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SUPREME COURT OF INDIA
SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.
Narendra Kumar Maheshwari, Petitioner
Versus
Union of India and others, Respondents.
Transfer Cases Nos. 161-165 of 1988 (with C.M.P. No. 29125 of 1988 in T.C. No. 162 of 1988)
Decided on 3-5-1989.
Advocates appeared
Mr. S. Ganesh, Mr. Arun Jaitely, Miss. Bina Gupta, Miss. Madhu Khatri, Mr. A.N. Haksar, Mr. Praveen Anand, Mr. Anip Sachthey, Mr. B.L. Pagaria, Mr. P. K. Jain, Mr. Udai Holla and Mr. T. Sridharan, Advocates, for Petitioners; Mr. G. Ramaswamy, Addl. Solicitor General, Mr. Soli J. Sorabjee, Mr. M. H. Baig and Mr. F. S. Nariman, Sr. Advocates, Mr. H. N. Salve, Mr. R. Sasiprabhu, Mr. S. S. Shroff, Mrs. P. S. Shroff and Mr. S. A. Shroff, Advocates with them, for Respondents.
Constitution of India,1950 – Article 19(1)(g) and 14 r/w 38 - Companies Act, 1956 – Section 73 and 2(12) - MRTP Act – Section 22(3)(d) - Securities (Contract and Regulation) Act. 1956 - Shares – Debentures Petitioner in that writ petition is one and respondents are Union of India - Case of the petitioner is that he is an individual who is a public spirited person and is an existing shareholder of Company known as Reliance Industries Ltd. (RIL), which was the promoter of Reliance Petrochemicals Limited, being respondent - Petitioner held at all relevant times 144 shares of RIL and 100 debentures of different categories - Respondent being RPL, was a newly set up public limited company for purpose of carrying on business of manufacture of petrochemicals - These petitions were filed in different Courts challenging the consent of Controller of Capital Issues granted for the issue of shares and debentures by the RPL. It was contended in the petition that the respondents Nos. 1 & 2, being the Union of India and the Controller of Capital Issues, ought not to have granted consent to respondent namely, RPL to issue share and debenture capital at an aggregate value - Whether the investors would get 2 shares or 3 shares or 4 shares for each debenture – Held, before court conclude, court must note that good deal of argument was adduced that these applications in different High Courts in civil suits were not genuine and properly motivated, but were mala fide - Even though these might not have been to feed fat an innocent object, it was apparent that it was to feed fat a grudge in respect of a competitive project by a competitor. Anyway, in the view court have taken, it is not necessary to decide the bona fides or mala fides of applicants - When he moved application initially, had suggested that court should lay down certain norms as to how courts in different parts of country should grant injunction or entertain applications affecting an all India issue or having ramifications all over the country - Except that before the Courts grant any injunction, they should have regard to the principles of comity of courts in a federal structure and have regard to self -restraint and circumspection, we do not at this stage lay down any more definite norms - Court may also perhaps add that it may be impossible to lay down hard and fast rules of general application because of diverse situations which give rise to problems of this nature - When court transferred these matters, court directed respondent to deposit a sum to be held if petitioners were made to spend unduly - Having considered the facts and circumstances of the case, court do not think that court would be justified in ordering disbursement of this sum to the petitioners whose cases have been transferred or plaintiffs whose cases have been transferred - Writ petitions and the suit fail, and are dismissed - Order accordingly.
JUDGMENT
SABYASACHI MUKHARJI, J. :— In these transferred writ petitions and one suit, we are concerned with the powers, functions and the role of the Controller of Capital Issues. By an order dated 9th September, 1988 this Court had directed that the four writ petitions and one civil suit i.e., W.P. No. 1791/88 pending before the Delhi High Court, W.P. No. 2708/88 pending before the Jaipur Bench of the Rajasthan High Court, W.P. No. 12176/88 pending before the Karnataka High Court. W. P. No. 4388/88 pending before the High Court of Bombay and Civil Suit No. 1172/88 pending before the Civil Judge. Junior Division Bench, Baroda, Gujarat, be transferred to this Court for disposal. It would be appropriate to deal with the facts of one of these, i.e. W. P. No. 1791/88, which was filed in Delhi High Court in T. C. No. 161/88. The other writ petitions and the suit raise more or less identical problems and issues on more or less same facts.
1A. The petitioner in that writ petition is one Narendra Kumar Maheshwari and the respondents are the Union of India, the Controller of Capital Issues, and Reliance Petro-chemicals Ltd. (RPL). The case of the petitioner is that he is an individual who is a public spirited person and is an existing shareholder of the Company known as Reliance Industries Ltd. (RIL), which was the promoter of Reliance Petrochemicals Limited, being the respondent No. 3. The petitioner held at all relevant times 144 shares of RIL and 100 debentures of different categories. The respondent No. 3, being RPL, was a newly set up public limited company for the purpose of carrying on the business of manufacture of petrochemicals. These petitions were filed in different Courts challenging the consent of the Controller of Capital Issues granted for the issue of shares (Rs. 50 crores) and debentures (Rs. 516 crores) by the RPL. It was contended in the petition that the respondents Nos. 1 & 2, being the Union of India and the Controller of Capital Issues, ought not to have granted consent to responent No. 3, namely, RPL to issue share and debenture capital at an aggregate value of approx. Rs. 600 crores. It may be mentioned that after these writ petitions and suit were filed, attempts were made to obtain injunctions restraining the issue of sharecapital and debentures as advertised. By an order dated 19th August, 1988 passed by this Court, this Court had restrained the issue of such injunctions and directed that the shares and debentures would be issued irrespective of any order of injunction passed by any court or authority in India. Different cases, as mentioned hereinbefore, were thereafter transferred to this Court.
2. On the basis of the said consent, it was stated that the respondent No. 3 had issued prospectus and at the relevant time had intended to open the issue from 22nd August, 1988, of about 3 crores debentures of the face value of Rs. 200 each which was the largest convertible debentures issue in India. It was alleged that the respondents had adopted very sharp methods to collect money from the public and ultimately to defraud them. It was stated that under the terms of the prospectus, each debenture of the face value of Rs. 200 would be fully convertible : Respondent No. 3 would issue one share of Rs. 10/- at per on the date of allotment. There would, thus, be an equity capital of about Rs. 30 crores, in all on allotment. Further, it was stated that the Company would convert Rs. 40/- of each convertible debenture into share after 3 years and the balance of Rs. 150 into share at any time between five and seven years. It was mentioned by the Company that it would convert at the second stage of conversion at such premium to be allowed by the Controller of Capital Issues. the petitioner alleged that it was not clear as to whether the investors would get 2 shares or 3 shares or 4 shares for each debenture, at the second conversion of Rs. 40/-. Similarly, it was alleged that the last portion of Rs. 150 would be converted in
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