Investigation launched by NCLT concerning Indus Motors; Justice S Siri Jagan designated as administrator

In a significant turn of events, the National Company Law Tribunal (NCLT) has ordered an independent investigation into Indus Motors Company Pvt Ltd, the leading dealer of Maruti Suzuki cars in Kerala, following allegations of fund diversion, related party transactions, and governance failures.

The allegations, presented in a plea by shareholders, accused the managing director and some family members of systematically misusing company resources. The NCLT stated that acts of oppression and mismanagement have occurred within Indus Motors Company.

The tribunal appointed former Kerala High Court Justice S Siri Jagan as the administrator of Indus Motors. The administrator has been granted authority over major corporate decisions, the ability to engage professional services, and immunity from legal proceedings for acts performed in good faith during the tenure.

One of the key concerns raised in the allegations is the ₹82 crore in related party transactions carried out over seven years. These transactions included inflated rental payments, salaries to relatives, and purchases from connected entities.

The NCLT also ordered financial restitution for the Aster DM Healthcare investment. The then directors of Indus Motors were ordered to pay ₹2,37,66,000 along with interest at the rate of 12% per annum. This stems from Indus Motors' investment of nearly ₹10 crore in Aster DM Healthcare's Initial Public Offering (IPO), despite conflicts of interest and red flags about overvaluation. The NCLT deemed this investment an ultra vires act, falling outside Indus Motors' automotive business objectives as defined in its Memorandum of Association.

Moreover, over ₹52 crore in interest-free loans were advanced to the managing director and his relatives without board approval, in violation of Section 185 of the Companies Act. The company's trademark was also allegedly used by other entities without consent or royalty payments.

Properties purchased with company funds were allegedly registered in the names of the managing director's relatives and leased back to the company at above-market rents. The NCLT declared two of the directors of Indus Motors as disqualified from being re-appointed or continuing as directors in any company, other than Indus Motors, for five years.

The respondents, including Wahab family members, denied all allegations against Indus Motors. They were represented by Senior Advocates UK Chaudhary, Santhosh Mathew, Alishan Naqvi, Rupal Bhatia, Saurav Chaudhary, Akhil Suresh, Priya Singh, and Mansuymer Singh. The search results do not provide specific names of the lawyers representing the prosecutors in the Indus Motors court case.

The petitioners were represented by Senior Advocate Aravind Pandian and a team from Shardul Amarchand Mangaldas. The tribunal also considered allegations that Indus Motors was represented as part of the Bridgeway/ Peeves Group without authorization from all shareholders.

Non-compliance of the orders within the timeframe set by NCLT may result in share redemption to recover amounts owed. The NCLT has ordered a refund of remuneration and benefits paid to disqualified directors and the Managing Director who had continued serving beyond the statutory age limit.

This development underscores the importance of corporate governance and the role of regulatory bodies in ensuring transparency and accountability in business practices. The outcome of the investigation and the decisions made by the NCLT will have significant implications for Indus Motors and its stakeholders.