HILLCREST REALITY SDN. BHD Vs. RAM PARSHOTAM MITTAL

JUDGEMENT

(1.) THIS order will dispose of the Defendant Nos 1, 2, 4 and 7's (hereafter called "the applicants") temporary injunction application, (IA 9920/09) seeking a restraint upon the plaintiff's going ahead with its proposed rights issue, whereby it intends to offer 1, 50, 30,003 shares of the face value of Rs. 10, at a premium of Rs. 30, thus proposing to realize Rs. 60 crores.

(2.) THE facts necessary to decide the case are that HQRL Pvt. Ltd. (hereafter "HQRL") was incorporated as a special purpose vehicle (SPV) in August, 2001, with the intention, of taking over assets of, and managing, the Hotel Ashok Yatri Niwas as a part of the disinvestment scheme. This was effectuated by a Scheme of "Arrangement of Demerger" (sanctioned by the Central Government on 5th July, 2002) between India Tourism Development Corporation [ITDC] (of which Hotel Ashok Yatri Niwas was a unit) and HQRL.

(3.) IN December, 2002 HQRL approved the transfer of one share from Moral Trading and Investment Ltd. to Mr. Ashok Mittal and two shares to Mr. Ram Parshotam Mittal. Their appointment (along with that of Mrs. Sarla Mittal) was approved in the Board of Directors of HQRL. It was resolved to increase the capital of HQRL from Rs. 90 lakhs to Rs. 33 crores. The additional capital was divided into 71 lakh equity shares of Rs. 10/- each and 25 lakh preference shares of Rs. 100/- each. The Articles of Association of HQRL Pvt. Ltd. were amended to state that preference shares would not carry any voting rights. Hill Crest Realty (a Malaysian company) purchased 23, 65,000 redeemable preference shares from HQRL bearing interest at 8.5% per annum. The Board of Directors of HQRL approved the allotment on 5th May, 2003 subject to the condition that the allotment did not carry any voting rights. This was followed (in July 2003) by a further purchase of 4, 64,290 preference shares by Hill Crest Realty on similar terms.