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DELHI HIGH COURT
Manmohan Singh, J.
Jute Investment Co. Ltd. - Appellant
Versus
Idbi Capital Market Services Ltd. & Ors. - Resopndent
LA. No. 21503/2015 in CS(OS) 3082/2015 and LA. No. 21723/2015 in CS(OS) 3105 of 2015
Decided On : 16-11-2015
The Court held that the plaintiff was not entitled to an injunction as prayed for. The Court also held that the plaintiffs are at liberty to take appropriate remedy by amending the plaint by seeking the declaration to become promoter or part of promoters group of the company and to seek damages as per law.
Fact of the Case:
The plaintiffs, Jute Investment Company Limited and Rameshwara Jute Mills Ltd., filed two separate suits seeking inter alia an injunction restraining the defendants from proceeding with the Letter of Offer/ Abridged Letter of Offer both dated 14th September 2015 issued by Defendant No. 4, Universal Cables Limited. The plaintiffs alleged that they were not shown as part of the "promoter and promoter group of companies" of the defendant No. 4 in the said Letter of Offer, which was unlawful, null and void ab-initio. The defendants contended that the plaintiffs were not entitled to an injunction as they had not shown a prima facie case, the balance of convenience lay in their favor, and the plaintiffs were guilty of delay and laches. The defendants also raised objections to the territorial jurisdiction of the Court and the maintainability of the suits.
Finding of the Court:
The Court found that the plaintiffs were not entitled to an injunction as they had not shown a prima facie case, the balance of convenience lay in favor of the defendants, and the plaintiffs were guilty of delay and laches. The Court also found that the plaintiffs were at liberty to take appropriate remedy by amending the plaint by seeking the declaration to become promoter or part of promoters group of the company and to seek damages as per law.
Issues: Whether the plaintiffs were entitled to an injunction restraining the defendants from proceeding with the Letter of Offer/ Abridged Letter of Offer both dated 14th September 2015 issued by Defendant No. 4, Universal Cables Limited.
Ratio Decidendi: The Court held that the plaintiffs were not entitled to an injunction as they had not shown a prima facie case, the balance of convenience lay in favor of the defendants, and the plaintiffs were guilty of delay and laches. The Court also found that the plaintiffs were at liberty to take appropriate remedy by amending the plaint by seeking the declaration to become promoter or part of promoters group of the company and to seek damages as per law.
Final Decision: The Court dismissed the plaintiffs' applications for an injunction and vacated the status quo order passed on 20th October, 2015. The Court also disposed of the defendants' applications for modification/clarification of the order dated 20th October, 2015. The Court directed the parties to file their written submissions by 30th October, 2015 and listed the matter for further proceedings on 8th January, 2016.
Manmohan Singh, J.:-
1. By way of this common order, I propose to decide the two applications filed by the two respective plaintiffs in the suit for declaration and permanent injunction being common issue involved in the matter. The first suit was filed by M/s. Jute Investment Company Limited on 8th October, 2015 and summon and notice was issued for 12th October, 2015 and on 12th October, 2015, the second suit was filed by M/s. Rameshwara Jute Mills Ltd. M/s. Universal Cables Limited is the defendant No. 4 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 Letter of Offer/ Abridged Letter of Offer both dated 14th September 2015 issued by Defendant No. 4;
(c) Pass necessary order staying the allotment of Right Shares until the existing holding of the Promoter and Promoter Group entities is finally determined;
(d) Initiate prosecution proceedings against all the Defendants for misleading incorrect and untrue statements in the Letter of Offer and Abridged Letter of Offer.”
3. In the interim applications the 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.
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 Manager to the Rights Issue proposed by defendant No. 4. The said company is engaged in the business of manufacturing of Cables and Capacitors. The equity shares of the defendant No. 4 Company are listed on BSE Limited and National Stock Exchange of India Limited.
(ii) The defendant No. 5 is the Chairman of the defendant No. 4 Company and engaged in day-to-day affairs of the defendant No. 4 Company. Defendant No. 6 is the Manager and the Chief Executive Officer of the defendant No. 4 Company. The defendant 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 defendant No. 4 had issued a Letter of Offer offering to issue 1,15,65,127 equity shares of the face value of Rs. 10/- and at issue price of Rs. 51/- each to its shareholders, including the plaintiff, in the ratio of 1 share against the existing 2 shares. The said Letter of Offer did not disclose all material facts and would not enable a shareholder to take an informed decision as to whether or not to subscribe to the said Letter of Offer. In the said Letter of Offer the names of various companies 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.
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