July 22; The Royal Western India Turf Club, already engaged in protracted legal battle with the State Government, received another blow when the Department of Company Affairs (DCA) of the Ministry of Finance, Government of India, slapped them with another show-cause notice.

Close to the directive issued to amend the Article of Constitution of the Club so as to permit voting rights to all classes of members, the DCA issued another notice, dated July 1 1997, in which it found the Club to be in violation of Section 293A of the Companies Act, 1956.

The root of the problem is the Bharatiya Janata Party (BJP) Maha Adhiveshan, for which the Club rented its premises to the party. The Maha Adhiveshan made a mess of the race course and the Club had to later spend Rs 42.20 lakh on restoration.

The BJP never paid back a cent to the RWITC. Neither did they pay the additional ground rent of Rs 10.06 lakh, nor the hiring charges at the rate Rs 3.3 lakh per day for the period between October 15, 1995 to November 14, 1995. That alone works out to Rs 198 lakh.

The DCA has classified these spendings of the Club as ``political contributions'' which far exceeds the minimum five per cent of the net profit as permitted to any company by the Companies Act, 1956.

The DCA took the least of the two figures -- Rs 198 lakh and Rs 52.26 lakh (Rs 42.20 lakh plus Rs 10.06 lakh) -- as net profit, and found that it exceeded the five per cent limit of Rs 2.65 lakh (5% of Rs 52.26 lakh) by Rs 49.61 lakh.

The provisions of Section 293A interalia states that: ``No company shall contribute any amount or amounts directly or indirectly to any political party or for any political purpose to any person, such aggregate amount as the case may be so contributed by the company in any financial year shall not exceed 5% of its average net profit determined accordance with provisions of Section 349 and 350 during the three immediately preceeding financial years.''

The DCA worked out the net profit of the Club to be Rs 52.91 lakh under Section 349 and 350.

The show-cause notice asked for an explanation from the directors and oficers within ten days. It was not immediately known whether the RWITC have replied to the DCA or not.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.