Ashiwin S. Mehta & Anr vs Union Of India & Ors

6. Pursuant thereto, the Custodian invited bids from individuals as well as from the corporate and other entities. The offers were to reach the office of the Custodian by 3.00 p.m. on or before 25th April 2003. In response, only two bids were received, the highest being Rs. 80/- per share given by Punjab National Bank. The Disposal Committee evaluated the bids so received and vide its minutes dated 25th April 2003, recommended that in addition to the aforesaid 54,88,850 shares, additional 8,15,485 benami shares also be sold to the highest bidder subject to sanction by the Special Court. Accordingly, the Custodian submitted a report to the Special Court for consideration and appropriate orders. By the impugned order, dated 30th April, 2003, corrected vide order dated 2nd May, 2003, the Special Court directed sale of 54,88,850 shares to Apollo and its management at Rs.90/- per 7 share. Being dissatisfied with and aggrieved by the order indicated hereinbefore, the appellants have preferred this appeal.

17.Lastly, learned senior counsel submitted that pursuant to the buy back of shares and on due compliance with the provisions of Section 77A read with Section 77A (7) of the Companies Act, Apollo had already extinguished 36.90 lakh shares so bought-back and therefore, to that extent, prayer of the appellants to rescind the purchase of shares is rendered infructuous. It was asserted that any order at this juncture, setting aside the impugned order, would not result in resurrection of the extinguished shares but entail a fresh issue of shares under 1 Sections 79 and 81 of the Companies Act, which is fraught with statutory restrictions and difficulties, resultantly affecting the rights of third party shareholders, who are not parties to the present dispute.

(emphasis supplied by us)

16 (1770) 4 Burr 2527 2

30.We have therefore, no hesitation in agreeing with Mr. Vellapally to the extent that same principle would govern an appeal preferred under Section 10 of the Special Court Act. However, since we have come to the conclusion that the Special Court has exercised its discretion in complete disregard to its own scheme and `terms and conditions' approved by it for sale of shares and above all that the impugned order was passed in violation of the principles of natural justice, we think that the facts in hand call for our interference, to correct the wrong committed by the Special Court.

31.For the view we have taken above, we deem it unnecessary to deal with the other contentions urged on behalf of the parties on the merits of the impugned order.

32. This brings us to the question of relief. In view of our finding that the decision of the Special Court is vitiated on the afore-stated grounds, it must follow as a necessary consequence that in the normal course, the impugned order must be struck down in its entirety. However, bearing in mind the fact that the sale of 54,88,850 shares was approved and all procedural modalities are stated to have been carried out in the year 2003, we are inclined to agree with Mr. Vellapally and Dr. Singhvi that at this stage, when 36.90 lakh shares of Apollo are claimed to have been extinguished, the relief sought for by the appellants to 2 rescind the entire sale of 54,88,850 shares will be impracticable and fraught with grave difficulties. In our opinion, therefore, the relief in this appeal should be confined to 4.95% of the shares, subject matter of interim order, dated 29th May, 2003, extracted above.

33. In the result, we allow the appeal partly; set aside the impugned order to the extent indicated above and remit the case to the Special Court for taking necessary steps to recover the said 4.95% shares from Apollo or its management, as the case may be, and put them to fresh sale strictly in terms of the aforenoted norms as approved by this Court vide order dated 23rd August, 2001. The shareholders who will be affected by this order shall be entitled to the sale consideration paid by them to the Custodian alongwith simple interest @6% p.a. from the date of payment by them upto the date of actual reimbursement by the Custodian in terms of this order.

34.However, in the facts and circumstances of the case, the parties are left to bear their own costs.

NOVEMBER 8, 2011.

RS 3