Writ Against Essar, Sisco Merger
The Ruia brothers' move to merge Essar Shipping Ltd with South India Shipping Corporation (Sisco) has hit a roadblock with the Chennai High Court admitting a public interest litigation (PIL) seeking a court monitored investigation into "the fraudulent deal by which the Ruias gained control of SISCO".
Justice E Padmanabha admitted the PIL filed by R Jabmani, a freedom fighter-cum-journalist after preliminary submissions to order issuance of notice to the respondents.The petitioner has named the state government represented by the chief secretary, chairman of Tamil Nadu Industrial Investment Corpo-ration (TIIC) and Shashikant Ruia, chairman and managing director of Essar Shipping Ltd as respondents to the case.
The petitioner, a former MLA, maintained that the loss caused to the state-owned TIIC due to divestment of 14.10 lakh shares of Sisco, equivalent to 23.52 per cent, in 1993 was "illegal, and hence invalid"
Detailing sequence of events from 1992, when TIIC wanted to sell 25,000 Sisco shares of Rs 100 each at a price of Rs 2520 based on the government guidelines of 1991, the petition said "the deal fell through as the Essar group refused to pay the price and TIIC's fiscal position improved."
However, the Essar group , said the petitioner, in connivance with officials and ministers got the government approval for TIIC to sell its entire stake. This, he claimed, was despite the fact that TIIC had never sought governmental approval for divestment. He said, "it still remains a mystery as to what prompted the government to approve divestment when there was no such proposal mooted by the corporation". In view of the letter from C Ramachandran, finance department on Oct 15,1992 (who also happens to be a director of TIIC), the corporation was forced to go in for divestment of Sisco shares at a lower price.
The PIL tracks the price movement of Sisco scrip all through this period to show how the average price should have been atleast Rs 500 for every Rs 100 paid up share (market price was Rs 640 during Dec 1993) against the Rs 375 per share TIIC got from the Essar group.Thus, he said the total loss to TIIC was Rs 37.37 crore, and the sole beneficiary of the deal was Essar Shipping chairman Shashikant Ruia.
The petition said, "it is inconceivable that the deal could be genuine as it is a case of fraud and corruption". He claimed that the Essar group was privy to the fraud as they were to emerge as sole beneficiaries , and allege that "shares transfer deal was illegal and fraudulent, and kickbacks have been paid to make the deal work".
The petitioner has sought issuance of directions by the court to get the entire gamut of divestment of Sisco shares by TIIC to Essar group be investigated. The petitioner also sought an order for declaring the deal illegal.
The petition also urged the court to stay proceedings of the merger of Sisco with Essar Shipping until the issue was resolved to the satisfaction of the court.
Justice Padmanabha has ordered issuance of notices to all the parties named in the petition, directing them to submit their arguments, if any, by the next hearing.