N PARTHASARATHY PROF S R NAYAK HARESH JAGTIANI LARESN AND TOUBRO LIMITED LARSEN AND TOUBRO LIMITED LARSEN AND TOUBRO LIMITED LARSEN AND TOUBRO LIMITED LARSEN AND TOUBRO LIMITED Vs. CONTROLLER OF CAPITAL ISSUES:UNION OF INDIA:A K LAKSHMI:INDIAN EXPRESS NEWSPAPERS BOMBAY LTD:HARESHJAGTIANI:HARESHJAGTIANI:HARESHJAGTIANI

JUDGEMENT

(1.) One Mr. Haresh Jagtiani, a practising advocate of the High Court of Bombay and a policy-holder under the Life Insurance Corporation of India and also holder of units issued by the Unit Trust of India and Mr. Shamit Majumdar, a holder of shares and debentures of Larsen and Toubro Ltd. filed a Writ Petition being No. 2595 of 1989 in the High Court of Judicature at Bombay against the Union of India and others including the financial institutions questioning the legality and validity of the consent given. by the Controller of Capital Issues for the proposed issue of convertible secured debentures aggregating Rs. 820 crores by Larsen and Toubro Limited insofar as the said issue seeks to offer such convertible debentures to persons other than the existing shareholders and members and the employees of Larsen and Toubro Limited and praying for quashing the same as well as for a declaration that the transfer of 39 lakh shares of Larsen and Toubro Ltd. held by Unit Trust of India, Life Insurance Corporation of India, General Insurance Company and its subsidiaries to Trishna Investment and Leasing Ltd. through the instrumentality of BOB Fiscal Services Ltd. is arbitrary, illegal, mala fide and a fraud on the statutory powers of the respondents and is clearly ultra vires of Articles 14 and 39(b) and (c) of the Constitution on the allegations that in or around the middle of the year 1988 the respondents entered into a secret agreement by which a large chunk of the equity shares of Larsen and Toubro Ltd., the largest engineering company in India, would stand surreptitiously divested by the respondents in favour of the Ambani Group, the third largest monopoly house in India. This divestment was achieved not directly but, indirectly and with a motive to conceal the real nature of the deal by interpolating BOB Fiscal Services Ltd. (a wholly owned subsidiary of Bank of Baroda) as the conduit for the transfer of shares from the public financial institutions to the satellite companies of the Ambani Group.

(2.) The petitioners also alleged in the petition that pursuant to this secret agreement, the following events took place in quick succession

(3.) Thus, BOB Fiscal Services merely acted as a conduit for funnelling shares from the public financial institutions to the Ambani group and this interpolation of BOB Fiscal Services was necessitated to get over the legal impediments in the way of selling any part of the controlling shares held by public financial institutions to private parties by private deals except to those already in management and at a price equal to two times the market price.