Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (11) TMI 1075 - DELHI HIGH COURT

2015 (11) TMI 1075 - DELHI HIGH COURT - TMI - Permanent Injunction - plaintiffs have sought inter alia an interim order restraining the defendants from proceeding any further with the Rights Issue under the impugned Letter of Offer dated 14th September, 2015 in any manner during the pendency of the suit - whether on the date of filing of the suit, the plaintiffs were entitled for injunction or not? - Held that:- There is no force in the submission of the plaintiff that they cannot go to the Comp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

im is decided when the shares have already been allotted once the plaintiffs either were not interested since the year 2011 and from September, 2013 when their names were not shown and still they did not take any steps. There is no force in the submissions. Learned Senior Counsel has argued that most of the issues/objections raised by the plaintiffs are of technical in nature which could have been taken by the plaintiffs before SEBI, if they had. The same cannot be determined after completion of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as part of Promoter or Promoter Company of defendant No.1. The aforesaid shareholding pattern has been available on the website of Stock Exchanges since 2013 but no objection was raised. The Resolution approving the rights issue was passed on 31st March, 2015. Thereafter, the said resolution was put up for vote to the shareholders by a postal ballet and the plaintiff chose not to cast its vote. The plaintiff was aware as far back as June 2015 about the terms of the offer when the same was put o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mpanies and it was argued that some of these loans are not even due till 2017, it was submitted that the object of the letter of offer was set out in the Board Resolution dated 31st March, 2015. The said Resolution was put up for voting by postal ballot to the shareholders. In the postal ballot form sent to shareholders the object of the letter of offer is clearly disclosed at page 175 of the documents filed with the reply. The postal ballot form was sent to the plaintiff at page 181 of document .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sclosed that an application had been filed on 5th October, 2015 before the High Court of Calcutta in the Testamentary proceedings pending there with regards to the estate of Late Smt. Priyamvada Devi Birla. The said application is listed for 27th November, 2015.

Letter of offer was issued and dispatched to the shareholders by defendant No.2 from Mumbai and submitted with SEBI by defendant No.4 in Mumbai and submitted by defendant No.1 to the stock exchanges from Satna, Madhya Pradesh. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ai & Ors., (1998 (10) TMI 510 - SUPREME COURT) namely enforcement of any fundamental rights or violation of principles of natural justice or where proceedings are without jurisdiction or vires of an act is challenged.

No prima facie case is made out by the plaintiffs. The balance of convenience also lies in favour of the defendants. If any order is passed, the defendants would suffer irreparable loss and injury. Third parties right has already been created. The plaintiffs are not enti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ayar, Sr. Adv. with Ms.Misha Rohatgi Mohta, Ms.Gunika Gupta & Ms.Aayushi Sharma, Advs. , Mr.Sandeep Sethi, Sr. Adv. With Mr.Neeraj Chaudhari & Mr.Prashant Sanghi, Advs FOR THE RESPONDENT : Mr.Amit Mahajan, Adv. for D-1. Mr.P.Chidambaram, Sr. Adv. with Mr.Ankur Chawla, Ms.Megha Gupta & Ms.Kanika Singh, Advs. for D-4. Mr.A.S.Chandhiok, Sr. Adv. with Mr.Ankur Chawla, Ms.Kanika Singh, Ms.Shweta Kakkad, Ms.Monika Tyagi, Ms.Megha Gupta & Ms.Mallika Mendhiratta, Advs. for D-5. MANMOHAN .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in CS (OS) No.3082/2015 and is defendant No.1 in CS (OS) No.3105/2015 (hereinafter referred as company or defendant No.1 for convenience). 2. The plaintiff has filed the above mentioned suit seeking inter alia the following reliefs: a) Pass a decree declaring the Letter of Offer/ Abridged Letter of Offer both dated 14th September 2015 issued by Defendant No. 4 as unlawful, null and void ab-initio; b) Pass a decree of Permanent Injunction thereby injuncting the Defendants from proceeding with the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

