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IGF moves DCA over VSNL-Tata Tele deal

BS Corporate Bureau in Mumbai

The Investors' Grievances Forum has filed a legal complaint with the Department of Company Affairs against the Videsh Sanchar Nigam Ltd's decision to invest Rs 12 billion in Tata Teleservices.

The complaint was filed under Sections 628 and 397-399. As per the provisions of section 628 of the Companies Act, 1956, whenever a company's affairs are conducted in a manner prejudicial to the interest of minority shareholders, DCA should look into the affairs of the company.

IGF is also planning to approach the Company Law Board and the Securities and Exchange Board of India. The grievances forum, if needed, also plans to file public interest litigation in the Mumbai high court in this regard.

"The Tata group, which has picked up a 45 per cent stake in VSNL, is siphoning Rs 12 billion from VSNL. It is against the interest of minority shareholders. Over valuation of Tata Teleservices is a pure case of looting, robbing the small investors. DCA should take proper action immediately," said Kirit Somaiya, Member of Parliament and president of IGF, said in a press release.

According to Section 397-99, minority shareholders can complain to CLB against oppression and mismanagement of the company.

"This is a mismanagement and the shareholders are not taken into confidence regarding the proposed investment and return. We request you to convene an EGM and pass the above resolution for investing an amount of Rs 12 billion," he added.

IGF has urged DCA to "immediately take action against the Tata group and Tata management of VSNL to protect the interest of minorities and small shareholders".

Further, in its letter to DCA, the forum has pointed out that "the Tata group's investment in Tata Teleservices without any due diligence/valuation and ascertaining any benefit to VSNL shareholders, in general, tantamount to fraud on minority/small investors of VSNL".

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