APPEARED AT THE TIME OF ARGUMENTS

RP No. 718 of 2008

For the Petitioner(s) Ms. Surekha Raman, Advocate

For the Respondent Mr. M.S. Ganesh, Sr. Advocate Mr. K. Seshachary, Advocate For the Respondent Mr. Sunil Negi A.M. (SSKI) For the Respondent-3 Ms. Sandhya Kohli, Advocate (SEBI) For the Respondent-4 NEMO

RP No. 2982 of 2008 For the Petitioner(s) Mr. M.S. Ganesh, Sr. Advocate Mr. K. Seshachary, Advocate For the Respondent Ms. Surekha Raman, Advocate For the Respondent Mr. Sunil Negi A.M. (SSKI) For the Respondent-3 NEMO For the Respondent-4 Ms. Sandhya Kohli, Advocate (SEBI)

PRONOUNCED ON : 23rd JANUARY 2014

O R D E R PER DR. B.C. GUPTA, PRESIDING MEMBER

This single order shall dispose of two revision petitions, RP No. 718/2008, odrej Industries Limited versus Ritu Bhargava & Ors.and R.P. No. 2982/2008, itu Bhargava versus Godrej Industries & Ors.and a copy of the same may be placed on each file. 2. These two revision petitions have been filed under section 21(b) of the Consumer Protection Act, 1986 against the impugned order dated 14.11.2007 passed by the Madhya Pradesh State Consumer Disputes Redressal Commission (for short he State Commission in FA No. 2104/2006, itu Bhargava versus Godrej Industries Ltd. & Ors. vide which, while allowing the appeal, the order dated 04.09.2006, passed by the District Consumer Disputes Redressal Forum, Indore, dismissing the consumer complaint no. 470/2004 was set aside. 3. Brief facts of the case are that the complainant Ritu Bhargava, an Advocate at Indore, M.P. held 45 fully paid up shares of `6 each of OP, Godrej Industries Limited, a public limited company, duly incorporated under the provisions of the Indian Companies Act, 1956. In February 2002, the OP Company framed a cheme of Arrangementbetween the Company and its shareholders which, among other things, provided for buy back of 40% of its shares. The Scheme was approved under section 391 and 394 of the Companies Act by the High Court of Judicature at Bombay. It has been stated that the objections to the scheme taken by the Securities & Exchange Board of India (hereinafter referred to as EBI and the Central Government were rejected by the High Court of Judicature at Bombay and the SLP filed by the SEBI against the order of the High Court of Judicature at Bombay, was also dismissed by the Supreme Court of India vide order dated 22.2.2006. The version given by the OP Company says that after sanction of the Scheme by the High Court, it sent letters of offer to all its shareholders, including the present complainant, intimating that unless the shareholders specifically communicated their option to continue holding the shares, it would be presumed that consent for buy-back of the shares had been given by them. The OP Company says that since the complainant did not exercise any option to retain the shares, the Company exercised its right to buy-back the complainant shares. They remitted an amount of `810/- to the complainant through account payee cheque on 12.09.2002 at the price of `18 per share. It has been stated in the complaint that the complainant did receive cheque no. 093334 dated 12.09.2002 for `810/-, but she returned the said cheque vide her letter dated 26.09.2002. She sent a letter to the Company saying that she neither received the alleged buy-back offer, nor did she exercise any option for buy-back. It was stated that unilateral purchase of shares was illegal and amounted to compulsory acquisition. The complainant requested that her shares should be re-credited to her de-mat account. The Company, however, stated that they had acted in accordance with the Scheme, duly approved by the High Court and there was no question of re-crediting the shares, because the same already stood cancelled and the cancellation was also approved by the Court vide order dated 28.11.2002. The complainant Ritu Bhargava preferred the consumer complaint in question, alleging deficiency in service and claiming direction to the OP Company to return / re-allot her shares. She also claimed compensation of `50,000/- for mental harassment etc. The District Forum vide order dated 04.09.2006, dismissed the said consumer complaint. However, on an appeal filed by the complainant before the State Commission, the order of the District Forum was set aside and the learned State Commission directed the OP Company to credit the shares to the de-mat account of the complainant and also to pay `5,000/- as compensation and `25,000/- as cost of litigation. It is against this order that the present petition has been made. The second revision petition, i.e., RP No. 2982 of 2008 has been filed by Smt. Ritu Bhargava stating that relief should be granted to the petitioner as prayed for in her complaint and the shares, in question, should be credited to her account and she should be compensated for mental harassment etc. 4. At the time of hearing before us, the learned counsel for the Godrej Industries Limited has drawn attention to the cheme of Arrangementbetween Godrej Industries Limited and shareholders of Godrej Industries Limited, saying that as laid down in the Scheme, not more than 2,46,88,014 equity shares, representing 40% of