order restraining the defendants from proceeding any further with the Rights Issue under the impugned Letter of Offer dated 14th September, 2015 in any manner during the pendency of the suit. 4. Let me now deal with the merit of the case. Main facts in CS(OS) No.3082/2015 as per the plaint are follows : i) The plaintiff is a part of the promoter & promoter group of defendant No.4-M/s Universal Cables Limited and holds 59107 equity shares (being 0.26%) in the said defendant who is the Lead Ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t No.7 is the Manager and Chief Operating Officer of the defendant No.4 Company. The defendant No.8 is the Chief Financial Officer of the Defendant No.4 Company. Defendant Nos. 9 to 14 are the Directors of the defendant No.4 Company. Defendant No.3 is the Compliance Officer and Company Secretary of the defendant No.4 Company. The defendant No.2 is the Registrar and the Share Transfer Agent to the Rights Issue. iii) In or about third week of September, 2015 the plaintiff came to know that defenda .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es falling under "promoter and promoter group of companies" of the defendant No.4 has been specified to be holding a total shareholding of 52.55%. iv) Though the plaintiff, has at all material times, been a part of promoter/promoter group of the defendant No.4. But the name of plaintiff has not been shown as part of "promoter and promoter group of companies" of the defendant No.4 in the said Letter of Offer. The shareholding of the plaintiff in the defendant No.4, being 59107 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e defendants is contrary to the various provisions of Companies Act, 2013, SEBI (substantial acquisition of shares and takeovers) Regulations 1997 and 2011 and SEBI (issue of capital and disclosure requirements) Regulations, 2009 wherein it mandates that shareholder falling within the category of promoter group is recognized as a special category of shareholder. A promoter has a number of rights and obligations and they play an active role in the affairs of the Company. vi) In paragraph 28 under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of this Issue, our Promoters and Promoter Companies will collectively hold atleast 52.55% of the fully diluted post-Issue equity capital. Further, if our Promoter and Promoter Companies acquire the additional and renounced shares, their shareholding will further increase. Consequently, our Promoters may exercise substantial control over us and have the power to elect and remove a majority of our Directors and/or determine the outcome of proposals for corporate action requiring approval of our Bo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of promoter and promoter group of defendant No.4 should have been consulted with prior to the defendant No.4 coming to a decision of issuing Rights Issue. Issue of Rights Issue of a Company is an important policy decision of the Company and a promoter of a Company has a important role in matters of, inter alia, policy of the Company. vii) The plaintiff has not been consulted in the decision making process of the said Rights Issue but has also been denied the opportunity which was given to the o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lements; (b) to apply directly or through the Promoter Companies for any Equity Shares renounced in their favour; and (c) to apply directly or through the Promoter Companies for any additional Equity Shares in the Rights Issue only to the extent of any unsubscribed portion of the Rights Issue, subject to the applicable law, to ensure that at least 90% of the Rights Issue is subscribed." viii) It is also stated in the plaint that the defendant No.4 is a part of M.P. Birla Group of companies. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

la. The said judgment also held that the estate of Priyamvada Devi Birla includes controlling block of shares in M.P. Birla Group of companies, including the defendant No.5. ix) The shares of Priyamvada Devi Birla, which are now held by the Administrators pendente lite, has also not been included in the promoter and promoter group of defendant No.4 in the said Letter of Offer. Such omission in the Letter of Offer would hamper a shareholder in deciding as to whether or not to subscribe to the sai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s Issue for the purpose of repayment of loans of a promoter and promoter group of the Company and not for repayment of loans of third parties is not a justifiable reason for issuance of Rights Issue. The issue price of ₹ 51/- fixed in the said Letter of Offer is without any basis and in fact is a very high and unattractive price and will not lead to offset the losses being suffered by the defendant No.4. xi) The territorial jurisdiction is invoked by stating that the Letter of Offer and Ri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d Letter of Offer both dated 14th September 2015 issued by defendant No.4. 5. In the second suit being CS (OS) No. 3105/2015, in addition to the averments made in the first suit, it is submitted that the plaintiff holds 25,152 equity shares holding 0.11% in the defendant No.1. The holding of the plaintiff has wrongly been shown in the Letter of Offer. The other following averments are made: a. Late Priyamvada Devi Birla, now her estate represented by Administrators pendente lite, holds 0.18% sha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Birla Ericsson Optical Limited) have been duly included in the holding of Promoter and Promoter Group and therefore there is no reason to exclude these holding of shares from promoter and promoter group. Amendment to Clause 35 of the listing agreement was applicable to all listed companies in the same manner. It is done with a oblique motive of denying them special rights which are attached to promoter shareholding as recognised in the Companies Act, 1956 and various SEBI Regulations. The specia .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Board of India. Reduced holding of shares of the promoter and promoter group has purposely been reflected in the said letter of offer for the purpose of changing the Company from a public limited to company to a closely held company, which is illegal. It is done in well-planned manner in de facto control of the company. 6. Replies on behalf of the Company to the application under Order 39 Rule 1 and 2 CPC filed by the plaintiffs have been filed. Common pleas are raised on behalf of the defendan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

