Supreme Court ruling may escalate feud for control of Finolex Cables

The Finolex Group dispute has taken a fresh twist, with a Supreme Court order Tuesday vacating an interim direction of the National Company Law Appellate Tribunal (NCLAT) and allowing Orbit Electricals, led by Prakash Chhabria, to participate in the voting at the Finolex Cables' annual general meeting scheduled for Friday.

The dispute pertains to the executive control of Finolex Cables involving the cousins Prakash and Deepak Chhabria.

The Supreme Court's directive is expected to escalate tensions in the ongoing dispute as it grants Orbit Electricals the authority to cast votes related to the resolution concerning the appointment of Deepak Chhabria as executive chairperson. While Orbit Electricals holds around 31% stake in Finolex Cables, Prakash Chhabria, directly and through Finolex Industries, owns 15%.


The Supreme Court order said that the NCLAT indicated no reasons for issuing the interim order, which directed both parties "to maintain status quo as was available prior to the extraordinary general body meeting dated May 3, 2019" until the judgment of the tribunal is delivered. NCLAT reserved its order on September 21, 2023.

However, in its order, the Supreme Court has said that any action taken on the proposed resolution pertaining to the appointment of the executive chairperson will be subject to the outcome of the final NCLAT order.

Prakash is the biggest shareholder of Orbit Electricals, the promoter entity of Finolex Cables, while Deepak is the latter company's executive chairman. Prakash Chhabria controls about 78% of Orbit Electricals, while KP Chhabria branch (father of Deepak Chhabria) and his children own around 7% stake.

Cousins Prakash and Deepak Chhabria have accused each other of scheming to gain control of Finolex Cables. Prakash, the largest shareholder of Finolex Cables, has alleged that in the 2018 AGM, Deepak didn't follow the mandate stipulated by the board resolution passed by promoter entity Orbit Electricals.

While Prakash Chhabria declined to comment, an email query sent to Finolex Cables did not receive any response until Wednesday press time.

Proxy advisory firms have offered disparate recommendations to shareholders of Finolex Cables regarding a resolution pertaining to the re-appointment of Deepak Chhabria as a whole-time director designated as an executive chairman for the term commencing on July 1, 2023, and concluding on June 30, 2028.

InGovern Research has suggested that FCL shareholders seek a postponement of the resolution, citing concerns over the adequacy of the notice period. On the other hand, Stakeholders Empowerment Services (SES) has advised shareholders to vote against it, while Institutional Investors Advisory Services (IiAS) has recommended that shareholders vote in favour of the resolution.

InGovern has alleged that the corrigendum published on September 16, 2023, does not meet the requirement of Section 118 (10) of the Companies Act and ICSI secretarial standards. The company issued a corrigendum on September 16, 2023, to the notice of the AGM. The original notice was dated September 4, 2023, and issued 25 days ahead of the AGM date of September 29, 2023.