DALMIA INDUSTRIES LIMITED Vs. STATE OF UTTAR PRADESH

JUDGEMENT

(1.) The validity of the Uttar Pradesh State Cement Corporation Limited (Acquisition of Shares) Ordinance 1991 (the Ordinance) was challenged before the Allahabad High Court by way of a writ petition under Art. 226 of the Constitution of India. The High Court by its judgment dated January 24, 1992 upheld the validity of the Ordinance and dismissed the writ petition. This appeal by way of special leave is directed against the Judgment of the High Court.

(2.) The Uttar Pradesh State Cement Corporation Limited (the Corporation) was a government company wherein all the shares were owned by the State Government. The Corporation was operating three cement factories situated at Churk, Dalla and Chunar. Since the Corporation was running into huge losses from the year 1972 onwards except during the year 1982-83, the State Government in April 1990, took a decision to privatise the Corporation. A cabinet decision was taken oil April 29, 1990 to convert the corporation - a wholly public sector undertaking - into a joint sector corporation. The decision was conveyed to the leading cement manufacturers in the country in a meeting held on May 19, 1990 at the office of the Principal Secretary, Industries. The meeting was attended by 25 cement manufacturers. The State Government appointed a privatising committee (the Committee) on September 11, 1990 to consider the offers of the cement manufacturers in that respect. In October 1990, the State Government appointed S. B. Billimoria and Company to value the share of the corporation. The said company, in December 1990. submitted its report wherein the share of the corporation was valued at Rs. 20/- against its face value of Rs. 100/-

(3.) Initially there was a good response from the cement manufacturers for the purchase of the corporation shares but finally the Dalmia Industries Limited (the appellant) alone remained in the field and all others backed out. The Committee considered the offer of the appellant to buy the shares of the corporation at a price of Rs. 75/- per share against the face value of Rs. 100/ -and finally accepted the same. The cabinet approved the recommendation of the committee. On February 14, 1991 a Memorandum of Understanding (the Memorandum) was entered into between the State Government and the appellant. The memorandum, inter alia, provided that the appellant would hold 51% shares of the corporation, it would take over the management of the corporation with all its assets and liabilities, it would nominate 5 directors, the State Government could nominate 4 directors and the appellant would also be entitled to have one of its directors as the managing director. On February 21/ 22, 1991 share transfer agreement and financial agreement were signed providing for the transfer of 49% of the shares to the appellant. On March 7, 1991 a meeting of the Board of Directors of the Corporation was held wherein 5 directors nominated by the appellant were appointed. On April 12, 1991 Praveen Kumar, one of the 5 directors nominated by the appellant, was appointed as the managing director of the corporation. According to the memorandum, the total amount payable by the appellant for 51 % of the shares at Rs. 75/- per share was a little above 26 crores. Out of the said amount the appellant paid one crore at the time of signing the memorandum. It was agreed to pay further two crores within three months of the signing of the memorandum which was paid. Another two crores was to be paid within six months of the signing of the memorandum and the balance amount of about Rs. 20 crores was payable within twenty four months. Various other financial arrangements were agreed between the parties but it is not necessary for us to go into the same.