WRPC Limited (WRPC) is a Mumbai-based company, in which the Central Government holds 35% of share capital while the Governments of Maharashtra and Karnataka hold 15% and 10% of share capital respectively. WRPC manufactures corrosion resistant overhead transmission and distribution products.
The internal auditors of the company had raised serious concerns in respect of certain internal control irregularities. During the year 2017-18, WRPC also defaulted in complying with statutory requirements pertaining to filing of its financial statements under Section 137 and Annual Return under Section 92. Consequently, the company received a notice from the Registrar of Companies, Mumbai-Maharashtra to rectify the default.
The Company was also served Show Cause Notices (SCN) by the Revenue Officials on certain GST and Income-tax related issues.
The Board of Directors of WRPC consisted of 14 Directors. Due to the increased volume of business, alleged internal control irregularities and lack of professional skills needed for the statutory compliances, the company felt the necessity of inclusion of some senior professionals on its Board. Accordingly, it was thought of inducting Rajan, a Chartered Accountant and Sanjay, a Company Secretary, as the Executive Directors.
Circuit Board Private Limited (CBPL), a Delhi-based company and PISCO Electronics Limited (PISCO Electronics), a Pune-based company, are the two major component suppliers to WRPC. CBPL is a family managed business with fifty-seven shareholders and PISCO Electronics is yet to be a listed company but in near future it intends to get listed.
As per the audited financial statements, the paid-up capital and turnover of CBPL and PISCO Electronics were as under:
CBPL had 4 Directors as on 31.03.2018 and 5 as on 31.03.2019. In case of PISCO Electronics, there were 7 Directors as on 31.03.2018 and 6 as on 31.03.2019. However, none of the companies had appointed any woman Director during these two years.
Ajay Prakash is the Chairman and Managing Director of CBPL. Considering his old age and other health related issues, he wants to retire from the company. Accordingly, he discussed the matter in a Board Meeting and also proposed to explore the possibilities of appointing his eldest son Pranav Prakash (MBA from FMS, University of Delhi) as the Managing Director of the company for a period of 10 years from 1.1.2020 onwards.
The Board Meetings of PISCO Electronics were convened five times during the calendar year 2018. No Board Meeting was held in January or February 2019 but thereafter, six Board Meetings were held during the calendar year 2019.
Vasuki is one of the executive Directors appointed by the PISCO Electronics. He had taken a loan of ` one crore from the company on 1.1.2018 after fulfilling the required formalities. The terms and conditions on which the loan was granted specified that Vasuki shall repay the principal amount in 5 years (i.e. 20 quarterly installments of equal amount) and the interest @10% per annum (to be charged at monthly rests on the reducing balance) shall also be paid as and when due.
However, due to the changed economic scenario during 2019, there was a drastic reduction in the normal borrowing rates. Accordingly, Vasuki requested the company for change in his borrowing terms i.e. to reduce the interest rate to 8% per annum from the existing 10% per annum and to increase the period of repayment from the present 20 installments to 30 installments.