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SC refuses to intervene in Kasturi & Sons dispute

SC refuses to intervene in Kasturi & Sons dispute
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First Published: Mon, Jul 18 2011. 06 32 PM IST
Updated: Mon, Jul 18 2011. 06 32 PM IST
New Delhi: The Supreme Court on Monday refused to intervene in the family dispute between the shareholders of Kasturi & Sons, the publisher of The Hindu. on the issue of editorial succession.
In a move that should strengthen the hand of the company’s editor-in-chief N. Ram, the Supreme Court dismissed the special leave petition filed by board members N. Ravi, N. Murali and Malini Parthasarthy and did not restrain the company from making changes in the management of the newspaper, including the apppointment of a non-family member as editor.
In May, the Company Law Board ruled against the proposed appointment of The Hindu’s national bureau chief Siddharth Varadarajan as editor and the removal of family members from the editorial posts. This new structure was supported by seven of the 12 members of the board.
Ram, leading the majority of the board that supported the supporting changes, subsequently appealed to the Madras high court, which ruled in his favour on 1 July. Soon after, the opposing faction of editor N. Ravi, managing director N. Murali (Ram’s brothers) and executive editor Malini Parthasarathy filed a special leave petition (SLP) with the Supreme Court against the high court judgment.
Ram was challenged under company law for alleged oppression and mismanagement.
Ravi, Murali and Malini, who were present at the hearing, found themselves on weak procedural ground as a bench led by Chief Justice S. H. Kapadia asked their counsel why they had not filed a civil suit.
“Why have you not filed a suit? These prayers can’t come under (sections) 397, 398 (of the Companies Act, 1956),” said Justice Kapadia.
The court then dismissed the petition saying, “We see no need to interfere at this stage.”
The court also referred the main dispute back to the Company Law Board in Chennai to be heard daily from the second week of August -- a move that will bring some amount of relief to the minority faction.
“The Supreme Court has dismissed the petition that had alleged oppression and mismanagement,” Ram said via telephone. “I am very happy about this order from the Supreme Court for which we have great respect and we will go forward and professionalize and contemporarise as per the decision taken by the clear majority of the board.”
Murali said Varadarajan will likely be appointed as editor at Wednesday’s board meeting. But Ravi and Malini are unlikely to be removed from their positions immediately, he added.
“We will have to see what happens as the CLB hearing will be day to day,” Murali said. “Removal of family members is not on the agenda for the board meeting. Only Siddharth’s appointment is.”
At the hearing, counsels for the petitioners made impassioned pleas before the bench on how the newspaper had kept the position of the editor within the family for over a century -- as a matter of tradition. They argued that there was no need to appoint an “outsider” to this position as there were enough well qualified professionals within the family.
“What is in the best interest of the company? The family members holding these functions are extremely well qualified. You will not find anyone more well qualified,” said senior lawyer Shyam Divan to the bench.
Mukul Rohatgi, who also appeared for Ravi’s side, argued: “Unfortunately, they have suddenly decided that an outsider who is very, very junior -- five rungs junior -- will guide the philosophy of the paper.” Abhishek Singhvi contended that “it is very doubtful if you can bring fundamental changes to the basic structure of the company without a special resolution.”
The bench did not seem convinced by these arguments. “What is the legal ground of challenge? If you go on law there are difficulties.” said Chief Justice Kapadia. “Under the articles of association should the editorial panel be set up by the owners or the editor-in-chief?” he asked. However, before dismissing the petitions the bench clarified that neither its observations, nor the High Court’s should influence CLB when it hears the case.
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First Published: Mon, Jul 18 2011. 06 32 PM IST
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