According to the minority shareholder, the orders issued by BIFR for merger of India Foils with Ess Dee are beyond the powers of the reconstruction board
Nagpur-based Laxmi Girish Jalan has requested the Securities & Exchange Board of India (SEBI) to initiate action against orders passed by the Board for Industrial and Financial Reconstruction (BIFR) in the India Foils case as these orders are beyond the powers and authority (ultra vires) of BIFR. Mrs Jalan, in a notice sent through her counsel Sandeep Jalan, also said that she may approach the Bombay High Court, in case SEBI fails to respond.
In what appears to be another case of absolute apathy and discrimination, minority shareholders have been crying foul about the merger deal between India Foils and Ess Dee Aluminium as they feel the acquirer has put a ridiculously low valuation.
Earlier in September 2010, the BIFR sanctioned and approved the merger of India Foils with Ess Dee in terms of the modified rehabilitation scheme. According to the scheme, India Foils’ shareholders were offered a share-swap ratio of 1285:1. This also meant that India Foils’ shareholders would surrender their 1,285 shares to get a single share of Ess Dee. Apparently, Mumbai-based chartered accountant firm, MP Chitale & Co, did this incredible valuation for the merger.
In November 2008, Ess Dee bought a majority stake in India Foils for Rs130 crore from the Anil Agrawal-led Vedanta Group as part of the rehabilitation scheme approved by the BIFR. However, advocate Mr Jalan has objected to the scheme of rehabilitation saying that BIFR cannot change ownership of a company. “According to Section 18 of the Sick Industrial Company (SIC) Act, among other things, the proposed scheme may provide for financial reconstruction, change or appointment of new board of directors, etc. While looking at, all the provisions of section 18 of SIC Act, 1985, it is nowhere provided that the ownership of the sick industrial company can be changed, save, by way of amalgamation,” he said in the notice, a copy of which is with Moneylife.
Mr Jalan said, the amalgamation ordered between India Foils and Ess Dee was ‘absolutely unwarranted’ and there was no ‘cause of action’ for the BIFR to exercise its jurisdiction. “The clause of SIC Act, 1985 does not contemplate the nature of amalgamation effected between sick India Foils and Ess Dee and the said amalgamation, in particularly frustrates the mandate of Section 18(3)(a) of the SIC Act, 1985 and Regulation 30 of BIFR Regulations 1987,” the notice said.
Some years ago, Kumar Mangalam Birla, who controls Hindustan Aluminium, almost bought India Foils, the Kolkata-based aluminium foil-maker. His team took a close look at the books of the company and balked. Then a more intrepid and ambitious businessman jumped in—Anil Agarwal of Sterlite. He is more adept at wading through the mess and fixing it—or so he thought. But even he gave up. Finally, it was left to the local boy who had made it good in Mumbai to come back and invest in his home state. Sudip Datta of Ess Dee Aluminium took over India Foils, a sick company, from Anil Agarwal for Rs130 crore.
After relisting it in June 2009, India Foils’ shares last traded on the Bombay Stock Exchange on 22nd October at Rs5.12 apiece.