are raised in the reply. They submit that the suit itself is not maintainable and once the suit is not maintainable, the question of passing of any interim order does not arise. 7. The first objection raised by them is about the lack of territorial jurisdiction to entertain the present suit in view of the reason that Schedule VIII, Part E, clause 5, sub-clause XV of ICDR Regulations lists the regulatory and statutory disclosures that are mandated by law to be made in rights issue. Point G(3) of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Indian Laws and the applicable rules and regulations thereunder. Any dispute arising out of the Issue will be subject to the jurisdiction of the appropriate court(s) in Madhya Pradesh only." It is stated that the Courts in Madhya Pradesh only have jurisdiction. 8. The second objection is raised that the present suit is not maintainable as the present challenge to validity of the Letter of Offer would lie before the Securities & Exchange Board of India (hereinafter referred to as "S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he plaintiff, who sought to challenge the satisfaction expressed by SEBI with the same and such a challenge could only be made under the SEBI Act or the applicable regulations issued under the said Act. The plaintiff has not even made SEBI a party to the present suit. 9. Thirdly, it is submitted that the plaintiff s main contentions in CS(OS) No.3082/2015 are that they are a part of promoter and promoter group of the Company. It is contended that the plaintiff is not a promotor as per plaintiff& .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

laintiff Company stopped filing the requisite disclosure. Thus, the plaintiff company itself chose to stop showing itself as a promoter of the Company. In the absence of the plaintiff submitting the mandatory disclosure and after waiting for a reasonable period, the company filed its shareholding pattern in September, 2013 and the Plaintiff was not shown as Promoter and Promoter Group Company. No objection was raised by the plaintiff nor any query/objection raised by the regulator or the stock e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

roup of Company is invalid and the only relief sought is with regards to the letter of offer. 10. The alleged grievance of the plaintiff in the suit is that by not showing the plaintiff as a promoter in the Letter of Offer, who has been deprived of the special rights without any basis. No prejudice has been caused to the plaintiff. Firstly the plaintiff is not a Promoter or part of Promoter Group of Company. Assuming that the plaintiff is a Promoter, even then no special rights and privileges ar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e apparent that no discretion vests with the Board inasmuch as the allotment of equity shares has to be done in consultation with the designated stock exchange and further it is stipulated that it will not be a preferential allotment. The said basis of allotment has been approved by both the stock exchanges i.e. BSE Limited and the National Stock Exchange of India Limited having nationwide terminals. During the course of hearing, it was informed that the question of exercise of discretion in the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dated 13th October, 2015 setting out the process of basis of allotment. 12. It is stated that in view of conduct of the plaintiffs themselves they are not entitled to any discretionary relief as the plaintiff was aware as far back as September 2013 about its non inclusion as part of Promoter & Promoter Group of Company in the shareholding pattern filed by the Company with the stock exchange. Since then, in every quarterly shareholding pattern filed by the Company the plaintiff was not shown .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on 8th October, 2015 knowing fully well that the closing date of the rights issue is 14th October, 2015 when the main process was to be completed by 15th October, 2015. The practice of approaching the court at the last minute in case of rights issues has been deprecated by the Supreme Court of India in Morgan Stanley Mutual Fund vs. Kartik Das, reported in (1994) 4 SCC 225. 14. The plaintiff in the first suit has not disclosed that an application had been filed on 5th October, 2015 before the H .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion restraining Harsh Vardhan Lodha causing Universal Cables Limited or Universal Cables Limited from proceeding with the rights issue dated 14th September 2015 (d) ...." In the aforesaid application, which was mentioned on 5th October, 2015 by the plaintiff and now the same is listed on 27th November, 2015. 15. On the other hand, on behalf of both the plaintiffs it is stated that several false and misleading statements have been made in the impugned Letter of Offer dated 14th September, 20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

