Cummins could be a good case to file class action suit: Anil Singhvi, Ican Investment

Anil Singhvi talks to ET NOW on unlisted companies in India set up by MNCs and what could be its impact here. Excerpts:

ET Now: What would your initial thoughts be when a company says that all new products and technologies will be introduced through an unlisted entity
Anil Singhvi: Yes, I find it very strange actually. This is an issue which we had with Maruti. If you remember when Maruti said that their new plant will be set up by Suzuki and Maruti went around explaining why they were doing it. There were very good reasons for them to have done that but we never understood, nor agreed with them and Cummins is completely a blow out of proportion because they are saying that all new products and technology will be introduced by an unlisted company. So what is a listed company doing here?

I think after the government removed the requirement that all MNCs need a government approval whenever they set up any subsidiary, I think all of them are taking advantage of this. Except for some shareholders and some people like me screaming and shouting, rest all can go and set up 100% unlisted companies here and listed companies over a period of time will just go out of the scene. It is very unfortunate.

Actually, when you look at it, the clause is being abused by the foreign MNCs..Look at Ricoh India. The other day I was looking at that,. So I think these are all trends.

I will not just look at Cummins as a stray example. I think right now, most MNCs working in India - be it Japanese or American - are looking at it that and wondering how they can really set up unlisted companies and route all the business into unlisted companies.

ET Now: A lot of the times the minority shareholders are not even made aware of their rights, So a lot of these issues sometimes go under the table or managements come out, make announcements, Q&A’s are conducted but in this move, the interest of the minority shareholders are not really protected.
Anil Singhvi: Well I can work around on this and the class action suit, though this may not have been yet filed - they have not notified the date. I find it so difficult when Parliament has passed Companies Act 2013 including the clause that a class action suit can be filed by the shareholders against the directors, auditors, management, all of that and they have not notified this section as yet.

One wonders when on one side, you are pushing so many other things with so much of speed and then you do not want to have this clause which can protect the minority shareholders. In fact, we have got three amendments to the Companies Act 2013, and they have not notified yet the sections which are so important and which empower the shareholders despite being enacted in 2013. So there has to be something.

According to me, somebody should go and file a class action suit by notifying it but since it was passed by Parliament and President has given an ascent to the Companies Act 2013 that means the intent of the Indian Parliament is to have class action suits.

And I think Cummins could be a good case for filing a class action suit against the independent directors and the management that they have not acted in favour of the minority shareholders.