Bhushans-Orissa Sponge dispute lands in SC

In February this year,the Orissa High Court had stayed the process of conversion of 35 lakh warrants of Bhushan group into equity shares.

Bhushan group had acquired 35 lakh warrants from Chandra family of Unitech promoters in its bid to acquire Orissa Sponge.

Monnet Group has also set its eyes on Orissa Sponge and is understood to have the support of PK Mohanty-led TRFI Investment,which holds 50 per cent stake in the sick company.

Orissa Sponge had moved high court after the Company Law Board in 2009 directed it to allow conversion of 35 lakh share warrants held by Bhushan Group into equity shares.

Orissa Sponge is of the view that if Bhushan Group is allowed to converts its 35 lakh warrants into shares,its holding in it will go up from existing 15 per cent to around 25 per cent,which would amount to an indirect takeover of the company. If its holding exceeds 15 per cent,it would trigger an open offer.

The apex court bench asked Orissa Sponge Iron & Steel to clarify if the conversion of 35 lakh warrants of Bhushan group into shares would amount to an indirect takeover or not.

The bench also wanted to know from Orissa Sponge Iron & Steel that if there was a threat of the company being taken over by the Bhushan group,why did it not approach the market regulator Sebi,which can invoke SEBI (Substantial Acquisition of Shares and Takeover) Regulations,1997.

Senior advocate Abhishek Manu Singhvi representing Orissa Sponge said since the matter was already pending before the Company Law Board,there was no need to go for another authority.

Bhushan group companies said,”By allowing OSIL appeal,the High Court has caused grave prejudice to the legitimate rights,title and interests of BEL. It has denied the rightful claim of BEL to seek conversion of warrants into equity shares,which were acquired in accordance with applicable laws and guidelines.

“As a result the High Court has not only interfered with the interest of minority shareholders of a public listed company but has also granted a free hand to OSIL and its associates to operate in complete defiance of sound principles of corporate governance,” it added.