No. 1 has been wrongly shown as 52.55% as against 60.93%. (ii) The plaintiff holds 0.11% shares in defendant No. 1 and such shares are part of promoter and promoter group of defendant No. 1 and have been wrongly excluded from Promoter and Promoter Group of defendant No. 1 in the letter of offer. (iii) Late Priyamvada Devi Birla, now her estate represented by Administrators pendente lite, holds 0.18% shares in defendant No. 1 and such shares are part of promoter and promoter group of defendant No .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d societies in other listed companies of the M P Birla Group (Birla Corporation Limited and Birla Ericsson Optical Limited) have been duly included in the holding of Promoter and Promoter Group and therefore, there is no reason to exclude these holding of shares by the defendant No. 1 from promoter and promoter group. Submissions on behalf of the Plaintiffs 16. It is argued on behalf of the plaintiffs that the exclusion of shareholders from the Promoter and Promoter Group of company has been mad .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nies and thereby have the total holding of Promoter and Promoter Group (including the hidden holding of such excluded entities) much beyond the ceiling limit of 75% holding of all promoter and promoter group entities imposed by Securities and Exchange Board of India. It is also submitted that certain other entities have been excluded from category of Promoter and Promoter Group in the impugned Letter of Offer deliberately, illegally and with malafide intent and in complete derogation of the law. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in a wide manner to include several connected entities. The defendant No. 1 has in fact not complied with such definition. The said exercise is not permissible and in this regard the legal framework prescribed under the SEBI law bars such re-classification of promoters as public. The SEBI document dated 23rd June, 2015 provides only three circumstances under which such re-classification is permissible. None of the said circumstances exist in the present case. 18. It is argued on their behalf tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Company being 60.93% is falsely represented to be a mere 52.55% without any basis i.e. a reduction by 8.38%. 19. It is stated that in the year 1999 in the Letter of Offer for Rights Issue, issued by the defendant No. 1, it has acknowledged that it was promoted by Late Shri M.P. Birla and after his death, Late Smt. Priyamvada Devi Birla had been acting as Chairman of the Defendant No. 1. The status declared in the said Letter of Offer of 1999 with regard to promoters , therefore, is sought to be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has been excluded from the Promoter and Promoter Group as the plaintiff had stopped making disclosure as a promoter of the defendant No. 1 under Regulation 30 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations after 31st March, 2011 and therefore, the defendant No. 1 has not shown the plaintiff as a Promoter or a Promoter Group company since September, 2013 does not have any merit. It is submitted that the plaintiff is a Promoter company by virtue of the definitions of Pro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f which the so called Promoters would seek the benefit thereof. There is no justification emanating from the records for pegging the price at ₹ 51/-, it is essential to note that such fixation of the price was within the domain of the defendant No. 1 Company and its Board of Directors/ Rights Issue Committee and there is no approval required by an independent statutory agency. 23. In the garb of a rights issue, the defendant No. 1 has sought to allot shares only to a specific group of shar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ard of Directors of the defendant No. 1 and therefore, no notice of such board meeting was given to the plaintiff. It is submitted that in the Postal Ballot Notice, the defendant No. 1 had not provided at all the terms and conditions of the Rights Issue. The price of the Rights share has also not been provided in the said Notice. The said Notice as well as the explanatory statement is vague and lacking in material particulars. The Defendant No. 1 s contention that the Rights Issue has been appro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ulted its legal advisors in relation to the filing of the suit. Thereafter, the suits were filed during 2nd week of October 2015. It is submitted that there has been no undue delay in approaching this Court. It was only on 7th September, 2015 that SEBI noted compliances made by the defendant No.1 on the comments on the Letter of Offer by SEBI. 26. On behalf of plaintiffs it was denied that the plaintiffs have not been shown as part of Promoter and Promoter Group Companies since September 2013. T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er has been signed on 14th September, 2015 in New Delhi. The meeting of Board of Directors of the Company in which the issue of shares was approved was held on 31st March, 2015 in New Delhi. 28. The meeting dated 7th September, 2015 of Rights Issue Committee of the defendant No.1 was held at New Delhi. In the said meeting, the Rights Issue Committee had approved the terms of the proposed Rights Issue inter alia, issue price, entitlement ratio, record date etc. Therefore, substantial part of caus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pute between the parties is not merely a breach of the Regulations framed by SEBI, but also allegations of fraud committed by the defendant No. 1 Company and its Board of Directors. Therefore, Section 15Y of the SEBI Act is not a bar to the present suit. Arguments on behalf of the defendants 31. Apart from various objections raised in the reply about the maintainability of the suit and interim application, it is argued on behalf of the defendants that after filing of the instant suit, the plaint .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

