After being named a wilful defaulter, Vijay Mallya, once king of good times, may have to tweak the pact with Saroj Poddar for the management control of Mangalore Chemicals and Fertilizers (MCF) and appoint outsiders as his nominees to the MCF board.
Mallya and his ally Poddar, chairman of Adventz Group, are locked in a battle with Deepak Fertilisers over management control of South-based fertiliser firm.
Mallya along with directors of Kingfisher Airlines, Subhas Gupte, Anil Kumar Ganguly, Ayani Kurassi and Ravindranath Nedungadi, have been named as wilful defaulters by United Bank of India after the grounded airlines failed to pay up loans.
With his Special Leave Petition before the Supreme Court being turned infructuous, the apex court has directed Mallya to pursue legal remedies before the Kolkata High Court. "The situation remains unchanged as (status of) wilful defaulter is irrelevant as far as my agreement with Mr Mallya over Mangalore Chemicals is concerned. The only difference is what will happen to Mr Mallya remaining chairman and the board positions. We continue to remain interested and that position remain unchanged. But the agreement obviously has to be modified as when we did the pact we never foresee this scenario," Poddar said.
"The agreement was structured in a manner that it would be a joint control. Even if Mr Mallya is not there he still has the right to appoint three directors and that doesn't change. So three directors can come in as long as they are not UB employees, as his employees like Subhas Gupte and Ravin (Nedungadi) have been named. There is also no family member of him (in the boards) as of now," Poddar said.
Reserve Bank of India's regulations state that wilfully defaulting directors should be removed from the board of the companies and shouldn't be inducted in the board of any company in future. Mallya and Poddar had inked an agreement in May to secure controlling stake in MCF to ward off a takeover attempt from Sailesh Mehta of Deepak Fertilisers.
According to the pact, Mallya would remain MCF chairman for the next five years. Mallya would also be allowed to appoint three directors on the board and a right of first refusal over Poddar's stake. But Mallya, Poddar believes, would give finality to their joint effort to control MCF despite being branded a wilful defaulter.
"Mr Mallya has told me there hasn't been any wilful default. After this United Bank development, we haven't met or discuss the (MCF) issue. But he had written a mail to me saying he has got this tag from United Bank which he believes is completely illegal and said he will contest this. While he didn't mention anything about MCF or about our pact the fact that he kept me informed is the confirmation that he is very much on," Poddar told reporters after the annual general meeting of Texmaco Rail and Engineering Ltd.
Mehta, chairman and managing director of Deepak Fertilisers, owns about 25.31% in Mangalore Chemicals and in April launched a hostile attempt to takeover announcing an open offer to buy another 26% for Rs 61.75 a share. Poddar, who owns 16.43% through Zuari Agro Chemicals, along with Mallya, who has a promoter stake of 22.91%, followed it up with a counter offer at Rs 68.55 per share
Since then, Mangalore Chemicals's stock price has stayed above the offer price closing at Rs 68.60 on Thursday.
The joint open offer of Mallya and Poddar is yet to get the nod of Competition Commission of India which Poddar expects anytime soon.