Apex court to hear NSIC plea against Singer on stake dilution

The Supreme Court would hear the plea of National Small Industries Corporation (NSIC) against the Indian subsidiary of global sewing machines and home care products manufacturer Singer, alleging dilution of its stake in the company.

NSIC, a government promoted organisation to take care of the growth of the small industry in the country, has alleged that Singer India, which is under BIFR for financial rehabilitation, had reduced its share holding in it from 7.76 per cent to 0.73 per cent.

It further submitted that the scheme to reduce its share capital, which was proposed by the Board for Industrial and Financial Reconstruction (BIFR), was done by Singer India without being approved by the annual general meeting of the company.

A Bench comprising Mr Justice Dalveer Bhandari and Mr Justice Deepak Verma admitted the plea and directed it to list it on Monday along with another petition of the Tamil Nadu Industrial Development Corporation (TIDCO), which has also approached the apex on the similar issue.

The apex court has already directed to maintain status quo over the shareholding of TIDCO in Singer India.

NSIC further alleged that Singer India has not even followed the mandatory procedure of publishing BIFR's scheme in at least two newspapers.

NSIC has approached the apex court challenging the orders of the Delhi High Court, which had rejected its plea and upheld the draft scheme of BIFR to rehabilitate the company.

According to BIFR sanctioned scheme April 28, 2008, Singer was asked to reduce equity shares of its stake holders by reducing the value of shares from Rs 10 to Rs 1.

This was challenged by NSIC contending that BIFR has no power to provide for reduction of equity shares under the Sick Industrial Companies (Special Provisions) Act, 1985.

“The sanction of the scheme, especially the sanction with regard to reduction in share capital and subsequent increase in the capital due to preferential allotment of equity shares, has substantially reduced the shareholding of the NSIC in the Singer India from 7.76 to 0.73 per cent which has caused grave and irreparable prejudice and loss,” said the petitioner.

“Courts below could not appreciate the fact that the draft rehabilitation scheme which inter—alia included a reduction in share capital was never brought before the AGM of the Company.”