Case: Narendra Kumar Maheshwari  Vs. Union of India (UOI) and Ors

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.2. The petitioner in that writ petition is one Narendra Kumar Maheshwari and the respondents are the Union of India, the Controller of Capital Issues, an t 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 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. crores) and debentures (Rs. 16 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 respondent 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 share-capital 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.3. 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 convertable: Respondent No. 3 would issue one share of Rs. 10/-at par on the date of allotment. There would, thus, be an equity capital of about Rs, crores in all on allotment. Further, it was stated that the Company would convert Rs. 40/- of each convertible debentures into share after 3 years and the balance of Rs. 0 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. 15 0 would be converted into shares any time between five and seven years at which time again the Control are would fix the premium for conversion. The petitioner further stated that it was thus not clear what the equity capital of the Company would be, whether it would be Rs. 0 crores or Rs. 600 crores or whether the residual amount would go into reserve account or whether a separate account would be opened in respect of the premium. It was alleged that the respondent No. 3 being RPL had been promoted by RIL and the past history of RIL showed that the share prices of RIL had fluctuated widely leaving lot of scopes for manipulations. It was alleged in the petition that there was no explanation from the Company or anybody from the share market as to why the share prices fluctuated so widely and it was obvious that there were market operators who prop up or bring down the prices depending on how it suited their convenience- The share value of RTL, the promoter company, was subjected to wide fluctuations on account of the purchase and sale operations of certain interested quarters close to the management of the respondent No. 3 Company, it was alleged. On more than one occasion during the past six months, the sale of the share in the stock market was banned in some stock-Exchanges due to fall in price. It was alleged that it indicated the cooperation and support from the authorities for maintaining the fictitious value of the share in the market; and thus on an equity capital of Rs. 2 crores an amount of Rs. 800 crores in the premium account has been obtained, but there would be no amount in General Reserve account because the Company had not earned anything worthwhile to put in General Reserve. It was further alleged that the lack of bona fide of the Reliance group was well-known; and that RIL had issued debentures of G Series and had assured to pay interest up to 5th February, 1988. It was alleged that the Company did not keep up this assurance, but converted the debentures into equity shares in the month of August, 1987 thereby avoiding payment of interest. In this manner, it was alleged, the Company saved interest of Rs. crores whereas in fact it incurred a loss. The case of the petitioner was that the Company was obviously trying to repeat the same game through the new Company by maintaining the share price only on an equity capital converted on each debenture. The paramount duty of respondents Nos. 1 & 2 before according permission was, it was asserted, to ensure that the requirement of the Company in raising such capital was bona fide. It was observed that no public interest was intended to be served by respondent No. 1, as it had chosen to allow respondent No, 3 to collect such huge amounts in excess of the requirement.4. It is further the case of the petitioner that the operations of RIL (Promoter) subsequent to the raising of past issues made by it were subjected to severs criticisms both in the press and in the public. It was pointed out that though the issue proposed was of shares of Rs. o crores and debentures of Rs. 516 crores, the company was allowed to retain over-subscription to the tune of 15% amounting to Rs. 77. crores. It was alleged that the respondent No. 3 was a new Company and it should not be allowed 15% retention; and if it wanted to raise Rs. 600 crores, it should have come out with an issue of that amount. It was further alleged that the respondent No. 2 without considering the propriety of the situation, allowed the respondent No. 3 to make issue of the capital for the interest of a few people. Hence, the sanction of the issue of convertible debentures of respondent No. 3 calls for judicial review. It was also alleged that the sanction was approved at exorbitant terms: 5% of the face value (equal to nothing) according to the petitioner, would be converted at par on allotment, another 20% (Rs. 5) at a premium to be decided by the Controller of Capital Issues after 3 years but before 4 years of allotment and the balance of Rs. 15 0 at such premium as might be permitted by the Controller of Capital Issues after years but before the end of 7 years from the date of allotment. It was stated that the investors would be completely left thrown at the mercy of respondents Nos. 3 & 4; and that till date no convertible debenture had been issued on such vague terms. In those circumstances, it was submitted the consent of the Controller of Capital Issues was bad, illegal on the grounds hereinafter alleged:5. The consent order was hit by arbitrary and capricious exercise of jurisdiction by respondent No. I. It was further alleged that the respondent No. 3s promoters i.e. RIL had been obtaining from respondent No. 1/2 such Consent Orders on the ground that it was in a position to raise such huge moneys from the public for the purpose of implementation of its projects without recourse to the Financial Institutions. According to the petitioner, for the first time, in the corporate history of India, RIL (Promoter) was allowed to raise Rs. 100 crores by way of issuance of F Series debentures. On account of the campaigning through Brokers for attractive returns, the public was misled and RIL wooed the public and collected Rs. 6 crores. RIL had not made any allotment on a proper basis but made allotments on some basis of Private placement. It was further alleged that the management of RTL through its associate companies obtained huge borrowals from nationalised banks ; and several bank employees got into trouble due to advancing of loans for the purpose of subscription in the F Series debentures through the associated companies of respondent No. 3/RIL which had popularly come to be known as Reliance Loan Mela. It was alleged that the Controller of Capital Issues and Union of India acted mala fide in issuing the consent order which was designed to benefit respondent No. 3 and prejudice the interests of the investing public. It was further alleged that in giving the consent order the respondent No. 1 blatantly overlooked the magnitude of the sum of Rs. 600 crores, proposed to be raised from the public through the new issue of debentures.6. It was alleged that the act of respondent No. 1/2 was vitiated as in issuing the consent order respondent No. 2 was influenced by extraneous considerations not germane to the public interest. The Capital Market in India has undergone turbulent changes in the recent years. Small investors such as employees, workers and small business community were coming forward, according to the petitioner, for the purpose of investment in corporate sector, It was further stated that small investors had no means of verifying the correctness or otherwise of the statements and the soundness/financial viability of any company. It was further alleged that the respondents Nos. 1/2 had acted wrongly and illegally in allowing the respondent No. 3 to raise share-capital on premium for financing new projects. It was contended in the petition of the petitioner that the consent order was a fraud.7. In those circumstances it was prayed that the court should exercise it jurisdiction under Article 226 and set aside the consent order which was for the public issue on 22nd August, 1988.8. The facts and the circumstances leading to this consent order have been stated in the affidavit on behalf of respondent No. 3 to the writ application. After disputing the locus of the petitioner, who challenged the consent order for making the public issue of 12. Secured Convertible Debentures by 3rd respondent, the respondent No. 3 stated that the petition suffers from laches and delays. On behalf of respondents No. 3 it was asserted that the public issues made by the 3rd respondent had been promoted by RIL. The RIL and RPL are inter connected and represented companies in the large industrial house known as Reliance Group. According to respondent No. 3, they represented Indias fastest growing private sector companies and comprised the worlds second largest investor family of over lakhs investOrs. It was further asserted that the 3rd respondent would have Indias largest private sector Petrochemical Complex for the manufacture of critically scarce raw-materials. It was stated that the 3rd respondent would manufacture versatile raw-material which was behind the plastic revolution, particulars whereof have been mentioned in the Annexure. It was further stated that the petrochemical complex of the 3rd respondent would come up at Hazira, District Surat in the State of Gujarat and the production was planned to start in a phased manner between the next 18-24 months. The 3rd respondent would be setting up a state-of-art world class plant in collaboration with the world leaders in the respective fields, i.e. (a) Dupont, Canada for HOPE (b) B.F. Goodrich & Co. for PVC, and (c) Scientific Design Co. for MEG.9. The terms of the issue of debentures of the face value of Rs. 200/- being fully converted into equity shares were the following:(i) A sum of Rs. 10/- being % of the face value of each debentures by way of first conversion immediately into one equity share at par on allotment ;(ii) A sum of Rs. 40/- being the 20% of the face value of each debenture by way of second conversion after three years but before four years from the date of allotment at a premium to be fixed by the Controller of Capital Issues ;(iii) The balance of Rs. 150/- representing 75 % of the face value of each debenture as third conversion after five years but not later than seven years from the date of allotment at a premium to be fixed by the Controller of Capital Issues.10. The premium, it was stated on behalf of respondent No. 3, that would be charged at the time of conversion into equity shares would be as fixed and decided by the prescribed statutory authority, namely, the Controller of Capital Issues, and the 3rd respondent and its Board of Directors would not have any say in the matter or be entitled to fix the same on their own. It was further stated that, subject to the necessary approvals being obtained in that behalf, the shareholders and the convertible debenture holders of the respondent No. 3, promoters company, would by entitled to participate in all the future issues of the 3rd respondent. The fully convertible debentures of the 3rd respondent would thus be a growth instrument with different rights, viz., earning a fixed rate of interest from the first day till it was converted into equity and thereafter entitled to dividend that might be declared after conversion into Equity. It is to that extent different from a purely equity share on which investor would earn dividend only when profits are declared. Thus, the instrument proposed by the 3rd respondent, according to it, has the best features of share as well as debenture. Apart from the above, in accordance without application for listing made by the 3rd respondent to the Bombay Stock Exchange and Ahmedabad Stock Exchange, the 3rd respondent has proposed that all the three components or parts of the instrument, namely, Part A representing an equity share on first conversion, Part B being 20% of the face value of the debenture and Part C being the balance 7 % of the face value of the debentures, would all b^ listed separately and independently so that after allotment, an investor can sell if he so desires the convertible portion of the debenture being Part B and *C and just retain the equity share