the paid-up equity capital of the company, were to be purchased by the Company, unless the shareholders expressed their desire to continue holding the shares and such desire was to be given in the shape of a written intimation to the Company within 30 days from the Record Date. In case, the number of shares required to be purchased as per above arrangement, exceeded the total number stated above, the purchase was to be done by the Company on pro-rata basis. It was also stated in the Scheme that a cash consideration of `18/- per share was to be paid to shareholders within 14 days from the date of purchase of the equity shares. The equity shares thus, purchased were to be cancelled and the share capital of the Company was to be reduced to the extent of face value of the equity shares so cancelled. 5. The learned counsel stated that the petitioner Company framed the Scheme and filed a Company Application No. 123/2002 in the Honle High Court of Judicature at Bombay for convening a meeting of the equity shareholders. The High Court by order dated 01.03.2002, directed a meeting of the equity shareholders of the Company to be held at Mumbai on 6.04.2002. The Scheme was made known to the shareholders through notices and publications but the complainant Ritu Bhargava did not prefer any objection to the Scheme. There was only one objection from one Shri Kashi Nath Saha. The cheme of Arrangementwas approved by a majority of the shareholders in the meeting whereafter, the petitioner filed Company Petition No. 374/2002 before the Honle High Court of Judicature at Bombay for sanction of the said Scheme. The High Court vide their order dated 06.06.2002 was pleased to make the petition absolute in terms of prayers in the said petition. It has been observed in the said order of the High Court dated 06.06.2002 that the Regional Director, Department of Company Affairs, Maharashtra, Mumbai had some reservations, namely, that the Company could have availed of the alternative relief available under section 77A and 198A of the Companies Act, 1956 to buy-back the shares. However, the High Court did not find the observations as sustainable. It has also been stated in this very order of the High Court that one Kashi Nath Saha addressed a letter to the court contending that the relief should not be allowed, but the said Shri Saha was not present before the court. The objections were rejected by the Honle High Court. 6. The record date as per the Scheme was 26.07.2002, which was duly intimated to the stock exchange on 26.06.2002 by an advertisement in the newspapers on 18.07.2002, giving details of the record date and suspension of trading. 7. During the said period, another Company, M/s Sterlite Industries had also brought out a similar Scheme, which was also sanctioned by the Honle High Court of Judicature at Bombay. 8. In the meanwhile, the SEBI preferred an appeal to the Division Bench of the Honle High Court of Judicature at Bombay against the order dated 6.6.2002 giving sanction to such Scheme on the ground that the sanction had been granted without following the procedure prescribed under section 77(A) of the Companies Act, 1956 and SEBI Regulations for buy-back of the shares by a listed public company. Further as per the Scheme, the silence of the shareholders was to be treated as an offer. Unless there is positive assent of the shareholders to transfer his shares, no transfer can be treated as valid. An appeal was also filed in the case of M/s Sterlite Industies as well. 9. The Division Bench of the High Court in the case of Sterlite Industries dismissed the appeal on 15.07.2002. Thereafter, appeal in the case of M/s Godrej Industries was also ordered to be dismissed by orders dated 30.07.2002 of the High Court. 10. The SEBI preferred Special Leave Petition No. 16267 of 2002 before the Supreme Court of India but the Supreme Court. The Honle Court heard the matter as Civil Appeal No. 5438 of 2002, but refused to interfere in the orders passed by the High Court and disposed of the appeals. The learned counsel argued that since the issues involved in the present case are similar, it is clear that the Scheme made by the Godrej Industries Limited had the approval of the Supreme Court as well. 11. Pursuant to the sanction of the Scheme, the Company sent Option forms to all equity shareholders and thereafter, the shares belonging to those shareholders who did not respond, were cancelled in accordance with the Scheme. Since the complainant did not exercise her option to retain the shares, her shares were also cancelled and an account payee cheque of `810/- was sent to the complainant, but she returned the same with a request to re-credit the shares in her account. 