Hc Verdict On Lic-Mrl Case On Friday

The Bombay High Court will give its verdict on the Life Insurance Corporation of India (LIC) and Modi Rubber (MRL) case on August 24. The arguments from both sides were concluded on Saturday last, over the issue of whether LIC would be in a position to revert the sale transaction of its 12 per cent holding in MRL.

The case came up for hearing on Saturday when the court was to take a view on whether or not "the unauthorised and illegal transaction" could be reverted. The LIC brass is maintaining that as the instructions offering the shares under the open offer were without the approval of the competent authority, such a transaction ought to be held null and void.

 

Incidentally, the Securities and Exchange Board of India (Sebi) had ruled out against any reversion in the sale order. This is as per the takeover code which states that once a sale order has been placed, it is not possible to take it back.

It might be recalled that on the afternoon of July 16, alarm bells rang at LIC as two middle-level officials in the investment department issued instructions offering the state insurer's 12 per cent holding in MRL under the open offer.

The sale of equity holding valued in the region of Rs 27 crore created immense pressure on the management to revert the transaction, especially since the meeting of financial institutions' heads had directed that FIs would not be participating in the open offer. The latter was not on account of the price being on the lower side and that the corporate entity was not willing to pick up the entire FI holding.

Frantic calls were made to the Stock Holding Corporation of India Ltd (SHCIL) to nullify the deal. However, as the two officials were authorised signatories listed with the SHCIL, such measures failed to revert the transaction.

According to the procedure at LIC, all purchase or sales transactions have to go through the investment department. The file then travels down to officers in the investment department, and goes up again to the chairman for his final approval.