being Part A. It was intended to ensure both liquidity and appreciation in the hands of the investor.11. The products which were intended to be manufactured by the 3rd respondent were many, namely, (a) High Density Polyethylene (HOPE) and Poly Vinyl Chloride (PVC) which are raw-materials behind plastic revolution ; (b) Mono Ethylne Glycol (MEG) is a critical polyester raw-material; HOPE and P/C being vital thermo plastic play an important role in the core sector and are used for manufacture of everything from films to pipes, auto parts to cable coatings, and containers to furnishings. It is not necessary for the issues involved in these applications to set out in detail the very many particulars given by the respondent No. 3 in support of the contention that a petrochemical complex proposed to be set up by the new Company-respondent No. 3 -would be beneficial socially and economically for the country as well as for the investOrs.12. The advantages of convertible debentures proposed to be issued at that time by the respondent No. 3 were also highlighted. It is stated that debentures are treated as equity. The 3rd respondents borrowing capacity remains unutilised and this would help it in implementing the future projects expeditiously. The first phase of the project is financed by the proposed issue of debentures and not by large capital borrowings from the public financial institutions (except to the extent of foreign loans of Rs. 8 crores from them). The interest which would, therefore, have been payable in the financial institutions will be paid to the debenture holders ensuring them a return and simultaneously the convertible clause which would have been applicable to term-loans obtained from the financial institutions would be available to the investors thereby ensuring them growth in equity value. It was further stated that since the preferential allotment of 50% of the total issue was made to RIL shareholders, the shareholding pattern of the 3rd respondent will be the most widely held peoples shareholding in the country and it was placed that there will be at least lacs shareholders of the 3rd respondent which would be a world market record.13. It was further stated that RIL, who are the promoters of the project, have one of the best track records for setting up of the Projects such as Polyester Staple Fibre (PSF), Polyester Filament Yarn (PFY), Linear Alkyl Benzene (LAB) and Purified Terphthalic Acid (PTA) plants at Patalganga in record time. Business records of Reliances Vimal and Recorn were also emphasised. It is, however, not necessary for the purpose of the issues involved in these applications either to dilate upon these or to consider the correctness or otherwise of there assertions. Reliances plant at Patalganga complex in the State of Maharashtra and its beneficial effects to the community and the State, as asserted on behalf of respondent No. 3, are also not relevant. It was stated that Reliance is privy to the technology of the world leaders, such as Dupont of U.S.A. and Imperial Chemical Industries of UK. Mr Pageria, learned Counsel appearing for one of the petitioners, Radhey Shyam Goyal tried to impress upon us that among the world leaders of technology, Du Pont of USA and Imperial Chemical Industries of UK cannot claim such high position. Neither is it necessary nor is it possible for us to consider these assertions and denials.14. The industrial licences have been applied for and it was stated that pending the formation and incorporation of RPL on 4.1.1988 under the Companies Act, 1956, RIL had undertaken and performed various acts and deeds, particulars whereof have been mentioned in the Statement of Facts. In the Statement of facts filed on behalf of respondent No. 3, a list of consents and approvals obtained by the 3rd respondent, has also been indicated.15. It was further stated that pursuant to the order of this Court, dated 19th August, 1988 the public issue was made under the prospectus dated 27th July, 1988 which opened on 22nd August, 1988 and closed on 31st August, i988. There had been an overwhelming response to the issue from all categories of investors including non-residents, RIL shareholders/employees and the issue was heavily over-subscribed. On behalf of the RPL, it was stated that the time frame of weeks commencing from 1st September, 1988 and ending on 10th November, 1988 had to be strictly adhered to. The provisions of Section 73 and other applicable provisions of the Companies Act, 1956, the provisions of the Securities (Contract and Regulation) Act, 1956 and the listing requirements of the Stock Exchange were also complied with.16. It was stated on behalf of the 3rd respondent that for the purpose of finalising the means of finance of HOPE, PVC and MEG Projects, RIL as the promoters of the 3rd respondent had engaged the services of the Merchant Banking Division of ICICI which is a public financial institution and one of the foremost consultants in the field. During the discussions which were initiated in the second half of 1987 with ICICI, the idea of implementing these projects through a new independent Company instead of RIL had taken shape duly taking into account the financial aspects, management aspects, issues related to management and operation control of setting up the projects within the existing company vis-a-vis the setting up of the projects in the new company, namely the 3rd respondent company, was taken up. The 3rd respondent company and ICICI also considered various alternative means of financing project keeping in view the following criteria:(a) That the project should be financially beneficial to the company. (b) That it should be financially attractive to the investor, (c) That it should be operationally easy for the company and the investor, (d) That it should meet the institutional/stock exchange/ Ministry of Finance norms and guidelines as regards financing of projects, (e) That it should be sustainable and attractive enough in terms of the profitability/servicing capability of the project, (f) That it should reduce the dependence of the company on institutional finance, (g) That it should encourage the capital market activity in India.17. The various alternative means of issue of security such as equity share and/or convertible cumulative preference shares (CCP) and/or partially convertible debentures and/or non-convertible debentures and or equity linked debenture issue and/or fully convertible debentures were all examined by the management and ICICI at length from various aspects including the aforesaid aspect, it was asserted on behalf of respondent No. 3.18. It was reiterated that the Controller of Capital Issues had applied his mind and considered all relevant, pertinent and proximate matters and the Controller bona fide bestowed painstaking consideration by examining the entire gamut of .leans of finance, the volume of finance needed and types of securities, marketability of securities, conditions of the capital market and other relevant considerations as are normally and properly to be evaluated by him as an expert authority A specialised expert statutory authority or agency under a valid and legal enactment has been set up for the purpose of examining on what basis securities such as share and/or convertible debenture should be issued and the merits of his conclusions are not open to judicial review.19. It has to be borne in mind that the writ petitioners were only potential investors in the shares and debentures proposed to be issued at the time when a large part of the averments had been made. It was open to them, if they felt that the scheme was not attractive not to subscribe to the issues It was, however, not possible for them, contend the respondents, to prohibit the issue or prevent the taking of other steps in pursuance thereof. Respondents 3 and 4 have set out various reasons why an interim injunction should not be granted. These are unnecessary to be dealt with now when the matter is being finally disposed of.20. Two other affidavits are necessary to be referred to. One is the rejoinder affidavit on behalf of the petitioner in writ petition No. 1791 of 1988 before the Delhi High Court, and the other is on behalf of the Government. So far as the petition of Narendra Kumar Maheshwari is concerned, it is necessary to note that he has stated that the capital market had undergone changes in raising issues and the investors had no means of verifying the correctness and soundness of the financial viability of the scheme. It was stated that the Central Govt. did on take the responsibility for financial soundness of the scheme. It was asserted that a new share of new company could not be raised at a premium but the Govt. had improperly permitted the issue of shares of a new company at premium in the instant case. It was stated that the consent order of the Controller of Capital Issues stated that premium would be payable on the shares to be allotted on conversion which, according to the deponent, amounted to fraud on the investing public and the subterfuge to boost up the market value of shares of RIL.21. It was reiterated that the RPL had been promoted by RIL whose shares had fluctuated in the share market so widely for which no explanation came forth from the company. These fluctuations in the share market were, according to the petitioner, on account of purchases/sales made by certain interested quarters close to the management. On many occasions the sale of the share of RIL in the stock market was banned in some stock exchanges due to fall in prices which, according to the deponent, was a clear indication of cooperation and support from the authorities.22. It was further alleged that there was discrimination in respect of time period of conversion of loan/investment into equity between the shareholders of RIL and the investing public. Immediately on allotment the conversion of percentage of investment of the rights holders is 3.49% whereas that of the investing public is only %. At the end of 3 years from the debenture allotment date, percentage debenture conversion of investment of the rights holders is 46. 1 % and that of the investing public is nil. Hence, after the end of 3 years time the percentage of conversion in investment of rights holders is 100% whereas that of the investment of right holders at the end of 3 years in figures is approx. Rs. 107.50 crores and the investing public is only 29.67 crores Between 3 and 4 years of debenture allotment the percentages of conversion of allotment of rights holders is nil and that of the investing public is 20%. Between and 7 years of the debenture allotment date the percentage of conversion of investment of the rights holders was nil and that of the investing public is 75% Thus the conversion of the debenture allotment between 3 and 7 years of right holders is nil and that of the investing public is 95%, which in figures comes to about Rs. 563.73 crores.23. In a democratic set up in country, it was asserted on behalf of the petitioners, the sanction of the issue amounted to concentration of wealth in one hand which brought danger to the national economy and was against the Directive Principles of State policy enshrined in the Constitution. It was submitted that the validity of the consent order had to be decided on the merits of the case in the background of the aforesaid. The petitioner had every right to question the validity of the consent order, it was stated.24. One consolidated reply to all these writ petitions on behalf of the Union of India through the Secretariat, Ministry of Finance, Deptt. of Economic Affairs and Controller of Capital Issues was filed by means of an affidavit affirmed by Mr. Prabhat Chandra Rastogi who, at the relevant time, was the Under-Secretary in the Ministry of Finance, and Deputy Controller of Capital Issues in the office of Controller of Capital Issues. He has mentioned that the consent of Capital Issues was granted on 4th July, 1988 and the same was amended to a certain extent on 19th & 26th July, 1988. He has explained in his affidavit the background of the circumstances leading to the consent order.25. In relation the 3 projects, namely, (i) for manufacture of 100,000 tonnes per annum Polyvinyl Chloride (PVC), (ii) 60,000 tonnes per annum of MEG (Mono Ethylene Glycol) ; and (iii) ,000 tonnes per annum of HOPE (High Density Polyethylene), RPL submitted an application