under the said rights issue but did not applied for the same as provided in clause (c) of the basis of allotment. The plaintiff now cannot raise any objection as regards the basis of allotment of shares. 32. The basis of allotment adopted at Page 148 of the Letter of Offer is the standard practice and is in compliance with the law. It is submitted that the allotment of additional equity shares to all the eligible shareholders were made on equitable basis having due regard to the number of equit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ders of the company whether be promoters or public shareholders or the plaintiff were able to exercise their rights equally under clauses (a) to (c). Thus, the shareholders have suffered. The basis of allotment has been approved by the designated Stock Exchange of the Company for the purpose of Rights Issue i.e. BSE Limited by its letter dated 20th October, 2015. 34. It is submitted on behalf of the defendants that the case of the plaintiff is that they have been deprived of the special rights t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the order in which the allotment is to be made under Sub Clause (a), (b), (c), (d), (e) of the same. So far as clauses (a) to (c) are concerned, the Board has no discretion whatsoever. Pertaining to sub clause (e) it may appear that the board has discretion but in fact on a strict construction of the said sub clause. No discretion vests with the Board inasmuch as the allotment of equity shares has to be done in consultation with the designated stock exchange and it is also stipulated that it wi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

itself - special rights of a promoter company, if any, would have only come after exhaustion of stage (e). The plaintiffs were entitled to apply for additional share at stage (c) but have chosen not to apply. 36. On behalf of the plaintiffs it is submitted that 52.55% of shareholding in the company is shown to be held by promoters & promoters Companies whereas total shareholding of Promoters & Promoters Companies should have been shown as 61.12%. Following categories excluded from promot .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f defendant No.1 and therefore the same are not being shown. With regards to 8.02% share held by Trust & Societies it is submitted that firstly they are not a party to the suit, plaintiff has no locus standi to espouse their alleged cause. Secondly, Note (b) at Page 38 clearly states that the said parties were removed from Promoters & Promoter Companies as far back as 2006 and no objection to the same raised till date. Pertaining to 0.18% of Late Smt. Priyamvada Devi Birla it is submitte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es therein with regards to the impugned letter of offer and the same is listed on 27th November, 2015. With regards to the shareholding of the plaintiffs in the two suits, the same has rightly not been included in the shareholding of Promoter & Promoter Companies of defendant No.1 as they are not Promoter & Promoter Company as already stated herein above. 37. With regard to allegation on behalf of the plaintiff that the Share price in the letter of offer is very high, it is argued that s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ated that: 5. The ex-rights price of the Equity shares as per regulation 10(4)(d) of the Takeover Regulation is ₹ 57.33. Therefore, the share price of ₹ 51/- is much below the ex-rights price determined as per regulations and there is no infirmity with the same. 39. With regard to argument that as to why the object is repayment of promoter loan and not loans of bank or third parties, in reply it is submitted that the defendant No.1 has not taken any loans from third parties. The only .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed working capital facility would be released subject to completion of rights issue thus any injunction would directly impact defendant No.1 s working capital and result in losses. It is submitted that the objects of the Issue was clearly and explicitly set out in the Letter of Offer dated 14th September, 2015 and as contained under Internal Risks disclosure No. 1, No. 13 and No. 17 of the copy of Full Letter of Offer filed by the plaintiff with the suit. There is no irregularity or illegality i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

asis of allotment at Clause (b), (c), (d) will not be a preferential allotment. There is no challenge to the basis of allotment in the plaint. Even, there can be no challenge to the same in the absence of stock exchange as allotment is done under these clauses in consultation with the designated stock exchange. The rights issue was approved by a special resolution and thus the objection is without any merit. 42. In rejoinder arguments, learned Senior Advocate appearing on behalf of the Plaintiff .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n reported as (2012) 8 SCC 148 (para 77). 44. Clause (c) of the Basis of Allotment provides that: c) Allotment to the Eligible shareholders, who having applied for all the Equity Shares offered to them as part of the Issue, have also applied for additional Equity Shares. The Allotment of such additional Equity Shares will be made as far as possible on an equitable basis having due regard to the number of Equity Shares held by them on the Record Date, provided there are any unsubscribed Equity Sh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s and as per definition of eligible equity and shareholders/eligible shareholders means:- Equity shareholders whose names appear on the register of members of our Company or on the list of register of beneficial owners of our Company maintained by the Depositories as at the end of business hours on the Record Date i.e. September 18,2015. 45. The said definition includes both promoters and non-promoters. The same has also been clarified at the Options available to eligible shareholders at page 13 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

