The tussle for exclusive right to manufacture alumina graphite (AG) refractories in India resulted in the resignation of two nominee directors of Krosaki Harima Corp (KHC) from Bajoria group company IFGL Refractories Ltd just before the extraordinary general meeting (EGM). Bajoria Financial Services Pvt Ltd (BFSPL), which holds a 51.21% stake in IFGL Refractories, has called for the EGM to remove KHC representatives Tetsuo Tsuzuki and Yuji Yamaguchi as directors of the Indian company. Citing a breach by KHC earlier this month, Bajoria Holdings Pvt Ltd says it has terminated its memorandum of understanding (MoU) with the Japanese company.
BFSPL, in a letter to IFGL Refractories, says, "Despite objections from IFGL and the Bajoria group (as promoter shareholders), KHC, through TRL Krosaki Ltd (TRLK), commissioned an AG refractory plant on 7 March 2022 in Odisha, India. KHC's overall conduct, including its decision to manufacture AG refractories through TRLK in India, has resulted in a serious conflict of interest and will cause irreparable damage to the immediate and long-term business of IFGL if the MOU is not terminated."
"Furthermore, by virtue of representation on IFGL's board, KHC, through its nominee directors, has been privy to confidential and sensitive business information of IFGL, including in relation to manufacture of AG refractories as also to key commercial discussions and customer pricing information held during IFGL's board meetings. That apart, through this entire relationship, the nominee directors of KHC have had full access to offices, plants and personnel of IFGL and were provided with business information which were only on the basis of the directors holding their position," the Bajoria group company says.
In their call for the EGM, BFSPL and Shishir Kumar (SK) Bajoria, who as promoter holds 4.11% in IFGL Refractories, stated that Krosaki, through TRLK, has become a competitor of the Indian company, and "since Krosaki's executives and employees on the board of IFGL are privy to sensitive, critical, and confidential business information, issues of conflicts of interest, confidentiality, and propriety have arisen."
According to BFSPL, KHC's nominee directors refused to attend the 28th May and 31 May 2022 board meetings of IFGL Refractories and "refused to make any disclosure on the basis that they were not 'obliged' to do so under Indian law... Such a refusal itself has given rise to grave concerns of conflict of interest, breach of confidentiality. It seems clear that the KHC directors act only for the benefit and under the instructions of KHC, without regard to their fiduciary duties as directors of IFGL."
"It is, therefore, apparent that the raison d'etre for BFSPL's grant of rights to KHC under the MoU, no longer exists. The long-standing relationship of trust and good faith that each shareholder would act in the interests of the company and the implied agreement that only IFGL would manufacture AG Refractories with KHC in India, no longer exists. There is no justification, therefore for the continuance of the grant or rights to KHC under the MoU and the fundamental basis of the MoU itself, stands vitiated," the Bajoria group company says.
KHC holds a 15.51% stake in IFGL Refractories and also owns 77.62% in TKRL.
In their representation, KHC's nominee directors on the board of IFGL Refractories say, "The AG refractories products manufactured by Krosaki, through TRLK, are high-quality, high-performance products, having different end uses or applications than those produced by IFGL."
"Krosaki and TRLK have their own market information of AG refractories product in India, inter alia, through its supply to customers. Therefore, Krosaki and TRLK do not need any information in relation to IFGL and its AG refractories business, whether confidential, critical, sensitive or otherwise, for the purpose of its AG refractories manufacturing plant with TRLK in India," the nominee directors say, while refuting the allegations in the EGM notice.
In 2018, BFSPL says on the request from KHC, it has applied to the stock exchanges as well as to market regulator Securities and Exchange Board of India (SEBI) to re-classify the Japanese company as a public category shareholder from a foreign promoter. However, its requests were rejected and KHC continued to be classified as a promoter shareholder of IFGL Refractories.
The Bajoria group company also alleged that "one of the former directors of IFGL, Kiyotaka Oshikawa was concurrently on the board of IFGL and TRLK between December 2017 and February 2021. Hisatake Okumura, who was a director of IFGL Exports Ltd (IEL) from October 2011 to May 2017, including when it was setting up manufacturing facilities and a director of pre-merged IFGL from May 2015 to May 2017, became a director of TRLK on and from 1 April 2018."
At 2.14pm on Monday, IFGL Refractories was trading 2.26% down at Rs260 on the BSE, while the 30-share Sensex was also down 1.18% at 58,139.44 points.