for issue of capital on or about 4th May, 1988 in the prescribed form RPL proposed raising of capital by various instruments, like, equity shares, cumulative convertible preference shares (CCP), partly convertible debentures, intended to be issued to the public, to the shareholders of RIL, debenture-holders and deposit holders of RIL. The original proposal for approval related to the following instruments:The instrument of convertible cumulative preference shares was proposed to be converted at a price to be fixed by the 2nd respondent at premium not exceeding Rs. /-per share between the third and fifth year from the date of allotment. The debentures proposed were to be of the face value of Rs. 0/-each and the conversion was to be of Rs. 200/-into shares as follows:6% of the face value (Rs, 30/-) would be compulsorily converted into equity at par at 1 year from allotment.16% of the face value (Rs, 80) would be compulsorily converted at 2 years from allotment into equity at a premium to be decided at the time of conversion but not greater than Rs. 20/- per share.18% of the face value (Rs, 90) would be compulsorily converted into equity at 3 years from allotment at a premium decided at the time of conversion but not greater than Rs. 30/- per share.60% of the face value (Rs. 300) would be redeemed between 8th and 10th years from allotment by draw of lots.26. It appears that the Industrial Credit and Investment Corpn. of India Ltd (for short ICICI), was the lead financial institution and lead manager for the issue of capital of RPL, and its merchant banking department, having the necessary expertise, was interacting between the 2nd respondent, namely, the Controller of Capital Issues and RPL. Discussions were held with ICICI to evaluate whether the company could Proceed with proposal by respondent No. 3 (RPL) by removing the instrument of cumulative preference shares as also the non-convertible portion of the debentures. This would have been necessitated by the sluggishness in the capital market, the market reactions to non-convertible debentures and the discount at which such instruments were traded after they come into existence, the complexity of cumulative convertible preference shares and the general reaction anticipated from the public for investment. It was stated that it was necessary to encourage investments and draw out savings from the home saving sector so that investments into productive and industrial sectors are promoted. The need to encourage growth of the Capital Market and to provide impetus for investment in a depressed market condition through several liberalisation steps, were factors in the consideration of the Controller of Capital Issues so that on balance investment in the industrial sector in high priority industries could be encouraged. RPL revised its proposal under which it proposed to raise equity shares of Rs. crores from RIL-its promoter. The fully convertible debenture issue of Rs. 16 crores from public was sought to be subscribed to in a manner that 50% on preferential share basis to be allotted to shareholders, debenture-holders and fixed deposit holders of RIL RPL made a suggestion for issue of debentures of the face of Rs. 200/-each with the following terms and conditions:(i) 5 % of the face value of the debenture at par on allotment ;(ii) 20% of the value (inclusive of premium) at a premium as may be decided in consultation with the Controller of Capital Issues at the end of the fourth year from the date of allotment ;(iii) the residual portion (inclusive of premium) at a premium as may be decided in consultation with the Controller of Capital Issues at the end of the seventh year from the date of allotment.27. In view of the revised project cost it was felt that the promoters contribution of Rs. crores was less and RIL as promoters were told, as asserted in the affidavit, to increase the promoters contribution to 15 % of the total project cost of Rs. 700 crores. RIL in view of this requirement, agreed to bring in Rs. 107.50 crores as its contribution to RPL out of which a sum of Rs. crores was directed to be kept as interest free unsecured loan at the time of allotment which would be converted into equity at par at the expiry of 36 months from the date of allotment of convertible debentures.28. As a practice, it is asserted, respondent No. 2 being the CCI, Observed that debenture holders/fixed deposit holders of RIL were not eligible for preferential reservation in the capital issue of RPL, and thus RPL was not permitted to issue capital to these categories on preferential basis and only the shareholders of RIL were preferential entitlement in accordance with the practice.29. By a Press Release dated the September, 1984 the 2nd respondent had issued certain non-statutory guidelines for approval of issue of secured convertible and non-convertible debentures. These guidelines had been subsequently amended by Press Release dated 8.3.1985 . Guidelines were also issued by Press Release on 19.8.198 for issue of convertible cumulative preference shares. There are guidelines issued by Press Release dated 1.8,198 for employees stock option scheme. In accordance with the guidelines of 15.9.1984, as amended on 8.3.1985, the consent for capital issue for secured fully convertible debentures was issued as the projects originally to be established in RIL were permitted by the Deptt. of Company Affairs to be transferred to RPL. The application for industrial licences and endorsements thereof from RIL to RPL had already been filed including inter alia, the endorsement of the letter of intent for the MEG Project. The scheme of finance for setting up of 3 projects, namely, PVC, HOPE and MEG had already been approved by the Deptt. of Economic Affairs in favour of RIL, promoter of respondent No, 3 and the Deptt. of Company Affairs also approved the transfer of project to RPL, and a revised scheme or finance was to be submitted by RPL. It was asserted that it was on the basis of appraisal by ICICI, a public financial institution which had evaluated the project cost for the 3 projects for the purpose of implementation of RPL. ICICI had evaluated the estimated project cost at Rs. 700 crores for setting up 3 undertakings of RPL-post transfer from RIL to RPL for implementation. Applications for the endorsement of industrial licences and the Letter of Intent had filed with the Deptt. of Industrial Development, Secretariat for industrial Approvals and these were pending consideration. The object of the issue was setting up of a new project and was within the scope of: the guidelines.30. The proposal contemplated was within the debt-equity norms and ratio in accordance with para 4 of the non-statutory guidelines as the debt in the proposal aggregated to Rs. 471 crores. This is because . debentures are considered as debt only when they are unredeemed beyond the period of years as per Explanation to Section (ii) of the Capital Issues (Exemption) Order, 1969. In the present case, 2 % of the face value of the debenture would stand redeemed by the 3rd and 4th year and before the year, and it would therefore ,not be considered as debt for the evaluating debt-equity-ratio as per the guidelines. Similarly, the promoters contribution of Rs. 100 crores plus 2i % converted debentures at the end of years would be categorised as equity representing share-capital and free-reserves converted . from the total investment of Rs. 16 crores proposed by RPL. It was assumed to aggregate to Rs. 229 crosses and debt-equity-ratio thus came to 2.0 : 1-which approximates the ratio of 2:1.31. It was further asserted that these guidelines being non-statutory and not rigid, a relaxation in the norm of debt-equity-ratio of 2:1 is considered favourably for capital intensive projects like petrochemicals which require large investments as would appear from the Note annexed to the guidelines. The guidelines postulate that these debentures should be secured. The proposal itself contemplated that the security would be in such form and manner as required by the trustees for the debenture holders for convertible debentures. It was asserted that it was not a requirement of the guidelines that the debenture issue be compulsorily under-written. The guidelines themselves contemplated that the 2nd respondent could satisfy himself that the issue need not be underwritten. An application to this effect had been made by RPL and was granted by the 2nd respondent after carefully examining this issue. The guidelines contemplated simultaneous Hasting of shares and debentures. In the present case, upon allotment, there was simultaneous compulsory conversion of % of the face value of the convertible debentures. It was stated that it was not an equity linked debenture as was asserted on behalf of the petitioner.32. However, it was further stated that, in view of the size of the issues, there was a modification dated 19th July, 1988 of the consent order which restricted and put a non-transferability condition on the preferential entitlement of the shareholders of RPL. It was limited to the corporate shareholders of RIL and relaxed for individual shareholders of RIL. The restrictive condition on their right to sell, transfer and hypothecate their shareholding was thought necessary in order to ensure that they do not disinvest soon after the issue and thus dilute their stake in the Company.33. On behalf of the Controller it was asserted that the guidelines should not be construed in a manner which would fetter, constrict of inhibit statutory discretion vested in the 2nd respondent for taking decisions in the interest of the Capital-market and for national purpose of furthering the growth of industrialisation and investment in priority sectors so as to encourage employment and demand in the national economy. The objectives of the control, according to the deponent, contemplated under the Capital Issues (Control) Act was to prevent wasteful investments and to promote sound methods of corporate finance. It was asserted that the administrative guidelines were only enabling in nature and could not and ought not to be construed as preventing the statutory authority from adopting or modifying varying norms in operational area of implementing the purposes of the Act especially when there were no letters under the Statute.34. The Controller of Capital Issues had issued, it was stated, guidelines as a result of the war-time needs and controls, since the year 1947 and flow from the experience gained under the Defence of India Rules 1939. Hence, according to the deponent, these controls have been progressively reduced and the Capital Issue (Exemption) Order, 1969 was brought into force so as to reduce the rigours of the Act. In the absence of any control for capital issues for securities, according to the deponent, there would be no fetter or restriction on the part of the Company to borrow or raise capital from the market. It is to check raising of wasteful capital and to avoid investment being made in non-productive, non-priority sectors and non-commensurate with the needs that the Act in question was brought into force. This is being implemented with the aid of competent bodies. It is further stated that the stipulation for fixation of premium at the time of conversion is not a new practice and had been applied in the year 1986 in the case of Standard Medical Leasing as also in ATV Projects Ltd. and the Industrial Credit & Investment Corpn. of India Ltd. As regards Convertible Debenture Issue, it was asserted that there is no violation of the provisions of Section 81(5) of the Companies Act, 1956 as the section contemplates only an optional conversion of Government loan into equities, In the instant case, there is a compulsory conversion of publicly held debentures of the convertible type. In the premises, Section 81(5) of the said Act has absolutely, according to the deponent, no application to the facts and circumstances of the case.

Court's reasoning:
