RAJKOT SAHER/JILLA GRAHAK SURAKSHA MANDAL, Vs. SECURITIES AND EXCHANGE BOARD OF INDIA AND RELIANCE POWER LTD.

JUDGEMENT

(1.) THE issue before us in this appeal is whether Reliance Power Limited (for short, RPL), which is Respondent No. 2 in this appeal violated in letter and spirit the provisions of Clauses 4.1 and 4.6.2 of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (for short, the guidelines), pertaining to the promoters' contribution in any public issue by an unlisted company.

(2.) RPL and Reliance Public Utility Private Limited (for short, RPUPL), were two unlisted companies of Anil Dhirubai Ambani group and were promoted by Reliance Energy Limited (for short REL) and AAA Projects Ventures Limited (for short, AAA). RPUPL decided to merge in RPL and a petition seeking sanction of the scheme of amalgamation was filed before the Bombay High Court on August 10, 2007. The objectives of the scheme as set out in the petition were to consolidate the similar businesses, increase the net worth of RPL, reduce the overhead and other expenses, and ensure optimum utilization of available services and resources of the two companies. The High Court of Bombay approved on 27.09.2007 the scheme of amalgamation under the provisions of Sections 391 to 394 of the Companies Act, 1956 (for short, the Act). The amalgamation became effective on 29.9.2007 when a certified copy of the order of the Bombay High Court was filed with the Registrar of Companies, Mumbai. Pursuant to the scheme of amalgamation, the High Court approved the exchange ratio of 1:1 and accordingly REL and AAA, the two promoters, received one equity share each of RPL for every equity share held by them in RPUPL. Consequently, both these companies were allotted 50 crore equity shares of Rs. 10 each of RPL on the said amalgamation. After the amalgamation, the paid up capital of RPL as on 30.9.2007, out of its total authorized capital of Rs. 16000 crores, was Rs. 2000 crores and consisted of 200 crore equity shares of Rs. 10 each. It was held by the promoters as per the details hereunder:

(3.) THE appellants were not satisfied with the findings in the impugned order as the IPO was not stopped by the Board and filed the present appeal before us. The main relief sought by them was that the operation of the impugned order should be stayed and that this Tribunal should prevent the IPO from being issued to public in the form envisaged in the Red Herring Prospectus that had been issued on 1.1.2008. The appeal was first heard on 4.1.2008 and the case was adjourned to 14.1.2008. No stay was granted. The appellant thereafter filed a writ petition in the Gujarat High Court on 8.1.2008 seeking stay of implementation and operation of the impugned order passed by the Board on 27.12.2007. They also pleaded that the proceedings before this Tribunal be stayed and that RPL should not be allowed to proceed with the public issue. RPL and others immediately moved the Supreme Court for grant of an interim stay of the proceedings before the Gujarat High Court. The Supreme Court in Transfer Petition (Civil) Nos. 30 and 31 of 2008 granted an interim stay on 9.1.2008. The Supreme Court further passed the following order on 11.1.2008 in the same case after some proceedings were filed in various courts including the City Civil Court of Mumbai for the stay of the IPO: