CHETAN G CHOLERA Vs. ROCKWOOL LTD

JUDGEMENT

(1.) These company applications are filed under Order 9, rule 13 of the Code of Civil Procedure, 1908 (CPC) read with rules 6 and 9 of the Companies (Court) Rules, 1959 ("the Rules", for brevity). The applicants, who are statedly shareholders of respondent-company, namely, Rockwool (India) Ltd. (hereafter, "Rockwool"), seek to set aside/review the judgment and order dated April 28, 2006, passed in Company Petition No. 33 of 2006. By the said order, this court confirmed special resolution dated March 27, 2006, of general body of Rockwool for reduction of capital by cancelling and extinguishing 95,93,137 fully paid-up shares held by promoters of the company, namely, Alghanim Industries (Mauritius) Ltd. (hereafter, AIM) and by cancelling and extinguishing 25,25,040 fully paidup shares held by public shareholders at the rate of Rs. 7 per fully paid-up share and also by cancelling and extinguishing partly paid-up shares. This court approved the scheme subject to modification that Rockwool shall pay to public shareholders at the face value of Rs. 10 per fully paid-up share. Needless to mention that this court had ordered publication of notice in two newspapers and in spite of the same no objections were received from anybody. These applications, which in effect are filed seeking review of the order of this court have been argued in detail covering the ambit of sections 77, 77A and 100 of the Companies Act, 1956. Case of the applicants :

(2.) The first applicant is an individual investor. He and his wife promoted the second applicant-company which invests in shares and securities listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). They individually and together held 1,63,248 shares of Rockwool which manufactures resin bonded rockwool in its factory at Kaveli Village of Zaheerabad Taluk in Medak District. In 1995, due to financial crunch, its net worth turned negative. Its accumulated dues to financial institutions stood at Rs. 1,918.19 lakhs. Therefore declaring it a sick company, it was referred to the Board for Industrial and Financial Reconstruction (BIFR). At that stage, AIM was inducted as a co-promoter and after receiving necessary approvals 19,87,687 equity shares of Rs. 10 each at par were allotted to them. AIM is a wholly owned subsidiary of KIMMCO, Kuwait, which is a part of Alghanim Industries. In addition to allotment of shares, AIM infused funds and its percentage of holding went from 25.07 per cent. to 63.01 per cent. They also acquired 1,67,20,000 shares of Rs. 10 each on March 31, 2000, at a discount price of Rs. 5 increasing their shareholding to 77.71 per cent. With such infusion, the net worth of Rockwool turned positive and the share capital rose from Rs. 5.9 crores to Rs. 41 crores. Rockwool cleared its unsecured debts to banks and became a debt free company.

(3.) AIM made a public announcement on June 24, 2005, to acquire 51,89,619 fully paid-up shares of Rs. 10 each, 39,18,000 shares of Rs. 10 each partly paid-up to the extent of Rs. 7.50 each, and 10,600 shares of Rs. 10 each partly paid-up to the extent of Rs. 5 each. The floor price was fixed at Rs. 5 per fully paid-up share and Rs. 7 per share was fixed as exit price based on reverse book building process on NSE, statedly in accordance with the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003 (hereafter, "the SEBI Guidelines"). The open offer by promoters was in force during the periods from July 4, 2005 to July 6, 2005 and successfully completed. The applicants herein however did not offer their shares for purchase by AIM. After purchasing the shares by reverse book building process, AIM applied to Hyderabad Stock Exchange (HSE) and BSE and accordingly Rockwool shares were delisted from HSE on Dec. 14, 2005 and from BSE on Sept. 30, 2005. AIM made yet another public announcement on Dec. 15, 2005, offering to buy delisted Rockwool shares at the exit price of Rs. 7 each. In this process, AIM as on Dec. 31, 2005, acquired 3,82,89,813 shares or 93.6 per cent. of share capital and balance share capital is held by 11,000 small shareholders dispersed all over India.