38. On 10th October, 1983 as RIL proposed to engage in manufacture of MEG, it filed an application for grant of an Industrial Licence under the Industries (Development & Regulation) Act, 19 1. On 16th August, 1984 RIL received a Letter of Intent No. 653 (84) Regn. No. 1323 (83)-IL/SCS issued by the Govt. of India for the manufacture of ,000 TP Act of MEG. Thereafter, from time to time on the applications made by the RIL., the Govt. of India by various letters extended the validity of the period ending up to 30th June, 1989. The last of such extensions was made by a letter dated 2nd September, 1988. On 11th may, 1988 pursuant to an application made, the Govt. of India permitted expansion of capacity for manufacture of MEG from ,000 TP Act to 60,000 TPA. From 12th January, 1988 to 22nd July, applications were made by RIL for change of Company from RIL to RPL for the MEG Project. It appears that on 11th August, 1988 approval/ sanction was granted by the Govt, of India for change in the implementing agency from RIL to RPL. On or about 19th January, 1985 a letter from the Govt. of Maharashtra was issued, stating that there was no objection to the Companys proposal for change of location for the MEG Project from Maharashtra to Gujarat. It also appears from the various documents which are mentioned in Vol. IV of the present Paper-Books at different pages (from 22 to 44) that by various orders under the Monopolies & Restrictive Trade Practices Act, sanctions and modifications were approved, the latest section being dated 11th October, 1988 whereby the Govt. approved the proposal of RPL for modified scheme of Finance. It is also significant to mention that on 25th January, 1988 an application was made under Section 22(3)(d) of the Monopolies & Restrictive Trade Practices Act with the proposal to implement the MEG Project along with other projects of RPL. It may be mentioned that by a letter dated 6th June, 1988 RIL had informed that they had originally planned to utilise a sum of Rs. 85 crores from G Series debentures for this project. But, however, they were not able to utilise this money as the entire G Series amount had been utilised for PTA and Lab projects including the working capital on account of overrun in the cost of Lab and PTA projects. Hence, it applied for permitting a new scheme of finance. By an order dated 21st July, 1988 the Govt. accorded approval to the proposal of RIL for modified scheme of finance to be implemented by RIL Thereafter, RPL made an application for modification of the schema of finance and the same was approved by the Govts order dated 11th October, 1988.39. It appears that on 9th October, 1984 pursuant to an application made by RIL for foreign collaboration with M/s. Union Carbide Corporation, USA, the Govt. of India by its order of that date accorded approval to the terms of the foreign collaboration for a period of six months for this project. It further appears that on 14th March, 1986 pursuant to an application made by RIL, the Govt. accorded approval for foreign collaboration with M/s. Scientific Design Company. It may, however, be mentioned that there was a letter dated 30.4.1986 whereby approval was granted by the Reserve Bank of India in respect of foreign collaboration agreement with M/s. Scientific Design Co. USA.40. The next aspect of the matter which has to be borne in mind in view of the contentions urged was regarding the licences. It appears that there was an application on 2th March, 1987, for licence. On 9th August, 1988 the Industrial Licence dated 2.3.1984 granted to RIL for manufacture of PVC was endorsed to RIL. This is important because one of the contentions that Shri Pagaria during the course of his long submissions made was that there was no valid licence.41. It also appears that so far as the Monopolies & Restrictive Trade Practices Act is concerned, an application was made by RIL on or about 12th October, 1984 under Section 22(3)(a) for manufacture of PVC. Several other steps were taken and on 29th June, 1988 there was an order of the Govt. of India under Section 22(3)(d) of the Act, according approval to the proposal for modified scheme of finance.42. There was a further proposal for modification and further orders. Last of such order was dated 11th October, 1988. Similarly, regarding the foreign collaboration, there were approval letters and the last one was dated 12th August, 19S8 for endorsement of foreign collaboration approval in favour of RPL. So far as HOPE is concerned, it appears that there was a valid licence ; and it may be mentioned that on 24th August, 198 pursuant to an application made by RIL under Section 22(3)(a) of the Monopolies & Restrictive Trade Practices Act, the Govt. granted approval for the establishment of a new undertaking for manufacture of HOPE.43. Regarding foreign collaboration, application was made by RIL in 1984 for approval of foreign collaboration with M/s. Du Pont Inc. Canada, for manufacture of HOPE. Such approval was given and the validity was extended and the foreign collaboration approval was endorsed in favour of RPL on 12th October 1988. Similar other consents were there, Mention may be made of letters dated 28th April, 11th March 6th December. 1986 2nd January, 1987, 15th July, 25th 26th July. 19th August 1988 which appear at various pages of Vol. IV of the papers Finally, capital-goods clearance was endorsed in favour of RPL for the PVC project on 12th August, 1988. Capital goods clearance was also endorsed in favour of RPL for HDPE project on 23rd August 1988. Thus it will be seen that all the basic ground work had already been done by the RIL.45. The Press note earlier referred to makes it clear that the transfers from one company to an allied company were considered unexceptionable except where trafficking in licences is intended. In this situation the change of name from RIL to RPL, of the licences, letters of intent and other approvals was only a matter of course and much importance cannot be attached to the fact that CCI did not insist upon these endorsements being obtained even before the letter of consent is granted. In any event the letter of consent is very clear. Clause (h) of the conditions attached to the consent letter make it clear that the consent should not be construed as exempting the company from the operation of the provisions of the Monopolies & Restrictive Trade Practices Act, 1969 as amended. Clause (e) makes it clear that it is a condition of this consent that the company will be subject to any measures of control, licensing, or acquisition that may be brought into operation either by the Central or any State Government or any authority therein. Under Clause (t) the approval granted is without prejudice to any other approval/permission that may be required to be obtained under any other Acts/laws in force. Having regard to the above history as well as having regard to the terms and conditions of the consent letter, the grant of consent itself being conditioned on the RPL obtaining the necessary approvals, consents and permissions before embarking on the project, we do not think that there was any impropriety in the CCI granting the consent without waiting for the formal endorsement of the various licences, letters and approvals in favour of the RPL.46. It is stated in the affidavit that in March/April, 1988 discussions centered around the concept of cumulative convertible preference shares (CCP) which was mooted as an instrument for the means of finance. The instrument would have been equity shares to the extent of Rs. 57 crores, cumulative convertible preference shares to the extent of Rs. 81 crores and convertible debentures to the extent of Rs. 478 crores with four conversions. In this connection, reference may be made to Annexure 1 at page 39 of the reply affidavit filed in these proceedings by RPL, Thereafter, on 4th May, 1988 RPL made an application to the Controller of Capital Issues seeking permission to make an Issue of Capital on certain conditions. Specific details thereof are not necessary to be set out here. It also made a proposal for issue of 81 lakhs 10% cumulative convertible preference shares of Rs. 100/-each for cash at par through prospectus to non-resident Indians/resident Indian public-81 crores. It is stated that in accordance with the present guidelines issued by the Govt. of India, the Company intended to retain excess subscription amount to the extent of % of Rs. 66 crores, i.e., a right to retain an additional amount.47. It was further stated that in accordance with the Guidelines issued by the Government of India, the Company had intended to retain excess subscription amount to the extent of 5% of Rs. 66 crores, i.e., a right to retain an additional amount of Rs. 8 crores. The idea was that the company would in the event of over-subscription request the CCI for allotment of such additional amount of Rs. 8 crores. It was further proposed to issue apart of the cumulative convertible preference shares to NRIs and a part to the foreign collaborators.The institutional proposal of the project cost emerged at Rs. 700 crores instead of Rs. 6 0 crores and it was then felt that RIL should increase its own contribution to the project by way of a promoters contribution at Rs. 100 crores, thereby increasing its stake to 14% at the suggestion of CCI. It was stated that this was also a requirement of the CCI guidelines and MRTP conditions At the end of June, 1988, there was an amendment of the Order by the Department of Company Affairs in favour of RPL for PVC. Similarly, on 21st July, 1988, the order for MEG passed 22 for RIL was amended permitting RPL to undertake the new projects for implementation of the MEG Project. It is not necessary to set out in detail these proposals. On 4th July, 1988, CCI granted the consent under the Capital Issues (Control) Act, 1947 to the public issue. There were variations between the proposal and the Order of consent of the CCI.55. On being moved, this Court, on August 19, 1988, passed an order in Transfer Petitions No. 192-193 of 1988 staying the three pending Writ Petitions in the three High Courts, namely Bangalore, Delhi and Jaipur and further stayed the proceedings in the suit being Civil Suit No. 1172 of 1988 filed in Baroda. It was directed that the issue of debentures would proceed without hindrance notwithstanding any proceedings instituted or orders passed and that any order or direction or injunction already passed or which might be passed would remain suspended till further orders of this Court. It was mentioned that on August 29, 1988, the complaint filed by Shri Sharma before the MRTP Commission was dismissed. On August 31, 1988, one Shri Arvind Kumar Sanganeria issued notice through his Advocate advising that a Writ Petition was being preferred in the Bombay High Court. On September 1, 1988, this Court granted an ex-parte stay of the proceedings in Writ Petition. No. 4388 of 1988 pending before the Bombay High Court. As mentioned hereinbefore, on September 9, 1988, this Court had transferred the four Write Petitions in the four High Courts and civil suit to this Court. It appears that there was a further writ petition filed by Shri Sunil Ambani in the High Court of Allahabad on the basis of two articles published in the Indian Express.59. Section 3(1) of the said Act enjoins that no company incorporated in the States shall, except with the consent of the Central Government, make an issue of capital outside the States. The other sub-sections of Section 3 deal with the modalities of such consent.60. It may be mentioned that the Statement of Objects and Reasons of the Act states that the object of this measure is to keep in existence...the control over capital issues which was imposed by Rule 94-A of the Defence of India Rules in May, 1943 and continued in force after the expiry of the Defence of India Act by Ordinance No. XX of 1946. Statement further states that although there has been an appreciable change in the general conditions which constituted the principal reason for the introduction of the control during wartime, it was thought in the light of experience gained that the control was still necessary to secure a balanced investment of the countrys resources in industry, agriculture and the social services. (See Gazette of India, 1947, Part V, p. 264).62. We have referred to the debates only to highlight that the purpose of the Bill was to secure a balanced investment of the countrys resources in the industry and not to ensure so much the soundness of the investment or give any guarantee to the investOrs. The section of the Act in question in express terms does not enjoin the CCI to discharge such obligations nor does the background of the Act so encompass.63. There was considerable discussion before us as to the scope of the powers and responsibilities of the CCI while granting his consent to an issue of shares and debentures proposed by a company.64. We are unable to agree fully with this somewhat narrow aspect of the CCIs role. In the very speech in Parliament to which the learned Additional Solicitor General referred, the Minister also stated:Apart from this main object of the Bill which is thus to prevent the diversion of investible resources of non-essential projects, the control has also been used for many other purposes. The more important of these purposes which may be called ancillary purposes are the regulation of the issue of bonus shares, regulation of capital reorganisation plans of companies including mergers and amalgamations which involved the issue or re-issue of capital, the regulation of the capital structure of companies with a view to discouraging undesirable practices, namely, issue of shares with disproportionate voting rights and encouraging the adoption of sound methods and techniques in company floatation, regulation of the terms and conditions of additional issues of capital etc.