res; - Renounce its Rights Entitlement in full. Also at page no. 158 of Letter of Offer states that the CAF form could be liable to be rejected if the instructions contained in the Letter of Offer are not followed 46. From the conjoint reading of all the aforesaid provisions that all eligible equity shareholders can apply for additional shares under category c of the basis of allotment, whether they are promoter or non-promoter. There is a force in the submissions of the defendants that the spec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

015 The plaintiff chose not to vote. 99.97% of the valid votes cast on the resolution by the shareholders voted in favour of the said resolution. 29.05.2015 Draft Letter of Offer Submitted to SEBI, BSE and NSE. 30.05.2015 Notice issued to the shareholders of the company including the plaintiff about proposed rights issue published in various newspapers. 19.09.2015 Certificate Issued by Defendant No.2 certifying that the Abridged letter of offer has been dispatched to all the shareholders of Defe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

scrow account to company account to proceed for allotment of shares and in the Board Meeting, it was decided to approve allotment of 1,15,65,127 equity shares of the face value of ₹ 10/- at an issue price of ₹ 51/- per equityshareincluding premium of ₹ 41/- per share. 48. Break-up of applications received in the rights issue as per details supplied on behalf of the plaintiffs are as follows : Total No. of Shares issued in the Rights Issue 11565127 Promoter Group Holding (Admitt .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by shareholders (Presumed to be all by Promoter Group) 4833825 Shares allotted proportionately to applicants. 2686257 23.23% Hence,100% issue is subscribed by the Promoters only. 11565127 100.00% 49. Summary of provisional basis of allotment (subject to disclaimer mentioned below) as on 15th October, 2015 are as under : Summary of provisional basis of allotment No. of Shares No. of Shares Shares offered (Issue Size) 1,15,65,127 Kept in Abeyance 0 Shares to be allotted 1,15,65,127 1. Shares appli .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g off for hold>1 85 Less : Shares rejected on Technical Reasons 0 Share Accepted 85 (b) 5. Total Shares Accepted 88,78,957 (a+b) 6. Balance Shares available for allotment for additional applied 26,86,170 7. Additional shares applied by Shareholders 48,33,825 Less : Shares rejected on Technical Reasons Less : One Share each allotted against Fraction as above 87 Balance Additional Shares Applied 48,33,738 Total Additional Shares allotted to Shareholders 26,86,170 (c) 8. Additional shares applie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

counsel for the defendants had replied to the rejoinder argument wherein additional points were raised. The arguments in both the matters are common. Due to Dussehra holidays, the Courts were closed between 21st October, 2015 to 27th October, 2015. Thus, counsel for the plaintiff was pressing for interim order of status quo as he apprehends that the process of allotment of shares may likely to be completed, however, counsel for the defendant No.1 was opposing the said request. The suggestion was .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and today as well. No further hearing is required. The parties to file the written submissions by 30th October, 2015. The orders will be pronounced on 16th November, 2015. In the meanwhile, the SEBI shall maintain the status quo with regard to allotment of shares (if already not allotted) till the pronouncement of orders. Dasti, under the signatures of the Court Master. 52. The order was released on 21st October, 2015 in the morning. On 29th October, 2015 the defendants filed the applications, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llotment of shares. Pursuant to the said summary basis of allotment the Rights Issue Committee of the Board of Directors held its meeting at 7:30 pm approving the allotment of equity shares in dispute. The following order was passed on 30th October, 2015: The orders in the interim applications were reserved on 20th October, 2015. The abovementioned fresh applications have been filed by the defendants for modification of the order dated 20th October, 2015. At this stage, it is clarified to the ex .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mber, 2015, the plaintiff filed applications under Order XXXIX Rule 2A read with Section 151 CPC for violation of the status quo order. The plaintiff submitted that the defendants have acted in hurried manner as they were expecting status quo order from the Court. The act of the defendants was with the motive to negate the effect of the order passed by the Court. 54. As far as the contempt applications filed by the plaintiffs are concerned, the same would be considered as per merit. However, at .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ies. 55. It is now to be considered whether on the date of filing of the suit, the plaintiffs were entitled for injunction or not. 56. The first objection of the defendants is that the plaintiff is not a promoter of defendant No.1. Admittedly, the plaintiff in the first suit alleged that he is a part of promoter and promoter Companies of defendant No.1, whereas in fact, the plaintiff is not a promoter or promoter Company as per plaintiff s own admission. 57. It cannot be denied that a promoter o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reafter the plaintiff Company stopped filing the requisite disclosure. The defendant No. 1 who filed its shareholding pattern in September 2013 and admittedly the plaintiff was not shown as Promoter and Promoter Company. 58. No objection was raised by the plaintiff nor any query was raised by the regulator or the stock exchange till date. The shareholding patterns have been available on the website of the stock exchanges since 2013. It is argued on behalf of the defendants that defendant s oblig .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

