Home / Companies / News /  Faber-Castell moves CLB against Indian partner

Mumbai: German stationery maker Faber-Castell Aktiengesellschaft has filed a case against its Indian joint venture partner with the Company Law Board (CLB), alleging mismanagement.

The German company holds a 90% stake in the Indian arm, A.W. Faber-Castell (India) Pvt. Ltd and Ors, and the balance rests with Anup Bhaskaran Rana, its managing director.

Filed under Section 397-398 of Companies Act, 1956, on 13 August, the complaint accuses Rana of misappropriation of funds, diversion of funds and fraud. A shareholder or board member can file a lawsuit under these sections for “mismanagement" and “oppression" by other board members.

Faber-Castell was keen to end the joint venture with Rana, two people familiar with the development said, requesting anonymity. “Faber-Castell is keen to buy out Rana’s stake in the joint venture," one of them said. “The case has been heard twice so far." Rana’s office declined comment on grounds that the matter is pending in the CLB.

Rana had been expecting his stake in the joint venture to increase. In an interview with The Hindu Business Line newspaper in March 2011, Rana had said, “A decision has been taken to steadily increase my personal stake in the company from 10% to 15% and finally there would be an option of taking it up to 26%."

Faber-Castell refused to comment. “We cannot disclose any details on the case," its spokesperson replied by email.

Net profit of Faber-Castell (India) fell from 2.3 crore in fiscal year 2011 to 97 lakh in the year ended March 2012, according to the data available with the Registrar of Companies. The company’s expenditure rose from 90.5 crore to 106 crore in that period. Faber-Castell started its India operations in 1998. Prior to this, it was selling its products through an alliance with another Indian stationery firm, Kokuyo Camlin Ltd (earlier known as Camlin Ltd). Earlier, in August 2011, the Registrar of Companies (RoC), Mumbai pulled up Faber-Castell (India), its director Rana, and company secretary Sapna Kannaidas, for violating Section 297 of the Companies Act.

Under this section, consent of the board of directors is mandatory for entering into a contract of sale or purchase of goods or subscription of shares with a third party, in which a particular director has interests. Besides, such a contract also needs the central government’s approval before it is carried out.

“The fact of the case is that the company has entered into some transactions with various parties in which directors are interested. Further, the company has entered into such contracts without prior approval of the central government, hence the company has violated the provision of Section 297 of the Companies Act, 1956," RoC had said in an order passed on 19 August, 2011. Faber-Castell (India) entered into seven contracts since 1998 with related parties without seeking prior approval from the central government. The Indian joint venture entered into contracts with Artline India Pvt. Ltd, Puma Stationery Pvt. Ltd, Gilpin Tours and Travel Management India Pvt. Ltd, A.W. Faber-Castell Stationery Pvt. Ltd and Delta Stationery Pvt. Ltd for purchase and sale of stationery material and purchase of travel tickets.

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