Pledged shares sale: Bhushan Steel sends notice to Aditya Birla Finance

Bhushan Steel has sent a legal notice to Aditya Birla Finance claiming damages for selling pledged shares without prior intimation. Bhushan Steel had pledged some shares in 2011 to take a ₹25-crore loan from the Aditya Birla group company.

Mala fide sale

ABFL sent a notice on August 6, 2014 alleging defaults by Bhushan Steel and sold 1.37 lakh pledged shares on the same day. According to Bhushan Steel this sale was mala fide and illegal as ABFL did not give reasonable time to redeem the pledged shares. According to the notice sent by Bhushan Steel, ABFL was under contractual obligation to give at least two business days’ notice under the provisions of the agreement prior to the sale of pledged shares.

“The communications were in effect nothing more than an intimation of the sale. Therefore, both communication and the resultant sale of pledged shares on August 6 and all subsequent sale of pledged shares by ABFL were illegal, void and done in bad faith,” stated the notice sent by Bhushan Steel seen by BusinessLine.

Margin requirement met

“In fact, there existed no reason for ABFL to invoke the pledge and sell the pledged shares on August 6, 2014, as the share prices on August 5 were good enough and fully met the margin requirement of the agreement,” it added.

Bhushan Steel’s share price had crashed 42 per cent during August 6-8 after the Central Bureau of Investigation arrested Vice-Chairman and Managing Director Neeraj Singal in connection with a bribery scandal involving Syndicate Bank chief SK Jain.

However, the company has blamed ABFL for the slide in share price.

“The decreased market price of Bhushan Steel after August 6 was artificial, attributable directly to ABFL’s illegal and irresponsible actions and cannot be said to be truly reflective of the market price of the shares of Bhushan Steel,” the notice stated.

Aditya Birla Finance spokesperson declined to offer any comments immediately.

The company has claimed damages from ABFL on the grounds that its decision to sell the pledged shares has resulted in a “huge loss of reputation, goodwill and share value which has been calculated to be ₹6,338 crore.”