After a long-drawn legal battle, the National Company Law Tribunal (NCLT) has given Gujarat Samachar, a Gujarati daily, six months to resolve their affairs or they may have to head for a split.
Owned by Lok Prakashan Ltd., it is under dispute between the brothers Shreyansbhai Shah and Bahubali Shah. The court noted that there has been clear oppression and mismanagement of the company, in the light of which they have asked Shreyansbhai Shah, the current publisher and editor, to assist the Board in finding a suitable replacement for himself.
According to the latest NCLT order issued on March 8, 2021, the 89-year-old newspaper will have to reconstitute the Board of Directors and appoint Justice (Retd.) Dilip Bhosale, Ex-Chief Justice of Allahabad High Court, as an Independent Director of the Company. The newly appointed Board will frame policies and a business succession plan for the smooth running of the company. Meanwhile, Shreyansbhai Shah will remain accountable to the BoD for all editorial practices.
If the deadlock is not resolved after six months, the BoD is directed to frame a plan to split the company between the two groups. They will have to appoint two valuers to evaluate the assets of the company for the purpose of the split.
While the Shreyansbhai group owns a 40.75% stake in Lok Prakashan Ltd., his brother’s group owns a 40.62% stake. Trouble began brewing in the family in 2001-2005 over bank account signatories. The issues only worsened after their father and then Managing Director Shantilal Shah passed away in 2006. A committee was formed to resolve the issues and its various recommendations were even implemented.
In 2012, Shreyansbhai’s AASPAS Multimedia Ltd launched GSTV. This worsened the dispute as allegations were made over the misuse of funds of Lok Prakashan. After the exchange of several letters over mismanagement, Bahubali Shah filed a petition with NCLT in 2017 seeking an end to it by splitting the company or by restoring the funds with interest that Shreyansbhai ‘clandestinely used’. After an almost four-year-long legal battle, the court issued them an ultimatum to resolve their issues or head for a split.
Among the allegations raised by Bahubali Shah is that after the death of their father, there has been no growth in their business and due to siphoning off profits and mismanagement, the company is not making desired profits.
The court noted that the revenue from their core business is declining. According to documents submitted to the Tribunal, their revenue declined from Rs 674.4 crore in 2016-17 to Rs 603 crore in 2019-20.
The NCLT, in its March 8 order, commented that the readership of Gujarat Samachar fell by 24% in 2019. The profit before tax of the company in the financial year 2019-20 went down by Rs 65 crore.
According to the IRS figures of 2019, though Gujarat Samachar’s readership has been declining, it has been in a commanding position in the Gujarat market. However, it is alleged that despite its lead position, a huge portion of the profits are coming from investments in equity and
mutual funds, and not from the core business of the newspaper.
The court noted that there has been no business growth since 2011, which is clear from the fact that the newspaper has not launched any new edition since the launch of their Bhuj edition in 2011.
The court observed that the oppression and mismanagement are clearly established and therefore it would be right to wind up the company. However, it also noted that it would be unfair to all the stakeholders, including the shareholders, employees, the company, and to the public at large, considering that it is a widely circulated newspaper. Keeping that in mind the court has devised the current solution in their order.