company is a part of Promoter & Promoter Company of Defendant No.1 or that its removal as part of Promoter & Promoter Company of Defendant No.1 is invalid. Therefore, the argument of the plaintiffs is without any force. 59. It is apparent from the record that the Shareholding Disclosures of the Plaintiff filed on Quarterly basis are available on its Company website (Rameshwara Jute Mills Company Limited) from quarter ending September, 2013. In such quarterly disclosures since September 2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Securities & Exchange Board of India and the mechanism provided under the Securities & Exchange Board of India Act, 1992. There is a force in the submissions of the defendants as in September, 2013 whey they were not shown as promoters of the company, the plaintiffs could have approached the SEBI by raising their grievances when there was discussion about the Letter of Offer or issue of rights issue. It came in the picture on 31st March, 2015. The plaintiffs at that point of time only .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

VIII to the ICDR Regulations. Further in terms of Regulation 9 draft of the document filed with SEBI shall be made public for comments and advertisement shall be given in the newspaper. 62. In the present case, it is not disputed fact that the draft letter of offer was submitted with SEBI on 29th May, 2015 advertisement given in the newspaper on 30th May, 2015 and the same was available on the SEBI website on 2nd June, 2015. The plaintiff has not filed its objections or made any comment on the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s Letter of Offer. Thus, the relief claimed by Plaintiff falls squarely within the ambit of Section 11A and 11B of the Act, SEBI is the appropriate forum for the same. 64. The plaintiff has not even made SEBI a party to the present suit. As per Section 15A if any person fails to furnish any documents, return or report to the Board or fails to file any return or furnish any information, books or other documents within a specified time period he shall be liable to penalty to an extend of ₹ 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ies & Exchange Board of India Act, 1992 reads as under: 15Y No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an adjudicating officer appointed under this Act or a Securities Appellate Tribunal constituted under this Act is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. F .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uance of any order passed by the Board [or the Adjudicating Officer] by, or under this Act]. 66. In Kesha Appliances (P) Limited v. Royal Holdings Services Ltd., (2005) 65 SCL 293 (Bom), it was held by the High Court of Bombay that the jurisdiction of the civil court is barred by virtue of the provisions of Section 15Y and Section 20A of the SEBI Act. 67. There is no force in the submission of the plaintiff that they cannot go to the Company Law Board as the shareholding is less than 10% as the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ptember 2013 when their names were not mentioned in the list of promoter and promoter group. They did not initiate any remedy thereof which was available. The question now before this Court is whether at this stage where the entire process has gone into and shares are allotted, the Court first declare them as part of the promoter and promoter group and then set-aside the letter of offer by declaring that letter of offer and abridged letter of offer are unlawful, null and void ab-initio when the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rom September, 2013 when their names were not shown and still they did not take any steps. 69. In the case of N. Jagan and another v. Investment Trust of India Ltd. in O.S.Appeals Nos. 39 of 42 of 1995, decided on 3rd April, 1995 by the High Court of Madras, refusal of injunction in case of alleged grievance of high share price was upheld and it was held as under: Two resolutions passed by the company at the extraordinary general meeting held on May 9, 1994. O.A. No. 592 of 1994 in C.S.No.705 of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dge has found that a prima facie case has not been made out to grant injunction as prayed for by the plaintiffs, particularly because the general body has passed the resolutions at the extraordinary general meeting. He has held that the plaintiffs have no right to dictate terms to the company to fix the value of the share at a particular rate and, therefore, they are not entitled to get any order for interim relief. In that view, the learned Judge has dismissed all the four applications before h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as at least aware from September 2013 about its non inclusion as part of Promoter & Promoter Company of defendant No.1 in the shareholding pattern filed by Defendant No.1 with the stock exchange. The defendant No.1 then in every quarterly shareholding pattern filed the Plaintiff has not been shown as part of Promoter or Promoter Company of defendant No.1. The aforesaid shareholding pattern has been available on the website of Stock Exchanges since 2013 but no objection was raised. The Resolu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

