The Supreme Court has stayed the Delhi High Court order allowing Spectrum Power Generation Ltd (SPGL) to issue preferential shares for a mega power project in Andhra Pradesh. The apex court also asked the high court to speed up the hearing of the case pending before it.
The appeal against the high court order was moved by the National Thermal Power Corporation (NTPC) and Spectrum Technologies US, which were promoters in the original project along with Jaya Foods. Later, Jaya Foods, a vermicelli firm owned by Krishna Rao, allegedly revoked the promoters' agreement. The litigation between the promoters over the issue is pending in the high court.
Meanwhile, Spectrum Power Generation, the new firm that has stepped in place of Jaya Foods moved the high court and got an order to offer preferential shares. This has now been stopped by the Supreme Court bench comprising Justice V N Khare and Justice Santosh Hegde.
Senior counsel Kapil Sibal, representing the US company, argued that it was willing to bring in enough funds for the project through equity. NTPC counsel Shanti Bhushan also submitted that it was willing to do the same.
He said NTPC had acquired the land and got clearance for all the infrastructure facilities. However, they were ousted by the vermicelli firm which "siphoned off" the capital, counsel said. They cited reports by the Industrial Development Bank of India and the State Bank of India that opposed preferential shares plan by Spectrum Power Generation.
P Chidambaram, counsel for Spectrum Power Generation, submitted that the shareholders must decide about the raising of capital. Under Section 81 of the Companies Act, it was mandatory that their meeting be called. The court cannot interfere in that.
Moreover, the proportion of shares should not be changed while the high court is set to hear the case next week. He pleaded that SPGL be allowed to raise money through preferential shares from mutual funds.