(emphasis added)65. That apart, whatever may have been the position at the time the Act was passed, the present duties of the CCI have to be construed in the context of the current situation in the country, particularly, when there is no clear cut delineation of their scope in the enactment. This line of thought is also reinforced by the expanding scope of the guidelines issued under the Act from time to time and the increasing range of financial instruments that enter the market. Looking to all this, we think that the CCI has also a role to play in ensuring that public interest does not suffer as a consequence of the consent granted by him. But, as we have explained later, the responsibilities of the CCI in this direction should not be widened beyond the range of expeditious implementation of the scheme of the Act and should at, least for the present, be restricted and limited to ensuring that the issue to which he is granting consent is not, patently and to his knowledge, so manifestly impracticable or financially risky as to amount to a fraud on the public. To go beyond this and require that the CCI should proper in depth into the technical feasibilities and financial soundness of the proposed projects or the sufficiency of otherwise of the security offered and such other details may be to burden him with duties for the discharge of which he is as yet ill-equipped.67. We are unable, however, to accept the criticism that there has been deviations from the guidelines which are substantial. We have referred to the guidelines. We do not find that there has been any requirement of such guidelines which could be considered to be mandatory which have not been complied with. We have considered this carefully and found that there have been no deviations from paras 3,5,12,13 and 14 of the guidelines. Nor has there been, as pointed out by the respondents, any infraction of guidelines Nos. 2 and 4. The fact that debentures of the face value of Rs. 200 have been approved as against the normal face value of Rs. 100 envisaged under para 8 or that the requirements of the service of underwriters have been dispensed with in exercise of the discretion conferred by para 11 do not constitute arbitrary, substantial or unjustified deviations from those guidelines. There has been sufficient compliance with the guidelines on the quantum of issue, debt-equity ratio, interest rate and the period of redemption and also guideline No. about the security of the debenture and there was sufficient security for the debentures in the facts and circumstances of this case. The preference in favour of shareholders of RIL was justified and based on intelligible differentia. Indeed, if we consider the role of the CCI it is primarily concerned to ensure a balanced investment policy not to guarantee the solvency or sufficiency of the security. In our opinion, most of the criticisms directed against deviation from guidelines were misplaced.We are unable to accept this contention.There is substance in this contention.(iii) The third loophole, according to the petitioners, is the insecurity by the terms of clauses and 6 of the prospectus dealing with created security and borrowings. Sri Ganesh submits that clauses and 6 severely qualify the rights of the debenture holders under the present issue in several respects:(a) There is, in their favour, only a residual charge on all or any of the assets of the company at Hazira and other places which shall rank expressly subject to subservient and subordinate to all existing and future mortgages, charges and securities as may be hereafter created by the company in any manner whatsoever ;(b) The company need not obtain the consent or concurrence of the debenture holders for creating any such mortgage etc. which will have priority over the present debenture issue or for disposing of any of the assets of the company:(c) Not only is the residential complex of the company excluded from the purview of the security, it is also open to the company and the trustees of the debenture holders to the exclusion of any of the company from the purview of the security ;(d) The current assets or the bankers goods such as stocks, inventories book debts, receivables, work in progress, finished and semi finished goods etc. stand excluded from the security.(e) Clause 6 again emphasises that the company shall be at liberty to raise any further loans and secure the same in priority to the present security and/or on such terms as to security, ranking or otherwise as may be mutually acceptable to the company and the trustees of the debenture holders without being required to obtain any further sanction from the debenture holders.If these clauses are closely perused, Sri Ganesh urges, it will be seen (a) that the charge in favour of the debenture holders has a very poor priority as it can rank subservient to any securities that may be created by the company in future in respect of further borrowings, (b) that the company and debenture trustees, by mutual agreement, can take any of the assets of the company outside the purview of the present security and (c) that the company can create such future securities as have a priority over the present issue or exclude assets from the purview of the security without the consent or concurrence of the present debenture holders.71. We think, as has been urged on behalf of the company, that these arguments proceed on a mis-apprehension of the true nature and scope of clauses and 6 above as well as of the nature and legal effect of a floating charge-what has been described in this prospectus as a residual charge-that is created at the time of issue of such debentures. In the first place, these clauses are only enabling in nature so as to permit the company, despite the mortgage in favour of debenture holders, to carry on Us business normally. It will be appreciated that the companys normal business activities would necessarily involve inter alia, alienation of some of the assets of the company from time to time (such as, for example, the sale of the goods manufactured by the company) as well the procurement and discharge of loans and accommodation facilities from banks, financial institutions and others (such as, for example, entering into agreements for hire purchase of plant and machinery and making payments of installments towards their price). The entire progress of the company would come to a standstill in the absence of such an enabling provision. Such a provision is not only usual but also essential because the basic idea is that the finances raised by the debentures should be employed for running the project profitably and thereby generating more and more funds and assets which will also be available to the debenture holders. Secondly, we think-and indeed RPL also conceded both in arguments as well in an affidavit filed on its behalf by Sri Mohan Ramachandra dated 10th January, 1989-that what the two clauses provide is only that the consent and concurrence of the debenture holders need not be obtained by the company before creating securities that may have priority over the present issue and that, under clauses and 6 read harmoniously together, the trustees for the debenture- holders have to concur before the company can raise any future borrowings and create therefore a security which will have priority over the security available to the present debenture holders. The Trustees here are not stooges of the company. The ICICI is not only a financial institution in the public sector but is also one of the institutions financing the project and thus having a stake in the success of the project. It can be trusted to adequately look after the interests of the debenture holders. Thirdly, as has been pointed out by the company, the misapprehensions of the petitioners are more imaginary than real. The company, in its affidavit, has pointed out that the Debenture Trust Deed dated 7.11.1 88, which has since been executed in the present case, contains a provision by which, at the time of creation of any future charge, the terms and conditions as to ranking have to be agreed upon between the RPL and ICICI.Thus if at any time the company proposes to create such higher-ranking charges, the trustees for debenture holders can stultify the same by taking immediate action. Fourthly, the impression sought to be created by the petitioners that the company may go on creating encumbrances left and right, to the detriment and prejudice of the present debenture-holders overlooks several restraints imposed on the company in this respect under the Companies Act, the CCA Act, the Monopolies & Restrictive Trade Practices Act and involving the consent of public financial institutions, commercial banks, the term lenders, the shareholders, the MRTP Commission the Central Government and the CCI before the creation of such securities. Lastly, the contention of the petitioners completely overlooks the basic principles underlying the commercial law concept of debentures secured by a floating charge as evolved in British Jurisprudence over the past two hundred years. Clauses like clauses and 6 are usually inserted in debenture issues and the company has drawn our attention to two like instances in certain issues approved in December 1988 and January, 1989. It has also been argued for the company that a fully convertible debenture is not a debenture at all in the true sense of the term and is more akin to an issue of equity and that, therefore there is no need that it should be covered by adequate security at all. These aspects of the matter are dealt with by us at some length later ; it is sufficient here to say that we are unable to accept the contention that the security in favour of the debenture holders is illusory and inadequate because of the wide language of Clauses (5 ) and (6) of the prospectus. Both these clauses have to read together and so read, we have no doubt, do not permit the creation of any charge ranking in priority to the charge created under these debentures save with the consent of the trustees of debenture holders.This argument is untenable. We have already pointed out, there was sufficient security as was warranted by the issue. This was an issue of 12. % fully secured convertible debentures of Rs. 200/- each. We have examined the share capital, the present issue and the scheme of conversion. In the premises, it is not possible to accept the submission of Shri Ganesh that the Controller satisfied himself (as stated by him in his affidavit) with the bare statement of the applicant company (RPL) that security would be created as per the requirements of the debenture trustees. There was this statement that the debenture trustees were well known financial institutions and they had been entrusted with this obligation. Learned Additional Solicitor General drew our attention to similar debentures and submitted and, in our opinion, rightly that this was the usual practice. It is not possible for the CCI to ensure more than that. The prospectus was not misleading to that extent. It, therefore, cannot be accepted that the CCI failed to apply its mind before the documents before him. Reliance was placed on the fact that the RIL had proposed the issue of shares for G-series for more or less identical project.These guidelines had been subsequently amended by a Press Release dated 8th March, 198 and these