12. Learned counsel pleaded that since the Record Date in this case was 26.07.2002, meaning thereby that the options were to be received from the shareholders within 30 days, i.e., before 24.08.2002, the petitioner sent a letter to the complainant by registered post, dated 21.10.2002 saying that they could not accept her request for continuing as shareholder of the company, because the shares had been purchased in accordance with the Scheme approved by the High Court. Learned counsel stated that the complainant was very well aware about the contents of the Scheme because public notice had been given about the Scheme. Moreover, the shares in question, had already become extinct and hence, they could not be credited to the de-mat account of the complainant in accordance with the order passed by the State Commission. The learned counsel stated that there had been no deficiency in service on their part and hence, the petition filed by them should be allowed. Learned counsel has also drawn attention to entry no. 31549 regarding postal dispatch of the letter of offer to the complainant vide ID No. IN30051310165988. 13. In reply, learned counsel for the complainant/Ritu Bhargava stated that Option Form stated to have been sent by the Company had never been received by them and hence, there was no question of sending any intimation about retaining the shares to the Company. The learned counsel has drawn attention to the observations of the District Forum in para 13 of their order dated 04.09.2006 saying that the District Forum had simply presumed that the version of the OP regarding sending of offer letter was true. 14. Learned counsel also referred to the observations of the State Commission that there was no evidence of actual delivery of letter to the complainant from the OP Company. Referring to the order passed by the Supreme Court of India on 22.2.2006, the learned counsel stated that the Supreme Court had only observed that SEBI could raise their submissions in appropriate case before appropriate forum and such forum could consider these questions in the light of legal provisions. It could not be stated therefore that the Supreme Court had granted their approval to the Scheme. The learned counsel further argued that holding of shares of a Company was similar to possessing a property and the same could not be purchased by the Company in the manner, stated by them. Moreover, it was obligatory on the Company to send the letter of offer by registered post, but it was not done. Further, there was no public notice after the Scheme was sanctioned. The learned counsel vehemently argued that there could not be any implied consent for the buy-back and in support of his arguments, he referred to the following orders, passed by Honle Supreme Court:- (a) amira Kohli versus Dr. Prabha Manchanda & Anr.reported in [2008 (2) SCC 1] (b) hisa Lal versus Dhapu Bai & Ors.reported in [2011 (2) SCC 298] (c) hagwan Das Goverdhan Das Kedia versus Girdharilal Parshottam Das & Co. and Ors., as reported in [AIR 1966 SC 543] (d) entral National Bank versus United Industrial Bankreported in [AIR 1954 SC 181] (e) . John Chandy & Co. versus John. P. Thomasreported in [2002 (5) SCC 90] 15. Learned counsel for the complainant further argued that as per section 4 & 5 of the Depositories Act, 1996, when there was an agreement between depository and participant, the complainant cannot be compelled to sell her shares, as there was a contractual relationship between the parties. 16. Learned counsel for SEBI stated that the complainant was not a consumer, vis-a-vis, them because there was no privity of contract between the complainant and SEBI. SEBI is a statutory body playing the role of a regulator and hence, it is not providing service to the shareholders. 17. In reply, learned counsel for the OP Company stated that it was clear from the order of the Supreme Court dated 22.02.2006 that the Company could go-ahead with the implementation of the Scheme. The Company had, therefore, acted in accordance with provisions of the Scheme and the procedure laid down in the Companies Act. At the present juncture, when the Scheme had attained finality, it was not possible to upset any provisions of the said Scheme. 18. I have examined the entire material on record and given a thoughtful consideration to the arguments advanced before me. 19. The basic issue raised by the complainant, Ritu Bhargava, in this case revolves around the proposition, whether she can be made to sell her shares to the Company without her consent. The complainant has pleaded that it is a contractual relationship between her and the Company and she cannot be compelled to sell her shares unless she wants to do so. 20. From the version given by the OP, M/s. Godrej Industries Limited and from the documents produced on record, it is made out that the cheme of Arrangementbetween the Company and its shareholders, as framed by the Company, was duly approved in the General Body Meeting of the shareholders of the Company and then approved by the High Court of Judicature at Bombay vide their order dated 6.6.2002. A perusal of this chememakes it clear that unless a shareholder indicates by a written intimation within 30 days from the Record Date of his intention to continue holding the equity shares, such equity shares shall be deemed to be purchased by the Company and also transferred in their name as per clause 4.5 of the Scheme. At the time of approval of the Scheme, objections were raised, saying that alternative relief available under section 77(A) and 198(A) of the Companies Act, 1956 to buy-back the shares should be