Dr Manoj Govil
Secretary (Corporate Affairs)
Govt of India
Dear Dr Govil,
Please refer to my letter dated 5-3-2023 on prima facie violation by the Board of Hindustan Zinc Ltd (HZL) of the requirements of the Companies Act and the need for taking appropriate action by your Ministry (https://countercurrents.org/2023/03/resolution-of-hzls-board-of-directors-on-acquisition-of-thl-zinc-ltd-mauritius-role-of-independent-directors/?swcfpc=1).
I understand that the HZL Board has also declared dividends (around Rs 32,000 Crores till date) during 2022-23 far in excess of its profits, which seems to violate the following requirement under Section 123 of the Companies Act.
“123. Declaration of dividend.—(1) No dividend shall be declared or paid by a company for any financial year except—
(a) out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2), or out of the profits of the company for any previous financial year or years arrived at after providing for depreciation in accordance with the provisions of that sub-section and remaining undistributed, or out of both”
I may point out that the HZL Board has been declaring excessive profits in violation of Section 123 of the Companies Act year after year during the last several years.
Apparently, the promoters of HZL, namely the Vedanta Group, by declaring such excessive dividends, literally amounting to bleeding the company of its hard-earned internal resources, are the ones primarily standing to benefit, as that group has significant debt repayment obligations to be addressed elsewhere. It is ironic that the government which has over 29.5% equity in HZL, has also joined hands with the Vedanta Group to infringe the said provision of the Companies Act.
In my view, the above-cited case of infringement of the Companies Act has far-reaching implications as it has seriously eroded the intrinsic value of HZL in which the government and the public have a substantial stake.
May I call upon your Ministry to examine this aspect also, in conjunction with the other statutory violations pointed out by me in my earlier letter, and initiate immediate action against all those involved in such violations?
E A S Sarma
Former Secretary to Government of India