'Pawar, Sule can't escape by blaming MD'

NEW DELHI: Agriculture minister Sharad Pawar and his daughter Supriya Sule’s defence that City Corporation’s participation in the bid for the Pune franchise of IPL in March was in the personal capacity of its MD Aniruddha Deshpande will not stand scrutiny of law, legal experts said on Friday.

As Deshpande conceded that the bid document was bought and submitted in the name of the company, the law would not allow the Pune-based construction firm to cling to a board resolution saying it allowed the managing director to do so only in his personal capacity, they said.

"The company is a legal entity. Once it buys the bid document and submits it in its name, there is no escaping the liability and the question of personal capacity bidding in the name of City Corp does not arise. The personal capacity defence is untenable in law,’’ senior advocate Mukul Rohatgi told TOI.

Leading corporate lawyer Diljeet Titus said a company, through a board resolution, could permit its MD to bid in his personal capacity. ‘‘But once the firm buys the bid document in its own name, then its involvement cannot be camouflaged by citing personal capacity of the MD,’’ he said.

Moreover, Section 2(26) of the Companies Act clearly specifies that a managing director of a company shall
‘‘exercise his powers subject to the superintendence, control and direction of its board of directors’’. In light of this, both Rohatgi and Titus were of the view that Deshpande’s statement — ‘‘The tender was bought in the name of City Corp. The board did not agree to the bid but permitted me to use the company’s name for bidding purposes’’ — hinted at an arrangement between the company and the MD.

Titus said, ‘‘If there was an arrangement between the company and its managing director to the effect that the company would lend its name for the MD to bid in a personal capacity, then too the involvement of both the firm and its managing director would be assumed from such an understanding.’’ While Deshpande said that he was permitted by the board of directors to bid in his personal capacity, Sule said, ‘‘It is in his personal capacity that Deshpande bid. It had nothing to do with the company. The company board had passed a resolution saying it would have nothing to do with the bid.’’

Other experts agreed with Rohatgi and Titus and said City Corp needs to answer some questions:

* Who paid for buying the bid document? — If the answer is City Corp, then the company cannot now wriggle out of the muddle by citing personal capacity of the MD, they said.

* Did the MD return the bid money to the company immediately after March 22 after being unsuccessful in getting the Pune franchise? Or did he return it to the company after the controversy broke out? Why did the board of directors not protest against Deshpande misuing the company name for personal benefit? — This would require a thorough examination, they said.

* If some discrepancies were detected in the bid documents warranting action under Company Law, could City Corp be allowed to say that though the document was bought in its name, it was only the MD who was liable in his personal capacity? — Even if it is in personal capacity of MD, as City Corp bought the bid document, both the firm and its MD would be jointly liable, experts said.

* Did the bid document specify that it was being submitted in Deshpande’s personal capacity? — If it was not specified that Deshpande bid in his personal capacity, then the company alone would be liable, whatever be the statements made now on behalf of the owners of City Corp, they said.

* As the bid document said nothing about personal capacity of the MD, was the board resolution ante-dated? — Ante-dating of a board resolution is a serious offence under the Companies Act and IPC. This can only be found out by a probe either by the Registrar of Companies, SEBI or the serious frauds investigation office (SFIO) in the corporate affairs ministry, they said.

Section 628 of the Companies Act 1956 provides for up to two years imprisonment for making any false statement in any returns, report, certificate, balancesheet, prospectus, statements or other documents relating to a company. A false statement would also attract provisions of the IPC — Section 463 (forgery), 464 (making a false document and 477A (falsification of accounts).