Calcutta, April 25: Prashant Jhawar was toppled as the non-executive chairman of specialty steel maker Usha Martin Ltd in a boardroom coup engineered today by leading banker, the State Bank of India.

Jhawar and his father - chairman-emeritus Basant K. Jhawar - have been under attack from bankers after ignoring six attempts in the past year to complete the documentation process relating to the pledge of 13 per cent out of their 25 per cent shareholding in UML.

The lenders wanted them to comply with the agreed covenants signed in December 2015 when they extended a Rs 1,190-crore accommodation, including a term loan of Rs 290 crore, to the struggling steelmaker.

The Jhawar father-son duo have been accused by the SBI of stymieing the process of restoring the financial health of the loss- making company and of having interests that were "not aligned" with UML.

Former Sebi chief Ghyanendra Nath Bajpai was unanimously chosen to replace Prashant Jhawar as non-executive chairman.

The board also revoked the powers of chairman emeritus Basant Jhawar, the 80-year-old founder of the Rs 4,500-crore group.

Cousin Rajeev Jhawar - managing director of the company - and his father Brij Kishore abstained from voting on the board resolution.

Prashant, who lives in London and does not handle day-to-day affairs of UML, and his father Basant Kumar Jhawar did not attend the meeting. However, all eight non-promoter directors, including SBI nominee R. Venkatachalam, unanimously voted in favour of the proposal to oust Prashant Jhawar.

Rajeev Jhawar could not be reached for comment.

Basant Jhawar said he was "shocked and saddened" with the turn of events. "I never imagined that this day would come in the company that I built over 50 years," he told The Telegraph.

He complained that UML's performance started going down over the past five to six years and his son could hardly be blamed for it since he had a non-executive role.

Speaking from London, Prashant refuted lenders' allegation that he did not pledge the shares.

"I did that on August 9, 2106. But the SBI asked me to cover future borrowings as well, which I did not agree to. A limit on borrowings must be set and the company must generate internal resources," he said.

He claimed to have been "wrongly removed as chairman by the board, in an ethically incorrect manner". Prashant said he would continue to be on the board as a director of UML. Asked if he would legally contest the board's decision, Jhawar said: "All options are open."

The company's scrip tanked 4.25 per cent to close at Rs 21.10 on the Bombay Stock Exchange when the broad market closed at a record high. However, the stock has rallied over 20 per cent in the past month.

Industry watchers said SBI's move to oust a promoter from the chairman's post because he refused to toe the lenders' line was unprecedented.

Debanjan Mandal, partner of Fox & Mandal and solicitor for Usha Martin, declined to call it a clash among brothers. "This is not a promoter's dispute. The resolution for the removal of the chairman was moved on a requisition made by the nominee director of the SBI," Mandal said.

Lenders said a section of the promoters did not do enough to revive UML.

"Prashant Jhawar ran the company through video conferencing. We (the bankers) could not allow the situation to worsen," a banker said on condition of anonymity.

Divestment dynamics

Last August, Prashant and his father brought a proposal to the UML board to sell the wire and wire rope division (which contributes 45 per cent of UML's turnover) to a private equity player for Rs 1,350 crore.

The board decided to expand the sale process and constituted a committee of independent directors to oversee it.

In February this year, UML appointed Royal Bank of Canada as its merchant banker which estimated that the company could hope to raise Rs 2,000-2,500 crore from the sale of the business.

Sources say that Prashant objected to the sale even though the valuation was significantly higher than the one he had earlier proposed.

B.K. Jhawar said Prashant wanted to put in a clause that the proceeds from the sale of the wire and wire rope division should be fully utilised to retire the debt of the company.

Prashant said he wanted a professional CEO for the steel division to be put in place but his suggestion was not accepted.

UML posted revenues of Rs 3,447.47 crore in 2015-16 and suffered a net loss of Rs 404.43 crore. During the third quarter of last fiscal, it suffered a loss of Rs 108.17 crore on a turnover of Rs 888.57 crore. UML has coal and iron ore mines to take care of its raw material requirements.