were released on 19th August, 198 for issue of convertible cumulative preference shares and also there are guidelines issued by Press Release dated 1st August, 198 for employees stock option scheme. In accordance with this guidelines, according to the deponent on behalf of the CCI, the consent of the CCI for capital issue for secured fully convertible debentures was issued as the projects originally to be established in RIL were permitted by the Department of Company Affairs to be transferred to RPL and endorsements thereof from RIL of RPL had already been filed including, inter alia, for endorsement of the latter or intent for the MEG Project. The scheme of finance for setting up of three projects namely PVC, HOPE and MEG had already been approved by the Department of Economic Affairs in favour of RIL. In that context, in our opinion, to contend that there was violation of the guidelines because the RPLs project was not a new project was too narrow and legalistic view.The CCI ought to have withheld permission for a fresh capital issue in the name of RPL for the very same project. However, the CCI did not appear to have applied his mind, according to Shri Ganesh. Consent Order, therefore, according to Shri Ganesh, was bad. We are, however, unable to accept this submission. The CCI was not performing the role of a social mentor taking into account the purpose of RIL. If RIL has misutilised any of its funds or the fund had not been utilised for Gscries. then RIL would be responsible to its shareholders or to authorities in accordance with the reliant provisions of the Companies Act, 19 6, This aspect does not enter into sanctioning the capital issue for the new project in accordance with the guidelines enumerated hereinbefore. That apart, even If RIL and RPL have to be treated as one for this purpose and the grant of consent for earlier debenture issues in favour of RIL are to be taken into account in judging the necessity of the issues, there is no illegality or irregularity in the impugned grant of consent to RPL. As referred to elsewhere, RIL had not been able to utilise any part of the G series of debentures on the MEG project as there had been a overrun in the PTA & LTB projects. Eventually, for reasons adverted to earlier, it was decided to have the MEG, PVC and HDPE projects undertaken by floating RPL, a wholly-owned subsidiary. In the result, even if we look at the projects not as new ones but only as those of the RIL to be implemented by RPL, the additional finances were needed for the extension, expansion and diversification of the projects originally envisaged. This is one of the objects for which a debenture issue is permissible under the Dimes,73. This has caused us certain amount of anxiety. Speed is good; haste is bad and it is always desirable to bear in mind that one should hasten slowly. However, whether in a particular case, there was haste or speed depends upon the objective situation or on overall appraisement of the situation. Here, as discussed earlier, the material shows that the details of the proposals have been examined and discussed and that an examination of the merits has not been a casualty due to the speed with which the application was processed; and especially in view of the fact that no injury has been caused to the investors and no substantial loss to their securities have been occasioned, we are of the opinion that much cannot be made of this criticism. Learned Additional Solicitor General placed before us other instances where applications had been sanctioned within shorter times.In our opinion, these factors were sufficient to justify the treatment of RIL differently from other investing public and thus the treatment does not amount to any discriminatory benefit to RIL in respect of the debentures of RPL. As a matter of fact, this was a known face and the shareholders or the subscribing debenture holders would be aware of the same. Shri Ganesh sought to urge that the CCI had not made any attempt to appreciate or quantify the extent of the said benefits and advantages and go into the question of whether the same are fair, reasonable and just. Consequently, for this reason also, there had not been, according to Shri Ganesh, due application of mind by the CCI before the Consent Order was issued. We are unable to accept this criticism.75. The discrimination alleged is on two grounds. The first is that RIL is entitled straightaway to the allotment of shares of the face value of Rs. 57. 50 crores whereas only 5% of the investment by the debenture-holders can be converted into shares at par simultaneously with the issue. The second is that a loan of Rs. crores advanced by RIL to RPL will be converted into shares at par at the end of 3 years whereas the debenture-holders will have to pay a premium even for converting 20% of their debentures into shares by that time. These allegations do not bear scrutiny. So far as the first ground is concerned, there is no justification for a comparison between these two categories of investOrs. RIL is the promoter company which has conceived the projects, got them sanctioned, invested huge amounts of time and money and transferred the projects for implementation to RPL. It is, therefore, in a class by itself and there is nothing wrong if it is allotted certain shares in the company, quite independently of the debenture issue, in lieu of its investments. So far as the second ground is concerned, it overlooks certain disadvantages attached to RIL in regard to the loan of Rs. 50 crores advanced by RIL as compared with the investor in the debentures. Firstly, RILs advance is interest free for 3 years whereas the debenture holders get interest at the rate of 12.5% during the period. Secondly, the debenture loan is secured while tee RILs are not. Thus the debenture-holders have certain benefits which RIL does not have and, if the debenture-holders have the disadvantage of having to pay a premium, that cannot constitute basis for a ground of discrimination.76. These considerations apart, we would like to observe that we are unable to appreciate how any question of discrimination is at all relevant in the present context. It is a company-not the State or a State instrumentality-that is issuing the shares and debentures. It is entirely for the company to issue the shares and debentures on such terms as they may consider practicable from their point of view. There is no reason why they should not so structure the issue that it confers certain greater advantages and benefits on the existing shareholders or promoters than on the new subscribers to the debentures. We do not think that it is permissible for the CCI to withhold consent only for this reason or to stipulate that consent can be given only if the shareholders and promoters as well as prospective debenture holders are all treated alike. The subscribers to the debentures are only lenders to the company who have an option to convert their debt into equity on certain terms, It is perfectly open to the subscribers to balance the pros and cons of the issue and to desist from taking the debentures if they feel that the dice are loaded unfavourably in favour of the proprietors of the company.78. One may perhaps concede that, with the vast expansion in recent years of the corporate sector and its constant tendency to have recourse to public funds for securing finances for its projects (either by way of share capital or borrowed capital), the scope of the responsibilities of the CCI can no longer be as limited as before. It may no longer be restricted merely to the task of preventing an imbalance of investment in various sectors or the diversion of investment to non-essential projects. The petitioners may perhaps have a point in suggesting that the CCI should as burdened with a duty also to safeguard the interests of the public who are invited to participate in such financing on large scale and at least to satisfy himself that the project for which funds are needed is not in the nature of a South-sea bubble and that the volume, terms and conditions of the issue proposed by the company are not such as to constitute a fraud on the public. But we think that the time is not yet ripe for placing on the office of the CCI, as at present constituted, more than a skeletal outline of responsibility in this direction ; his shoulders are, as yet, not strong enough to bear such burden. He does not have the time, the staff, the powers of enquiry, the benefit of public hearing, the requisite background, or the economic commercial or financial skill or expertise to so assess the technical, commercial and financial aspects of the projects as to be able to give the public investor a guarantee that he is not being led up the garden path. All that one can say at present is that the parameters of his action have to be found within the four corners of the Act and the guidelines. May be, he can legitimately withhold his consent to a project that is ex facie impracticable (for instance, as was put to the parties in the course of hearing, a project to convert base metal into geld) or a project, which, in the present state of finances and scientific knowledge and progress of our country, is an impossibility-(for example, to have a transport service to the moon). May be, he also can in a proper case, refuse his consent to a scheme of finance if, ex facie, and without any detailed investigation, he is satisfied, that it is too big for the applicant company to handle, or too risky and onerous to be permitted in public interest. But this is a decision which he will have to venture upon, on his own responsibility, in patent cases where the nature of the project or the scheme of financing is, on its face, startlingly non-feasible, impracticable or risky. He cannot, however be compelled to withhold consent, or found fault with for having granted consent, in a case such as this, where the proposed project is in a core industrial sector, where there considerable scope for foreign currency savings and the scheme of financing proposed has been developed in consultation with and scrutinised and approved by, a leading public sector financial institution (which has also agreed to be the trustee for the Debenture-holders). It is too much to suggest that the CCI should be held to have failed in his duty by accepting the opinion of such institutions and not investigating for himself from various angles and in particular, the adequacy of the security offered to the debenture-holders under the scheme.79. While we do appreciate that in the changed atmosphere, the corporate sector, when seeking to attract public moneys while raising new capital must perform both responsible and responsive roles, it is difficult to enjoin that the CCI while considering the question of consent/sanction of the capital issues can fulfil any role beyond the policies prescribed under which, as noticed before, it was enjoined to function. There are other various Acts like the Income-Tax Act, Companies Act, Monopolies & Restrictive Trade Practices Act to subserves other social objectives which are conducive or ancillary to the directive principles. Nelson, it is reported to have said before the battle of Waterloo, that England expected every man to do his duty. It is well to remember that every authority in a vast developmental society must perform his role keeping in view the part he is expected to play in the background of the whole perspective and should not encroach upon others taking the onus upon himself to do everything. That would lead to chaos and confusion.81. We find the factual position to be this. The application for consent to the issue had not specifically earmarked any portion of the issue to the employees of RPL and RIL. In the course of the discussion with the CCI, it was suggested that 12,90,000 debentures should be offered by way of preferential allotment to the employees of the RIL and RPL Para of the consent order by the CCI conveyed the approval by the Central Government under proviso to rule 19(2)(6) of the Securities Contracts (Regulation) Rules, 1957 subject to the conditions that the allotment to the employees shall not exceed 200 shares per individual. The Company by its latter of 7th July pointed out that shares in the above para was a mistake for debentures and also suggested that a maximum of 200 debenture-which on first conversion would become 200 shares-be allotted