YUGANTAR Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners claim to have filed this writ petition in public interest, seeking a restraint on the Bank of India, respondent No. 5 herein, from issuing shares and collecting money from the public under its public issue of 15 crores shares at Rs.lO each, for cash at a premium of Rs. 35 per share. The petitioners are also seeking inter alia to evolve standard rules in replacement of Government's absolute power to write off losses of Banks. A direction is also sought for an enquiry into damage to records of the respondent-Bank due to a fire.

(2.) The petitioner No.l, Mr. Jagdish Chandra Sharma is reported to be the convener of the newspaper 'Yugantar'. The petitioner No.l claims to be attached to several social, cultural, organizations in the capacity of patron. He is a former member of the Agra Development Authority. The petitioner No.l claims to be deeply interested in matters of public importance to the nation and the society at large. Petitioner No. 2 is a society engaged in welfare activities and legal literacy and family counselling etc. Petitioner Nos. 3 to 5 are social workers.

(3.) The petitioners were impelled to file the present writ petition, when they found that the respondent No. 5, Bank of India, had taken out the public issue of 15 crores equity shares of Rs. 10 each at a premium of Rs. 35 per share, when the Bank was suffering and incurring losses for the last several years. The petitioners claim that the losses for the year 1995-96 was Rs. 1420 crores. The petitioners find, the advertisement issued offering shares, deceptive and misleading. The petitioners claim that SEBI, respondent No. 2 herein, has failed to discharge its statutory obligation under Section II of the Securities and Exchange Board of India Act, to protect the interest of the investors in the security market inasmuch as it failed to prohibit fraudulent and unfair trade practice, act of respondent No. 5 in offering shares at a heavy premium despite losses through misleading advertisement. It is claimed that SEBI failed to make an enquiry to prevent the public issue which was detrimental to the interest of the investors. It is further alleged that as per the guidelines issued by the SEBI, it was obligatory that the prospectus and the advertisement for the issue of shares was vetted by it, which it failed to do. The petitioners also accuse the Reserve Bank of India of having failed to comply with the provisions of Sections 58-B and 58-C of the Reserve Bank Act of 1934, since there was wilful omission to mention in the advertisement material fact of losses incurred by the Bank. This was with the intention to collect public money through misleading information in the advertisement and the prospectus. The petitioners claim that it had sent a representation to the Governor, Reserve Bank of India, the Chairman of SEBI and the chairman of Bank of India, praying that respondent-Bank should be restrained from collecting money from unsuspecting investors unless it is in a position to generate profit on its own without the help writing off of losses. In the said representation, it was claimed that the Bank had been running in losses and it is only after the loss of about Rs.1369 cores that had been written off by the Government in 1996-97 that the Bank started showing profits. The said profit was not a reflection of the earnings but was due to the losses being written off by the Government. The bank mis-represented the facts by not disclosing the losses being written off while claiming profits of Rs. 150.39 crores in 1995 and Rs. 276.48 cores in 1996.