Document Fragment View

Matching Fragments

2. The appellant-plaintiff, which is a company engaged in manufacturing textiles and chemicals, is a shareholder in Gujarat Gas with 49,95,325 shares amounting to about 39 per cent. of the shareholding. In all 5,00,000 shares amounting to 3.87 per cent. of the total equity capital were sold by the plaintiff to defendant No. 2, a foreign institutional investor (FII), in October, 1993, and the said transfer was registered by the company in December, 1993. Defendant No. 2 (through defendant No. 8 also an FII), thereafter, sold 5,89,000 shares to defendants Nos. 6 and 7 (also FIIs) between March and November, 1996, and defendant No. 2 sold 1,19,000 shares to the plaintiff in June, 1997. Claiming a right of pre-emption, the plaintiff has filed the present suit for a decree against defendant No. 2 (FII) to execute transfer forms in respect of the suit shares (i.e., 3,81,000 shares), at the price at which defendants Nos. 2 and 8 executed transfer forms in favour of defendants Nos. 6 and 7 and in the alternative the plaintiff has prayed for a decree of Rs. 5.25 crores by way of damages in lieu of specific performance against defendant No. 2.

8. The GIIC did not immediately respond to the aforesaid request, and some time in October, 1993, the plaintiff sold 5,00,000 shares to defendant No. 2 (Jardine Fleming India Pacific Trust, an FII) at the rate of Rs. 119.45. Defendant No. 2 entered into the said transaction through defendant No. 8 (Fledgeling Nominees International Ltd., another FII). The company (defendant No. 1) registered in December, 1993, transfer of the said 5,00,000 shares in favour of defendant No. 8 a/c. defendant No. 2, i.e., "Fledgeling Nominees International Limited Account Jardine Fleming India Pacific Trust".

Thanking you, Yours faithfully,             For Jardine Fleming India Limited, (Sd.) Dr. Rafiq Dossani."      

12. On October 17, 1994 (page 155), the plaintiff sent a letter to the GIIC stating that the circumstances under which the plaintiff had sought to encash a part of their holding in Gujarat Gas in order to meet certain pressing obligations on the plaintiff's cash flow were explained by the plaintiff to the GIIC at various meetings. There was a protracted delay in replying to the plaintiff's proposal for approval for partial disinvestment and hence the plaintiff had no choice but to make alternative arrangements. The plaintiff further informed the GIIC under the said letter that the conditions stipulated by the GIIC as per their communication dated March 7, 1994 (page 162), were found unacceptable to Indian institutional investors. Therefore, the plaintiff was unable to proceed with their proposal and had only made a small disinvestment of 5,00,000 shares amounting to 3.87 per cent. in favour an FII and that the plaintiff has an undertaking from Jardine Fleming India Securities Pvt. Ltd., that if and when they seek to sell the shares, they would offer the first right of refusal to the plaintiff and that the plaintiff would be in a position to strictly observe the terms of the shareholders' agreement regarding the right of first refusal. The plaintiff further clarified that Jardine Fleming India Securities Pvt. Ltd. had purchased the shares as an FII and that they were not in the position of nominee shareholders who are contributing any part of the promoter's capital, but they are basically secondary investors.

13. It appears that nothing noteworthy happened between October, 1994, and March, 1996. But on March 27, 1996, defendant No. 2 sold 50,000 of the aforesaid shares in the open market at Rs. 148.50 per share. Thereafter in September, October and by. November 6, 1996, defendants Nos. 2 and 6 sold in all 5,89,000 shares to defendants Nos. 6 and 7, who are also FIIs at rates ranging between Rs. 133.65 and Rs. 118.80. The share transfer forms with the share certificates were lodged by defendant No. 3, through whom the aforesaid transaction was effected, with defendant No. 1 (i.e., Gujarat Gas) including 4,50,000 shares out of the total 5,00,000 shares purchased by defendant No. 2 from the plaintiff. The aforesaid share transfer forms were lodged by defendant No. 3 acting as a constituted attorney of defendants Nos. 6 and 7 on the strength of a power of attorney given by defendant No. 5 which stated that defendant No. 5 had been authorised by defendants Nos. 6 and 7 to make investment in Indian stocks and shares.