October, 2015 knowing fully well that the closing date of the rights issue is 14th October, 2015. 73. Last minute in case of rights issues has been deprecated by the Supreme Court of India in Morgan Stanley Mutual Fund (supra). Para 40 and 42 read as under: 40. Today the corporate sector is expanding. The disgruntled litigants indulge in adventurism. Though, in this case we have come to the conclusion that the District Consumer Forum will have no power to grant injunction yet in general cases it .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he meeting of general body. The Court is approached at the last minute. Could injunction be granted even without notice to the respondent which will cause immense hardship and administrative inconvenience. It may be sometimes difficult even undo the damage by such an interim order. Therefore, the court must ensure that the plaintiff comes to court well in time so that notice may be served on the defendant and he may have his say before any interim order is passed. The reasons set out in the prec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ffer was set out in the Board Resolution dated 31st March, 2015. The said Resolution was put up for voting by postal ballot to the shareholders. In the postal ballot form sent to shareholders the object of the letter of offer is clearly disclosed at page 175 of the documents filed with the reply. The postal ballot form was sent to the plaintiff at page 181 of documents filed with reply. The plaintiff chose not to vote. 99.97% of the valid votes cast on the resolution by the shareholders voted in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

there with regards to the estate of Late Smt. Priyamvada Devi Birla. The said application is listed for 27th November, 2015. The relevant extract of the prayer clause in the aforesaid application has been reproduced herein below: (a) Leave be given to serve a copy of the instant application on Universal Cables Limited; (b) Set aside and/or quash the impugned rights issue by Universal Cables Limited; (c) Injunction restraining Harsh Vardhan Lodha causing Universal Cables Limited or Universal Cab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g the jurisdiction under which provisions of law and the rules and regulations are applicable to the letter and offer. 77. The Letter of Offer dated 14th September, 2015 at page 125 of the documents filed with the plaint provides as under: Disclaimer with respect to jurisdiction This letter of Offer has been prepared under the provisions of Indian Laws and the applicable rules and regulations thereunder. Any dispute arising out of the Issue will be subject to the jurisdiction of the appropriate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt No. 1. No communication was ever issued with regard to the letter of offer from marketing office at Delhi and the same were issued only from the registered office of defendant No. 1 located at Satna, Madhya Pradesh. The plaintiff has alleged that the letter of offer has been issued by defendant No. 1 within the territorial jurisdiction of this Court. The said averment is not correct as the Letter of offer was issued and dispatched to the shareholders by defendant No.2 from Mumbai and submitte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed law that even where courts in two places may have jurisdiction, an exclusive jurisdiction clause in favour of one of the two places ousts the jurisdiction of the other. Swastik Gases Pvt. Ltd. v. Indian Oil Corporation Ltd, (2013) 9 SCC 32 (paras 31-33); ABC Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem AIR SC 1239, (paras 12, 15, 16 and 18), M/s. Hanil Era Textiles Ltd. vs. M/s Puromatic Filters (P) Ltd., AIR 2004 SC 2432 (para 7). 80. The written statements in the matter are yet to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e present case as the same are materially different. The present case does not fall in any of the exceptions carved out in the case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai & Ors., (1998) 8 SCC 1, namely; - enforcement of any fundamental rights or violation of principles of natural justice or where proceedings are without jurisdiction or vires of an act is challenged. The case of Midas Hygiene Industries P. Ltd. and Anr. v. Sudhir Bhatia & Ors., (2004) 3 SCC 90, which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version