MUMBAI, July 13: The Supreme Court will commence hearings on Monday on the validity of share allotments by the Arvind Mafatlal group company, Mafatlal Industries Ltd (MIL), in 1987 to other group companies, including the National Organic Chemical Industries Ltd (Nocil) and Sushripada Investments Pvt Ltd.

The Court will decide on admitting a special leave petition (SLP) filed by Nocil and Surekha Holdings Pvt Ltd (which has since acquired the shares of Sushripada Investments) challenging the 1996 order of a division bench of the Gujarat high court.

The bench had, in its order of July 1996, confirmed the observations of a single judge of the same court that the aforesaid allotment was in violation of the injunction order of the city civil court at Ahmedabad.

The city civil court had on September 4, 1987, passed an order prohibiting MIL from allotting shares out of the unsubscribed portion of the rights issue to anyone excepting banks and financial institutions.

It also decided that allotment of the shares should be made subject to the results of the suit. The result of the suit is still awaited.

Despite this, MIL alloted 1,24,400 shares to Nocil, 42,500 shares to Sushripada Investments and 30,227 shares to others in the Arvind Mafatlal group out of the unsubscribed portion of the rights issue in December 1987.

This volume of shares accounted for 14.66 per cent of MIL's equity capital at that time.

If the share allotment is cancelled now, the Arvind Mafatlal group holding in MIL will come down by around 8 per cent.

The observations of the single judge of the Gujarat high court were challenged in the division bench by MIL and not by Nocil and Surekha Investments. The SLP in the Supreme Court has, however, been filed by Nocil and Surekha Holdings. MIL has been named a respondent. The other respondent in the SLP is Miheer Mafatlal, a nephew of Arvind Mafatlal.

The petitioners in the SLP have stated that since they are affected parties in the share allotments, their points of view should have been heard by the division bench. Nocil has also said that it would suffer a loss of almost Rs 10 crore if the share allotment is cancelled now.

The matter dates back to mid-1987 when MIL's then ongoing rights issue was challenged by three shareholders in the city civil court at Ahmedabad on June 27, 1987. MIL's 1:1 rights issue of 8.10 lakh equity shares of Rs 100 each at a premium of Rs 200 a share had opened on May 4, 1987.

Since the market price of the MIL stock was hovering just around Rs 300 at the time of the issue, the response to the issue was only to the extent of 40 per cent.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.