The government has filed a case against Premier Automobiles Ltd in the Company Law Board, under Section 388 B of the Companies Act, 1956, for alleged unsatisfactory accounting of Rs 610 crore (Rs 6.10 billion) of the booking amount for Fiat Uno.
In its petition, the government has sought the removal of the entire board of directors of the company.
The government has alleged that in another breach of the law, Premier Automobiles Managing Director M V Doshi entered into an agreement with Fiat Auto Spa, Italy, on behalf of the company without the permission of the board.
The petition filed last week said the shareholders and the board of Premier Automobiles were allegedly kept in the dark about the assets and liabilities transferred to Fiat Auto Spa at the time of the transfer of the Kurla plant.
In reply to a questionnaire from Business Standard, Premier Automobiles said it had submitted full particulars regarding the use of the booking money for Fiat Uno to the Registrar of Companies.
L Krishnamoorthy, vice-president and company secretary of Premier Automobiles, said in a faxed reply that the documents were submitted in pursuance with the investigations conducted into the episode by the department of company affairs in 1998.
He added that these included bank statements and copies of letters to all those who had requested cancellation of their bookings for the Uno.
The petition, however, says the company is yet to furnish full details of the use of the booking money.
Krishnamoorthy said the agreement with Fiat Auto Spa for transfer of Premier Automobiles' Kurla plant was signed after the auditor, Price Waterhouse, submitted its due diligence report to the Italian firm.
He added that the board was aware of the proposed restructuring of the Kurla plant and its transfer to the new joint venture company.
The petition has also accused the company of transferring its Kalyan and Kurla plants without the sanction of a high court, as required by law. While the Kalyan plant was handed over to PAL Peugeot, the Kurla unit was transferred to Fiat.
Though the director's report stated that the Rs 12 crore (Rs 120 million) sales proceeds of the Kalyan plant were received, the auditor's report suggested otherwise, the petition pointed out.
In his reply, Krishnamoorthy said the transfer of the Kurla and Kalyan plants did not require sanction from a high court because the proposals did not amount to an arrangement with creditors or envisage a reduction of capital.
Other alleged offences cited in the petition include diversion of funds to the extent of Rs 5 crore (Rs 50 million) to a company on the pretext of logo licence fee and borrowing money from Citibank in excess of powers delegated by the board.
The company secretary said the sum was paid to a promoter company for using the company logo, which is accepted practice. The amount borrowed from Citibank was well within the powers delegated by the board, he added.