extraordinary general meeting (AGE) to prevent the company from going into liquidation. MHL has debt of just ₹15 crore but assets worth around ₹1,000 crore, which shareholders say they stand to lose if the company goes into liquidation. A creditor of MHL has dragged the company to NCLT and shareholders fear the company could be pushed into liquidation.

Investors led by overseas fund Acacia Partners, Equity Intelligence India and a few other HNIs are asking the EGM to induct five professional directors to the MHL board to lead the company. MHL has 47,000 shareholders and those who want the EGM say all lose value because there is no professional board in place.

The invitation to the EGM was sent by shareholders holding more than 15.5% on March 4 and the company has not yet responded. Shareholders say a simple rights issue can solve the ₹15 crore debt problem and hence there was no need to liquidate the whole company for such low liability which would destroy the value shareholder.

“Society is going astray”

The shareholders proposed the appointment of PS Jayakumar (Ex MD, Bank Of Baroda), Advocate VM Doiphode IRS (a leading lawyer in Mumbai), CS Zibi Jose (former ICSI Central Board Member), l lawyer Bobby J Arakunnel (Kerala High Court) and Nirej V Paul, an HNI investor. Most of the former MHL board members have resigned.

In 2018, the Enforcement Branch seized 15.73% of the sponsor’s stake in MHL to collect dues from Mallya. MHL was Mallya’s holding company and still has stakes in many companies, making it extremely valuable.

MHL has been dragged before the National Company Law Court, Bangalore (NCLT) in insolvency proceedings by a creditor, Sunstar Hotels and Estates, which has a claim of around ₹15 crore against the company. Shareholders say Zuari Agro-Chemicals was the original creditor, but MHL entered into a three-party agreement with Sunstar Hotels on November 19, 2021 to repay Zuari. In just two months, in January 2022, MHL’s new creditor, Sunstar, dragged the company to NCLT to collect its debt.

shareholders said Activity area that the company was misled by those connected with the former promoters and management to undergo liquidation to pay only ₹15 crore to the creditor even though the company has assets, mainly comprising stakes in listed companies, at height of around ₹1,000 crore.

“MHL can easily pay ₹15 crore to the creditor if there is professional advice in place. Market regulator SEBI must take notice of the dubious plot to defraud 47,000 shareholders of the company. Without a professional board, the company was suspended from trading by stock exchanges because the company failed to meet listing standards and corporate governance. All this is deliberate to bring the company towards liquidation. Large foreign shareholders also tried to join the NCLT case, but the company itself opposed it in court,” said a shareholder who signed the letter to convene the EGM.

“MHL needs a board that can serve shareholders and emphasize the need for an appropriate corporate governance structure. Currently, the collusion of board members acting in concert with creditors seems obvious and even the courts will see through,” said Jayakumar, former MD, BOB.

An email sent to MHL went unanswered.

Published on

March 22, 2022


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