SC bans Mafatlal share transfer

NEW DELHI, July 14: In a special leave petition filed by Mafatlal Industries against Miheer Mafatlal, the Supreme Court has ordered that th...

NEW DELHI, July 14: In a special leave petition filed by Mafatlal Industries against Miheer Mafatlal, the Supreme Court has ordered that the disputed shares from the 1987 rights issue should not be transferred to third parties without the leave of the court.

Two more petitions have been filed by subsidiary companies, National Organic Chemical Industries Ltd (Nocil) and Surekha Holdings Pvt Ltd challenging an order of the Gujarat High Court holding that the extra shares alloted to Nocil and Surekha in the 1987 rights issue were invalid.

Since the thrust of the petitions was that the allotees of the rights issue were not heard before passing of the order, the judges were of the view that the matter must be decided by the lower courts. Nevertheless, Harish Salve, counsel for Miheer Mafatlal, insisted that since MIL was heard before passing the order, it was necessary that the apex court consider the case. Thus leave to be heard has been granted in the petitions, which shall come up for detailed hearing in near future.

Story continues below this ad

The dispute between Arvind Mafatlal and his nephew Miheer Mafatlal essentially relates back to April 1987 when the rights issue in Mafatlal Industries Ltd. (MIL) offering 8,10,000 equity shares of Rs 100 each at a premium of Rs 200 per share was announced. This issue was challenged in the city civil court of Ahmedabad by 3 shareholders of MIL which granted a stay order in June 1987 directing MIL to maintain status quo in respect of the allotment of shares.

Although the subscription to the rights issue closed on July 3, 1987, Miheer Mafatlal did not subscribe to the rights issue. The petition reveals that in December 1987 the MIL board alloted 5,34,839 equity shares which included 42500 shares alloted to Sushripada as rights entitlement. The Board of Directors of MIL also alloted 1,24,400 shares to Nocil as additional shares in addition to 9,258 shares applied by it. About 30,000 shares were alloted by MIL as additional shares to various other shareholders who had applied for additional shares in the rights issue.