to each of the employees of RPL as well as RIL. The CCI, however, modified Para by his letter of the 19th July, 1988 to say that allotment to the employees shall not exceed debentures per individual. In this context, it does not appear that the restriction of the allotments to the employees was at the instance of the company nor does it seem that any discrimination was intended in respect of the allotments to the employees. Nor has our attention been invited to any legal requirement or guideline prescribing any fixed or minimum quota of allotment to the employees of the company. We are, therefore, unable to see any discrimination. In any case, the petitioner in this case has no cause for grievance on that score.88. Hazira has been selected with special reference to the availability of natural gas oil from South Sea Basin and it is countrys first ethylene handling port and has economies of transportation and terminal facility at Hazira etc. It is not necessary to set but however how the company developed in different stages. The application for consent was filed on 14th May, 1988 as mentioned hereinbefore. The licence and letter of intent were endorsed in favour of the RIL and the scheme for finance in favour of the RPL.In fact in Re. Florence Lands case (supra), the Court observed that if the companies were not allowed to resort to floating charge, they would have to call the meeting of existing charge holders/debenture holders each time they intend to create future charge. The decision in Re. Panama New Zealand, and Australian Royal Mail Co., as indicated in Palmers Company Law at page 708 is a landmark because it established the validity and the utility of a floating charge. In the instant case, if the permission of the debenture holders A ere required or is insisted upon to create future security, 2. million debenture holders would have to be informed and invited for meeting. The extravagant effects of this course would be colossal especially when a shareholders meeting is also additionally called for the same body of persons. It is, therefore, incorrect to say that a floating charge creates an illusory charge because future securities can be created ranking in priority over it. The legal position is that a floating charge creates a present equitable right in favour of the debenture holders/trustees. It creates a present charge in the property/undertaking of a company even before the time of payment of the debenture arrives, The fact is that a company can deal with its property without the permission of debenture holders/trustees, before crystallisation by resorting to a floating charge on the undertaking (See the observations in this connection in Re. Florence Lands case (supra); Re. Standard Manufacturing Co. 1891 1 Ch. 627; Re. Borax Foster v. Borax Co. 1901 (1) Ch. 326; Greatnor Maritime Co. Ltd v. Irish Marine Management Ltd. 1978 (1) WLR 966. This however does not mean that the company can keep on creating future charges with superior ranking without any let or hindrance because the debenture holders/trustees can any time move to crystallise the floating security if they felt the security is in jeopardy. 3094. In the present case, there is no case to suggest or believe that ICICI (which is one of the most important national Government financial institutions,) will not act effectively and promptly to ensure that the security in favour of the debenture-holders is not rendered illusory. Even Guideline dated 14th January, 1987, has cast the responsibility of supervising creating, monitoring, and implementation of security in favour of debenture-trustees. The company cannot normally create a general floating charge ranking in priority to or pan passu with a prior floating charge unless the prior floating charge itself permits such a course. In this connection, reference may be made to the observations in The Encyclopaedia of Forms and Precedents, 4th Edn., Vol. 6 para 27 at page 1102-1103.It, Therefore, follows that : -i) A debenture is usually secured by floating charge only.ii) A company which creates floating charge has a right to create future security which may rank superior in ranking.iii) However, this right of the company may be restricted by agreement.iv) Where no restriction is provided, any future specific charge will rank superior to the earlier floating charge (Section 123 of the Companies Act).v) Again, where no specific provision is made in the earlier floating charge with respect to the ranking of future floating charge then any future floating chare will be inferior to the earlier floating charge. In this connection, reference may be made to Section 48 of the Transfer of Property. The risk of floating charges can be controlled by creating legal mortgage in favour of debenture trustees as has been explained in All About Debentures by Sen & Chandreashekhar [p. 66-67].95. In the present case, a legal mortgage has been created by RPL in favour of the trustees in respect of its immovable and movable assets, except book debts, in respect of which financial institutions will hold a first charge on account of foreign loan. In the present case, RPL does not have any existing loans. Therefore, the charge in favour of the debenture holders is presently the first charge. No future borrowing is contemplated at this stage except the foreign currency loan to the amount of Rs. 84 crores. Therefore, the submission that the security is illusory cannot be accepted and the CCI is right that the apprehension is based on factually unsound and unfounded grounds. Even if the value of the foreign currency which has been sanctioned in principle by the three financial institutions, taken into account, the assets coverage goes down at each stage and does not make any critical difference to the value of the security of the debenture-holders under the Trust Deed. The purposes of borrowings, namely, term-loan borrowings, deferred payment credits/guarantees and borrowing for financing new projects do not, on analysis, raise any difficulty. There are sufficient in-built checks and controls. The company, being an MRTP company would have to obtain both MRTP permission for creating any security irrespective of its value and fresh CCI consent under the CCI Act, except in case of exempted securities. Therefore, in our opinion, this submission is really in the nature of a red-herring. It was submitted that we should at least direct that the future security should not rank superior to the floating charge in favour of the existing debenture holders.96. Having regard to the factors which the investors should have taken into consideration, we are of the opinion that all relevant factors were borne in mind by the CCL There is no substance also in the ground of discrimination. It is reiterated that Article 14 of the Constitution does not forbid reasonable classification. RIL is a promoter company. It had conceived the projects got them sanctioned and invested hedge amounts of time and money in the process. It was open to RIL to undertake these projects, on its own and not to make any public issue at all. The ground that there was non-application of mind because the CCI did not take into consideration the issue of G-Series is also without substance. Under Guideline 2(a) of the Guidelines of 1984, capital could be raised only for setting up of new project. MEG, it was submitted, was not a new project for capital had been raised for it by RIL under G-Series, It was further submitted that the Controller did not ask RPL to get the bankers prior clearance certificate under Guideline II (v) of the Guidelines of January 14, 1987. Finally, the CCI did not take note of the fact that the application under Scheme I of Rule III of the Capital Issues (Application for Consent) Rules did not contain the relevant information. The position of cost over run has been explained. So there was no substance in the submission that it was not a new project. Secondly, it cannot be accepted that the CCI did not insist the bankers prior clearance certificate. These guidelines apply to non-convertible debentures or partly convertible debentures. These do not apply to compulsorily convertible debentures. Even assuming that these are applied to compulsorily convertible debentures, there was no need for the CCI to ask for the bankers prior clearance certificate because RPL was not issuing any new set of debentures. All requisite information had been furnished.97. Shri Ganesh as well as Shri Pagaria tried to submit that in order to protect the investors, a function, which they submitted, the CCI, in changed circumstances should determine whether the project is profitable. Where a project has been appraised by an institution like ICICI, Controller can safely assume that it is profitable and he need not engage in separate independent exercise of his own in this regard. The scope and nature of the Controllers powers and jurisdiction have to be determined in the light of the specific provisions of the CCI Act, its history, the debates, to which we have referred, the capital structure of the national economy and its over all direction, in higher priorities, are decided by the Government and the planning Commission by formulating Five Year Plans. However, the capital structure and direction of a particular industry is decided in terms of the provisions of IDR Act. That a particular industrial house may become a monopoly or otherwise have a restrictive and detrimental effect on the economy of the country, is the concern of Monopolies & Restrictive Trade Practices Act. Therefore, the scope of the CCI under the Act is of a limited nature and must be kept in its proper perspective. It is true that he cannot, as was contended on behalf of the petitioner, oblivious of the fact that small scale investors are coming into operation and there is a social obligation of the State to provide safe guidelines. Yet, each authority must circumscribe its work in the proper light. Unless, therefore, CCI acts perversely, irrationally or with procedural impropriety, his decisions cannot and should not be faulted on the ground that other consequences might follow. Of course, no other consequences have been indicated before us.98. As a matter of fact, there was no allegation that the CCI acted mala fide or on extraneous considerations. The CCI applied its mind to the facts of this case and the factors in general. There was no undue haste. A statement was produced indicating that the application for grant of consent had been disposed after some time, but within the time frame in which such applications are normally disposed of.99. It may, however, be stated that being not statutory in character, these guidelines are not enforceable. See the observations of this. Court in Fernandez v. State of Mysore [1967]3SCR636 (Also see R. Abdullah Rowther v. State of Transport, etc. AIR 19 9 SC 896 ; by. Asst. Iron & Steel Controller v. Manekchand Proprietor [1972]3SCR1 ; Andhra Industrial Work v. CCV&E 1971 SCR 321; K.M. Shanmugham v. S.R.V.S. Pvt. Ltd. [1964]1SCR809 . A policy is not low. A statement of policy is not a prescription of binding criterion. In this connection, reference may be made to the observations of Sagnata Investments Ltd. v. Norwich Corporation 1971 2 QB 614 Also the observations inBritish Oxygen Co. v. Board of. See also Foulkes Administrative Law, 6th Ed. at page 181-184. In Ex P. Khan 1981 1 All. E.R., the Court held that a circular or self made rule can become enforceable of the application of persons if it was shown that it had created legitimate expectation in their minds that the authority would abide by such a policy/guideline. However, the doctrine of legitimate expectation applies only when a person had been given reason to believe that the State will abide by the certain policy or guideline on the basis of which such applicant might have been led to take certain actions. This doctrine is akin to the doctrine of promissory estoppel. See also the observations of Lord Wilberforce in IRC v. National Federation 1982 AC 617. However, it has to be borne in mind that the guidelines on which the petitioners have relied are not statutory in character. These guidelines are not judicially enforceable. The competent authority might depart from these guidelines where the proper exercise of his discretion so warrants. In the present case, the statute provided that rules can be made by the Central Government