Chennai police have confirmed the arrest of H&M’s
ex-chairman V Ramachandran, CEO & MD GK Muralikrishna, and director
Sai Yerra subsequent to our report
The Economic Offences Wing (EOW) of Tamil Nadu police has reportedly
arrested three directors of Helios and Matheson Information Technology
(H&M) for failing to repay deposit and interest to several
depositors. Those arrested by the EOW include, H&M’s former chairman
V Ramachandran, the company’s chief executive and managing director GK
Muralikrishna, and director Diwakar Sai Yerra. According to our sources,
these people are behind the bars since 1st April as the lower court
denied them a bail.
After receiving several mails and messages from depositors and
shareholders of H&M about the arrests, we have been trying to get
the news confirmed by authorities for the past four days. However, our
emails, SMS sent to top officials of Tamil Nadu EOW remained unanswered
until writing the story, and we would incorporate their views as, and
when we receive it. We sent emails to Dr Prateep V Philip, Additional
Director General of Police (EOW), with a copy to Superintendent of
Police (EOW). We also sent SMS to Jesu Rajan, in-charge DSP, who is
investigating the case, as per the information provided by the office of
SP, EOW, Chennai.
H&M also not informed the stock exchange about these arrests. Its
last regulatory filing talks about the company’s petition before Company
Law Board (CLB) seeking more time to repay depositors and investors.
Earlier, the Madras High Court has issued a notice to (H&M), an
unfancied software company, after admitting a winding up petition filed
by investors and depositors. H&M has been defaulting on repayments
for fixed deposit and interest dues since last several months.
Chennai-based senior lawyer R Venkatavardhan had filed the winding up
petition, a copy of which is available with Moneylife.
While several depositors and investors are sending letters, notices to
H&M for bounced cheques, while the company continues to report good
results. Earlier in January, H&M reported a 35% jump in its net
profit to Rs74.12 crore for the 12 months to end September 2014, even
though it was unable to pay salaries or repay fixed deposit-holders.
The complaint alleges that H&M is in such a grave cash flow crisis
that most of its post-dated cheques (principal and interest) for fixed
deposits have bounced due to of 'insufficient funds'. This fraud is
evidently being perpetrated to prop up the valuation of the company so
as to fraudulently obtain loans from the banks through pledge of shares
and to present a façade of credibility to the public at large. This
issue has all the makings of a major scam that is bound to affect
thousands of investors, depositors and creditors including banks," the
complaint reads.
Another interesting aspect in this episode is the share price movement
of H&M. The company recorded its 52-week high at Rs145.50 on 7
October 2014. After that, it continued to fall till 27th March, when it
hit its 52-week low of Rs38. On the same day, H&M issued a release
claiming 'revenues' from a skill development programme. In addition, the
company also informed the stock exchanges about its petition before the
Company Law Board.
On 27th March, when H&M share price hit a 52-week low on the BSE,
the company issued a statement about its skill development program. It
said, "...the group's business in skill development program under the
National Skill Development Corp National Skill Certification and
Monetary Reward Scheme (STAR Scheme) in its first year has gone well.
Second year of operations is to comment for the skill development
program under the aegis NSDC. Similar programs under Ministry of Rural
Development (MoRD) are also underway. This is yet another initiative by
the group to create a revenue stream that is non-linear unlike the
classic information technology business that is directly proportionate
to the number of employees deployed."
The H&M regulatory filing on 31st March says, "the Company has
filed an application before the Company Law Board, Chennai, as provided
in section 74 (2) of the Companies Act 2013, seeking extension of time
up to 12 months for all deposits that fell due for repayment after March
31, 2014. Necessary public notice has been published in newspapers and
also intimation sent to all the depositors in this regard."
No wonder, after hitting a 52-week low at Rs38, the share price of H&M jumped 54% as on 10th April.
