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37. On May 31, 1978, a note was prepared by UTI in respect of the letter dated May 29, 1978, received by it from the company for consideration at the Inter-Institutional Meeting (IIM) to be held on May 31, 1978. The note summarised the assistance required by the company as being Rs. 480 lakhs of which Rs. 300 lakhs were to be the capital expenses in the first phase for the proposed modernisation programme; the company had approached UTI for a term loan of Rs. 300 lakhs by way of privately placed debentures. UTI was prepared to provide Rs. 200 lakhs to the company for its modernisation programme by way of privately placed debentures on its normal terms and conditions for such assistance. In the meanwhile, it was suggested that ICICI as the lead institution would process the request of the company further. UTI proposed to exercise its right to convert Rs. 40 lakhs (20 per cent. of the proposed assistance) into shares with immediate effect, subject to the approval of the Government, at a premium of Rs. 60 per share of Rs. 100, paid up. If the other institutions wished to participate with UTI in sharing the assistance of Rs. 200 lakhs, the UTI would reduce its assistance to that extent. The note was accompanied by a flash report. The note and the flash report set out the "very tentative" figures and brief facts mentioned in the company's letter dated May 29, 1978, and the note accompanying it.

40. On June 1, 1978, UTI wrote to the company that it was agreeable in principle to provide the financial assistance, along with other institutions, of Rs. 300 lakhs for financing a part of the cost of the company's modernisation programme. The assistance would be in the form of subscription to the privately placed debentures and the amount of Rs. 300 lakhs would be reduced to the extent that other institutions indicated their willingness to participate. UTI's commitment to subscribe would be on the understanding and subject to the conditions set out in the letter. Clause (7) which related to the condition regarding conversion, reads thus :

45. On June 8, 1978, ICICI wrote to the company saying that it was prepared to subscribe to the debentures of the value of Rs. 50 lakhs out of the total amount of Rs. 300 lakhs. The terms and conditions stated, inter alia, that ICICI would have the option to convert debentures of Rs. 10 lakhs into shares during the period June 15, 1978, to June 14, 1980.

46. On June 8, 1978, UTI wrote a letter to the company. It is necessary to reproduce it in extenso.

"Dear Sir, Financial assistance for the company's modernisation programme.