Heirs of Rai business empire in fierce court battle over shares at family firm

Currently, Mr Jaswant Rai is the majority shareholder with 123,165 shares in Rai Investments Ltd. 

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The case comes a few days after Mr Iqbal went to court and obtained an order freezing the company's bank accounts at Absa, Industrial Area branch, after he was allegedly removed as a signatory to the account.

“The plaintiffs aver that any such change in the bank mandate was ultra vires the 4th defendant’s Articles and thus unlawful, null and void as it was not authorised by its board of directors,” Mr Jasbir said in the court documents.

They have named Jaswant and his sister Daljit Kaur Hans as respondents and their brother Sarbjit as an interested party in the case. 

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Patriarch Mr Rai died on December 28, 2010 in Mumbai, India, and the family has interests in cement manufacturing (Rai Cement), edible oils and soaps (Menengai Oil Refineries), sawmills (Timsales, RaiPly and Webuye Panpaper), wheat farming, horticulture, sugar (West Kenya, which owns Kabras Sugar) and real estate (Tulip Properties).

In the petition, the duo want the court to intervene and stop Jaswant from operating the bank account, arguing that he is continuing to operate the accounts unlawfully to the exclusion of other directors.

The company was incorporated on March 30, 1978 with a nominal share capital of Sh3 million.

Mr Jasbir said currently Daljit holds 8,079 shares, Jasbir (37,867), Iqbal (33,704), Jaswant (123,165), Sarbjit (21,753) and the estate of late Tarlochan (16,932).

He says the allotment was made in May 1995 when additional allotment of shares was made, but alleges that the allotments were against the Articles of Association of the company. 

Mr Jasbir revealed that he filed a winding up petition in 2000 questioning the dilution of his shares in the company, but the issue of pre-emption rights and the illegality of the allotments were not raised.

He further stated that the issue of 86,230 shares to Mr Jaswant was also raised in the succession proceedings but no relief was sought.

He now wants the court to declare that the allotments made on May 5, 1995 and June 11, 1998 and the transfer by Mr Tarlochan to Mr Jaswant on June 18, 1999 were contrary to the articles of association of the company and therefore illegal. 

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He says the court should order that the shares be reallocated prior to 1995 and that the shareholder and the estate of his late father should each receive 48,300 shares.

Mr Jasbir is also seeking an order that the company's accounts be opened in respect of the dividends paid to Mr Jaswant and Ms Daljit in respect of what he describes as unlawfully allotted shares.

In response, Ms Daljit wants the case dismissed on the basis that the statement of claim fails to state a cause of action against her.

She further said that Mr Jasbir has no right to file a suit based on the allotment of shares to her.

“The suit with regard to allotment of shares in the 4th defendant, having taken effect on May 5, 1995 and June 11, 1998 respectively, the last of the transactions being more than 25 years before the date of the suit herein. Any claim arising therefrom is therefore time-barred in terms of the provisions of Section 345(5) of the Companies Act as well as Section 491) of the Limitation of Actions Act,” she said.

She also argues that Mr Jasbir is seeking to deprive the estate of his late father of his shares without seeking to join the estate as a party to the case.

In another case pending in the High Court, Mr Iqbal is seeking to be reinstated as a signatory to the bank account.

“The said removal renders the account susceptible to manipulation and withdrawals without the consent of the Applicant (Iqbal) who is still a director/shareholder,” Mr Iqbal says in court papers.

“The Companies Act… requires decisions of the company to be made vide resolutions and in this case, the removal of the Plaintiff from the company mandate has never been discussed in a meeting of the shareholders/directors of the company and it must be concluded by any independent umpire, therefore, that the conduct of the Defendant is unlawful,” he adds.

Mr Iqbal insists that Business Registration Service records show that he is still a director and shareholder of Rai Investments Ltd and therefore would have known if there had been a board meeting or resolution to remove him as a signatory.

The family is also currently in court over a 1999 Will left by their late father.

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