only. Furthermore, according to Section 6(2) of the Act, the competent authority has the power and jurisdiction to condone any deviation from even the statutory requirements prescribed under Sections 3 and 4 of the Act. In Regina v. Preston Supplementary 197, it had been held that the Act should be administered with as little technicality as possible. Judicial review of these matters, though can always be made where there was arbitrariness and malafide 20 and where the purpose of an authority in exercising its statutory power and that of legislature in conferring the powers are demonstrably at variance, should be exercised cautiously and soberly.100. We would also like to one more aspect of the enforceability of the guidelines by persons in the position of the petitioners in these cases. Guidelines are issued by Governments and statutory authorities in various types of situations. Where such guidelines are intended to clarify or implement the conditions and requirements precedent to the exercise of certain rights conferred in favour of citizens or persons and a deviation therefrom directly affects the rights so vested the persons whose rights are affected have a clear right to approach $e court for relief. Sometimes guidelines control the choice of persons competing with one another for the grant of benefits largesses or favours and, if the guidelines are departed from without rhyme or reason, an arbitrary discrimination may result which may call for judicial review. In some other instances (as in the Ramanna Shetty case), the guidelines may prescribe certain standards or norms for the grant of certain benefits and a relaxation of, or departure from, the norms may affect persons, not directly but indirectly, in the sense that though they did not seek the benefit or privilege as they were not eligible for it on the basis of the announced norms, they might also have entered, the fray had the relaxed guidelines been made known. In other word they would have been potential competitors in case any relaxations or departure were to be made. In a case of the present type, however, the guidelines operate in a totally different field. The guidelines do riot affect or regulate the right of any person other than the company applying for consent. The manner of application of these guidelines, whether strict or lax, does not either directly or indirectly, affect the rights or potential rights of any others or deprive them, directly or indirectly, of any advantages or benefits to which they were or would have been entitled In this context, there is only a very limited scope for judicial review on the ground that the guidelines have not been followed or have been deviated from. Any member of the public can perhaps claim that such of the guidelines as impose controls intended to safeguard the interests of members of the public investing in such public issues should be strictly enforced and not departed from departure therefrom will take away the protections provided to them. The scope for such challenge will necessarily be very narrow and restricted and will depend to a considerable extent on the nature and extent of the deviation. For instance, if debentures were issued which provide no security at all or if the debt-equity ratio is 6000 : 1 (as alleged) as against the permissible 2:1 (or thereabouts) a Court may be persuaded to interfere. A Court, however, would be reluctant to interfere simply because one or more of the guidelines have not been adhered to even where there are substantial deviations, unless such deviations are, by nature and extent such as to prejudice the interests of the public which it is their avowed object to protect. Per contra, the Court would be inclined to perhaps overlook or ignore such deviations, if the object of the statute or public interest warrant, justify or necessitate such deviations in a particular case. This is because guidelines, by their very nature, do not fall into the category of legislation, direct, subordinate or ancillary. They have only an advisory role to play and non-adherence to or deviation from them is necessarily and implicitly permissible if the circumstances of any particular fact or law situation warrants the same. Judicial control takes over only where the deviation either involves arbitrariness or discrimination or is so fundamental as to undermine a basic public purpose which the guidelines and the statute under which they are issued are intended to achieve.101. But in the instant case, in the view have taken, it is not necessary to base our decision on this aspect. We find that the CCI has, in fact, acted in substantial compliance with the principles of these guidelines. He has acted objectively and bonafide. He has not acted in undue haste. No substantial prejudice or injury to the petitioners have been demonstrated. In the aforesaid view of the matter, we are, therefore, unable to interfere. In this connection, furthermore, a common sense view has to be adopted-See the observations in Council of Civil Service Unions and Ors. v. Minister for the Civil Service 1985 AC 7. Public interest in this case does not require that we should interfere. In this case, there is no illegality in the decision of the Controller of Capital Issues. He has not exercised a power which he does not possess. There is also no irrationality. He has not acted in any manner that no reasonably authority would have acted in the decision. There is no procedural impropriety in his decision. He has not failed in his duty to act fairly insofar as fairness was warranted by the justice of the situation.102. In the aforesaid view of the matter, we are of the opinion that there was no substance in the write petitions and also in the civil suits conversed by these transfer applications.The purpose of the Act must be found from the language used. The scheme and the language used, strictly speaking, do not indicate any positive role for the CCI in discharging his functions in respect of grant of sanction. But it has to be borne in mind that he is a part of a State instrumentalities committed to the endeavours of the constitutional aspiration to secure justice, inter alia, social and economic, and also under Article 39(b) to (c)of the Constitution to ensure that the ownership and control of the material resources of the community are so distributed as to best subserve the common good and that the operation of the economic system does not result in concentration of wealth and means of production to the common determent. Yet, every instrumentality and functionary of the State must fulfil its own role and should not trespass or encroach/entrench upon the field of others. Progress is ensured and development helped if each performs his role in the common endeavourer.104. In that light it is true that as was contended by learned Counsel appearing on behalf of the petitioners that in the changed socio-economic conditions of the country one who is charged to ensure capital investment has to perform the social role in capital formation and to protect the interest of the capital market, and to oversee the growth of industrialisation and investment in such a manner as to ensure employment and demand in the national economy to prevent wasteful investment and to promote sound methods of corporate finance. The guidelines are only a guide and nothing more. The application of mind by the CCI before sanction must be in the perspective for which he is enjoined by the Act. He must endeavour to secure a balanced investment of the countrys resources in industry, agriculture and social services. The Controller should perform the role of social control and fulfil the social purpose in conjunction with other authorities and functionaries. It is necessary for him in discharge of his functions to ensure that there is not too much concentration of particular industries in particular areas, and that there is a scientific development and proper investment in key and core project.105. The present petitions have perhaps brought to the fore for the first time a public interest aspect of the issue of shares and debentures. In the past decades, investors in shares and equities constituted a very limited section of the public and consisted of two extreme types-either persons who could shrewdly appraise the merits of each issue and take a considered decision or persons who just wanted to invest and get a return for their moneys but were indifferent to the terms and conditions of such investment. The position has changed in recent years. There has been a vast increase in the number of members of the public who have surplus money to invest ; the size of the issues has assumed macro-proportions ; and the types of instruments are also becoming more and more sophisticated. Entrepreneurs , with legal and expert assistance at their command, could easily trap unwary investors and the development of a public interest lobby that can scrutinise issues carefully and advise prospective investors on their comparative merits and demerits may not be entirely undesirable. It is also perhaps necessary that the CCI, in considering the grant of consent to such issues, should have these aspects brought to his notice. We think that it may be too cumbersome to have a provision that the details of every proposed application for consent should be publicised to the maximum extent by the CCI, that objections and comments from the public should be called for, that there should be a public hearing before the CCI before grant of consent and that the CCI should pass a reasoned order granting or withholding consent. That would also delay the whole process of approvals which should be as expeditious as possible. But we have no hesitation in saying that some procedure has to be evolved to ensure that the CCI gets the benefit of the comments, suggestions and objections from the public before arriving at his decisions whether to grant consent or not and, if so, on what terms and conditions. Perhaps, evolution of certain rules in this respect could be examined at this juncture of industrial growth in our country. But having regard to the facts and the circumstances of the case in view of the various facts mentioned hereinbefore, we are of the opinion that there was no undue haste. There was proper application of mind that the sanction was for a new project. Sufficient security for the debentures as was enjoined to be ensured before sanction has been ensured in the facts and the circumstances of this case and the guidance provided by means of guidelines K-s been substantially complied with. There has been no infraction as such of the norms required to be followed in granting the sanction. The challenge to the sanction, therefore, must fail.106. Before we conclude, we must note that good deal of argument was adduced that these applications in different High Courts in suits were not genuine and properly motivated, But were malafide. Even though these might not have been to feed fat an innocent object, it was apparent that it was to feed a grudge in respect of a competitive project by a competitor. Any way, in the view we have taken, it is not necessary to decide the bonafides or malafides of the applicants. Shri Nariman, when he moved the application initially, had suggested that we should lay down certain norms us to how the courts in different parts of the 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 my injunction, they should have regard to the principles of comity courts in a federal structure and have regard to self restraint circumspection, we do not at this stage lay down any more definite norms. We may also perhaps add that it may be impossible to lay down hard and fast rule of general application because of the diverse situations which give rise to problems of this nature. Each case has its own special facts and complications and it will be a advantage. rather than an advantage, to attempt and apply any stereotyped formula to all cases, Perhaps in this sphere, the High Courts themselves might be able to introduce a certain amount of discipline having regard to the principles of comity of courts administering the same general laws applicable all over the country in respect of granting interim orders which will have repercussion or effect beyond the jurisdiction of the particular courts. Such an exercise will houseful contribution in evolving good conventions in the federal judicial system.