• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources

Group Sites

• The Hindu
• Business Line
• The Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Gaurav Raghuvanshi

Ahmedabad , Nov 25

AT LEAST one shareholder of Reliance Industries Ltd has challenged the company's demerger scheme, prompting the Bombay High Court to adjourn hearing on the matter by one week and give the dissenting shareholders a hearing.

The court has posted the case for December 2 for further hearing and to allow the dissenters to the scheme to present their arguments. "I have already filed my objections with the court and prayed for the dismissal of RIL's petition on the Scheme of Arrangement. I have been asked by the court to file an affidavit with the details, which I intend to file on Monday," Mr Kalpesh Mankad, an Ahmedabad-based chartered accountant, who has challenged the scheme, told Business Line.

Mr Mankad has filed a 16-point objection before the Bombay High Court alleging that the `Scheme of Arrangement' was based on "vague assumptions" that gave vast discretionary powers to the Ambani brothers and was detrimental to the company's shareholders.

The scheme was approved by the shareholders on October 21 at a meeting chaired by Mr Justice M. L. Pendse, who had been appointed by the High Court for the purpose. The flaws in the proposed scheme, according to Mr Mankad, range from non-disclosure of the assets amounting to Rs 19,119 crore being demerged to corporate governance issues. Mr Mankad says in his petition that the assets of Reliance Energy, Reliance Capital and Reliance Infocomm, aggregating Rs 19,119.54 crore as listed in the scheme, are incomplete and vague. "As per the provisions of Section 393 of the Companies Act, the explanatory statement must describe the value of individual assets and liabilities to be transferred. It helps the shareholders to take an informed decision," Mr Mankad says in the petition.

By not disclosing the assets and liabilities, Reliance is not only creating a doubt in the minds of shareholders for possible foul play, but also giving unfair advantage to the management to tamper with the list, he alleges. Similarly, the scheme (Clause 27-vii-i&j) provides no details about the debentures, bonds and other debt securities. It also proposes to release all encumbrances over "certain assets" and empowers the demerged company to give discharge from securities created over such assets.

Mr Mankad has contended that the shareholders of RIL are entitled to know the objects of raising such loans in the past and the end use of the funds to ascertain whether they relate to the demerged company or not. Also, the security holder is entitled to give due discharge after his claim is satisfied and not the demerged company on its own. Mr Mankad has also challenged the decision of Reliance Petroleum Trust and four other entities - Reliance Aromatics and Petrochemicals Ltd, Reliance Polyfins Ltd, Reliance Energy and Projects Development Ltd and Reliance Chemicals Ltd - to forego their entitlement of the shares of the demerged companies.

The Petroleum Trust holds 7.51 per cent equity of RIL, corresponding to the parent company's share after Reliance Petroleum Ltd was merged with the RIL. The other four entities hold another 4.7 per cent. The petition says that as RIL had funded the purchase of equity of RPL for the "economic benefit" of its shareholders, the right of refusal of the shares should rest with the company's shareholders and not with the trustees of the Petroleum Trust.

Mr Mankad has submitted that the trust should first be dissolved and the existing RIL shareholders, including institutions and individuals, be issued those shares before the demerger is effected. The shares in question represent 12.2 per cent equity of RIL and are valued at Rs 12,750 crore, based on RIL's stock price of about Rs 750 per share, he has said and claimed that the present scheme favours Mr Anil Ambani.

In fact, Mr Mankad has questioned as to how RIL could foist Mr Anil Ambani as the Chairman of the demerged companies after his relinquishing control over them. Forming the new board and choosing the Chairman should be the sole prerogative of the shareholders. Finally, the petitioner says that in 2003-04, RIL had assumed book debts amounting to Rs 3,500 crore of Reliance Infocomm. Now that the telecom entity was being demerged, RIL should transfer the debts to the new telecom company instead of keeping it in its books of account.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

More Stories on : Shareholder Activism | Restructuring

Stories in this Section
Inflation up on costlier minerals, textiles

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line