Friday’s exchange of letters between Gautam Singhania, Chairman and Managing Director of textile major Raymond, and the shareholder advisory firm IiAS is just the latest in a long-drawn property dispute within the Singhania family.

Sale of apartments

At the heart of the matter is the sale of four duplex apartments in JK House in Mumbai to the promoters of Raymond Ltd. If it goes through, the sale will cost the company, and its shareholders, an opportunity loss of ₹650 crore, IiAS estimated.

In its most recent report, IiAS has asked minority shareholders of the company to vote against a resolution to sell four luxury apartments owned by the company to members of the promoter family as well as to vote against Gautam Singhania’s reappointment as director to Raymond’s board.

Tripartite agreement

In its report, IiAS said the transactions relating to the signing of the contentious tripartite agreement to sell apartments at throwaway rates to promoters — including Gautam Singhania – were undertaken in November 2007. The decision to sign these agreements were made at two board meetings — held on June 23, 2006 and July 20, 2007.

“During this phase, Gautam Singhania was the company’s Chairperson and Managing Director. He was also a party to the agreements,” said IiAS.

Given his recent disassociation with the transaction (in Friday’s letter to minority shareholders asking them to vote against the resolution), IiAS said Singhania was abdicating his responsibility.

When regulations require the audit committee to approve a related-party transaction such as the one at Raymond before putting it to shareholder vote, IiAS also asked why the company’s audit committee deferred the decision to shareholders.

Not in firm’s interest

Additionally, IiAS pointed out that Vijaypat Singhania (Gautam Singhania’s father) has exercised his rights to the property, and hence is not acting in the company’s interests. Yet, Vijaypat Singhania not only continues to be a board member, but also a member of the audit committee.

Also, IiAS pointed out that in its original EGM notice to shareholders, Raymond had said that if shareholders failed to approve the sale, it may potentially result in a dispute with the relevant counter-parties, and “who may contend that the company has breached the relevant tripartite agreement by failing to act on or fulfil its obligations under the same. Such potential disputes could be protracted and costly, and could result in financial or other liabilities on the company.” Given this condition, IiAS said that the minority shareholders of Raymond are caught between a “rock and a hard place.”

Well within rules: Raymond

Responding to IiAS’ report, a spokesperson for Raymond said: “Gautam Singhania has expressed his views on the matter and has taken a firm and decisive stand putting forth his clear intent to protect shareholders interests ahead of family and has assured that the company is taking all appropriate measures to safeguard stakeholders. We would like to state that all disclosures have been made as per statutory guidelines and regulatory compliance.”