Pawar's son-in-law, others enjoyed special rights

Last Updated: Tue, Oct 23, 2012 21:10 hrs

Sadanand Sule, son-in-law of Nationalist Congress Party (NCP) President and Union Agriculture Minister Sharad Pawar, was one of the parties to a shareholder agreement with Lavasa that vested special rights in its signatories.

According to the agreement signed in December 2003, parties which held 12.5 per cent or more were entitled to several rights in relation to Lavasa, including the appointment of directors. The agreement was terminated by the Lavasa board on July 30, 2010, a few months before the company filed its offer document for an initial public offering ( IPO) with the Securities and Exchange Board of India (Sebi). These details are available in the draft offer document filed with Sebi in September 2010. The facts arouse interest in the context of police officer-turned-activist Y P Singh’s recent allegations of irregularities in Lavasa deals, and those having benefited the NCP leadership. An NCP spokesperson had said Sules exited the investment in 2003-04.

Emails to spokespersons of HCC and Lavasa on Monday did not elicit a response. A person close to the companies said they did not want to comment on “what is essentially an activist vs activist showdown.” An email to Sadanand Sule also did not elicit response.

  • August: Yashomala merges with Lake City Corporation
  • October: Sadanand and Supriya Sule get 1.24 million shares amounting to 20.8% stockholding
  • September: HCC, promoter of Lavasa, buys 1.5 million shares in secondary market
  • December: Agreement inked between promoters and Yashomala shareholders
  • March-November: HCC buys 1.49 million shares in secondary market
  • September: HCC transfers secondary market purchase to Hincon Realty (HREL)
  • September: HREL becomes party to the agreement with Sule, others
  • July: Agreement terminated  

Sule and his co-shareholders in Yashomala Leasing and Finance Pvt Ltd (YLFPL) — Aniruddha Deshpande and Vinay Maniar — were the only individual parties to this shareholders’ agreement. These three investors had got their shares in Lavasa through a court-approved merger with Yashomala in August 2002.

Other parties to the shareholding agreement include Lavasa’s promoter entities Hindustan Construction Co Ltd (HCC), Hincon Holdings Ltd and Hindustan Finvest.

“Our company, Hindustan Finvest, HCC, Hincon Holdings, Aniruddha P Deshpande, Vinay V Maniar, Sadanand B Sule, Janpath Investments and Holdings and Venkateshwara Hatcheries have entered into a shareholders’ agreement on December 9, 2003,” the offer document said.

The agreement vested special rights in shareholders who controlled 12.5 per cent stake or more. Sule, with wife Supriya Sule, controlled 20.8 per cent after the Lavasa-Yashomala merger. The agreement said: “Any further amendments to the memorandum and articles of association shall require prior consent of parties holding at least 12.5 per cent of the subscribed, issued and paid-up equity share capital,”

Unless prior consent of the parties in writing is received, any further issue of equity/preference shares shall be made in such a manner that the participation by the parties in the total issued share capital of the company shall at all times remain in the same proportion of their shareholding in the equity and preference share capital of our company.

“Every shareholder who holds 12.5 per cent of the shares shall be entitled to appoint one director on the board of the company and every additional 12.5 per cent shares shall entitle the shareholder to appoint an additional director,” the agreement added. It also had other conditions such as a right of first refusal, typically found in private equity agreements. In 2005, the agreement was modified to include another entity known as Hincon Realty. This entity had bought 2.99 million shares from HCC for a price of Rs 120.68. HCC had acquired these shares between 2003 and 2004 through a series of transactions, which it offloaded to Hincon Realty.

“Pursuant to the adherence deed dated September 27, 2005 between the parties and HREL (HCC Real Estate Ltd), HCC had transferred 2.99 million equity shares of our company at a price of Rs 120.68 per equity share,” the offer document said. Additionally, HCC, Hindustan Finvest and Hincon Holdings transferred nine million cumulative redeemable preference shares, 2.62 million preference shares and 2.37 million preference shares each at a price of Rs 20 per preference share.

After this transaction, HREL, a subsidiary of HCC, became the dominant promoter entity. HREL also adhered to the terms of the agreement with Sule and others.

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