The Oriental Bank of Commerce has flagged allegations of “mismanagement and siphoning of public money” at a subsidiary of the Delhi-based Dalmia Bharat Group. The allegations have been made by the Bawri Group, which is Dalmia Bharat Group’s joint venture partner Calcom Cement Ltd, a 2.1-million tonne cement manufacturing unit in Assam
Dalmia Bharat Ltd owns 76 per cent stake in Calcom through its subsidiary Dalmia Cement Bharat Ltd.
In a letter accessed by
The letter, dated January 14, quotes allegations by the earlier promoter of the company that “affairs at CCIL (Calcom) are not being managed in a prudent manner and (there have been) several financial irregularities including fund diversion through circular transactions.” Axis Bank declined to comment.
When contacted, Dalmia Bharat said: “Some aspects of the agreement between the two parties (Dalmia Cement and Calcom) are being contested before the learned arbitrator appointed by consensus by both the parties. Pending resolution of dispute in the arbitration proceedings, the learned arbitrator, has directed both parties (Dalmia Cement and Bawri Group) to refrain from any public discussions on the matter.” Bawri, however, said that there is no ongoing arbitration.
Scratch the surface and the larger picture appears to be a corporate battle brewing in Kolkata between Dalmia Cement and Bawri Group, a business family based out of the city and the original promoters of Calcom who now hold a majority of the remaining 24 per cent voting rights in the company. (The Government of Assam is a minority strategic shareholder also.) The Bawri family handed over controlling stake in Calcom to Dalmia Cement in November 2012, while retaining 50 per cent economic interest.
In an interview, Ritesh Bawri, former Managing Director of Calcom, said: “Once the Dalmia Group took over management, they did very classic economic value destruction. First, the capex necessary in the company virtually doubled, from ₹300 crore to ₹800 crore. Effectively, that made Calcom the most expensive cement plant ever put up in India.”
“They also started loading operating costs from other wholly-owned Dalmia Group companies (like Adhunik Cement) to Calcom, while also doing related party transactions of over ₹500 crore,” Bawri alleges. “They would buy the clinker (from Calcom) only from their group companies; they would borrow money only among themselves and not go out into the market, not take money from the banks. And then lend (to Calcom) at 18 per cent interest,” he added.
Currently, the ₹400-crore Bawri Group has taken its case to the Company Law Board in Kolkata. In an order passed in July 2015, the CLB found “a prima facie case of oppression and mismanagement” at Calcom. The matter will be heard next in August. The Dalmia Group has contested the CLB's jurisdiction in this case at the Guwahati High Court.