followed, but the High Court did not find these observations sustainable. The matter was considered by a Division Bench of the High Court in the case of terlite Industriesand it has been mentioned in the order passed by the Division Bench on 15.07.2002 that it was pleaded before them on behalf of the SEBI and Central Government that unless there is a positive assent of a shareholder to transfer his shares, no transfer can be treated as valid. Learned counsels for the SEBI and Central Government pleaded before the High Court that clauses 4.1 to 4.8 of the Scheme treat the silence of the shareholders as an offer and this was violative of section 108 of the Companies Act, the Depository Act, 1996, the SEBI (Depository and Participants) Regulations Act, 1996 and the Bye-laws framed by NSDL under the Depositories Act. The Scheme would also violate the SEBI (Disclosure and Investor Protection) Guidelines, 2000. It was pleaded, however, by the counsel for the Company that an arrangement under section 391 of the Companies Act is essentially contractual in nature and unless there is illegality or fraud involved in the Scheme, the Court cannot decline to sanction the Scheme. The Division Bench in their order dated 15.07.2002 have listed the following points for their consideration:- ) Whether the appeals filed by the Central Government and the SEBI are maintainable in law? ii) Whether the Company Court has power to grant reorganisation scheme under section 391 read with sections 100 to 104 empowering the company to buyback the shares from the shareholders or whether section 77A is the only mode to buyback the shares? iii) Whether the scheme sanctioned by the company court is contrary to any provisions of law or is unconscionable and unfair and against the interest of the shareholders? 21. The Honle High Court after consideration of the entire issue declined to entertain the objections raised by the SEBI and the Central Government and dismissed their appeal, meaning thereby that the order passed on 06.06.2002 by which the deemed or indicative consent was permitted, was upheld. A similar order was passed on 30.07.2002 in the case of the present OP, M/s. Godrej Industries Limited also. It is made out that the matter went to the Honle Supreme Court also by way of SLP filed by the SEBI, but vide their order dated 22.02.2006, no change was made in the order passed by the High Court. 22. In view of the position narrated above, when the Scheme has been duly approved at the level of Honle High Court and the Honle Apex Court, the right of the Company to take action according to the provisions of the Scheme, cannot be challenged in the present revision petition. It is held, therefore, that the Company was well within their rights to proceed in accordance with the Scheme duly approved. 23. The other important issue is whether the Company took appropriate steps to inform the shareholders about the Scheme, seeking their option for continuing to hold the shares or not? The Company has taken the stand that the Record Date of 26.07.2002 was decided by the Board of Directors of the Company and duly intimated to the stock exchange on 26.06.2002 and also by an advertisement in newspapers on 18.07.2002. A communication was issued to the shareholders under ertificate of Post In this regard, the OP Company has filed an affidavit of Shri Suresh Gandhi, partner of the service agent, rompt Services, Mumbai,together with register of U.C.P. from which the relevant extract, evidencing proof of mailing has been produced. It has been mentioned against serial number 31549 and ID No.IN30051310165988 that the option letters for buy-back were sent to Ritu Bhargava at her address in Indore. However, the version taken by the complainant is that she never received the option letter. In view of the documents produced on record by the Company, it is made out that they sent option letters to all the shareholders and they have taken action in accordance with the provisions of the Scheme as duly approved. The complainant is, therefore, not entitled to the relief on the account that she could not exercise her option to retain the shares. 24. In view of the position explained above, it is held that the only relief that can be granted to the complainant is the payment of the value of the shares as on Record Date. The Company already made two attempts to make payment of `810/- to the complainant, but she refused to accept the said amount. The Company is directed to make payment of `810/- (the value of 45 shares @18/- as per share) to the complainant again. As the said amount has been lying with the company since the date from which the payment became due, it shall be appropriate that the Company make payment of `810/- alongwith interest @12% p.a. from the date of payment of first offer to the complainant, i.e., 12 September 2002. 25. With the above observations, the revision petition no. 718 of 2008, filed by Godrej Industries Limited is allowed and the order passed by the State Commission is modified as stated above. The revision petition filed by Ritu Bhargava, i.e., RP No. 2982 of 2008 is ordered to be dismissed. There shall be no order as to costs.