MANU/DE/0041/1992

Equivalent Citation: AIR1992Delhi253, [1996]85C ompC as153(Delhi), (1992)ILR 2Delhi877

IN THE HIGH COURT OF DELHI

C.W.P. No. 3945 of 1991
Decided On: 12.02.1992
Appellants:Madan Gopal Jajoo and Ors.
Vs.
Respondent: Union of India and Ors.
Hon'ble Judges/Coram:
D.P. Wadhwa and R.L. Gupta, JJ.
Counsels:
For Appellant/Petitioner/plaintiff: A.K. Sen, Sr. Adv., A.K. Aggarwal, Anoop Bose,
T.P.S. Kang, D. Vidyanandan, S. Nanda Kumar and O. Rajoo, Advs
For Respondents/Defendant: S.K. Tewari, A.P. Aggarwal, Andhiyarujina, Sr. Advs.,
V.B. Trivedi and Bharat Sangal, Adv.
Case Note:
Company Law--Capital issue--terms amended--approved by share and
debenture holders and C.C.I.--Whether issue may still be set aside.
Petitioners, share and debenture holders of Larson and Tubro Ltd./Respondent No. 3,
were aggrieved about certain changed terms concerning the company's issue of
Debenture Series IV. The original terms had indicated that over Rs. 600 crores was to
be utilized to finance two Reliance Industry projects. Later on, after the issue had
already opened and the public had paid in money, the management decided not to
finance the Reliance projects after all and instead use the money for its own i.e.
Larson and Tubro purposes. An extraordinary general meeting of share and debenture
holders was called; a very large majority voted to support the changed decision. On
this basis the Controller of Capital Issues also consented to the change.
The petitioners contended that the consent of the C.C.I. was illegal and that the
Debenture Series IV should be withdrawn and set aside,
Dismissing the writ petition, the Court
Held:
The resolutions in the shareholders and debenture holders meetings were passed
with overwhelming majority. The third parties whose rights were affected were
consenting parties to the change. Persons falling in the categories of the petitioners
are quite insignificant in number. Having reached such a stage any order by this
Court that the Debenture Issue may be recalled would have unsettling effect on the
capital market and would affect the right of almost whole of the investing public.
ORDER
D.P. Wadhwa, J.
1 . In this writ petition filed by four petitioners there are three respondents. The

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1 . In this writ petition filed by four petitioners there are three respondents. The
petitioners are holders of shares and debentures of the third res-Larsen &.Toubro
Limited, a public limited company ('the Company' for brevity). The first respondent is
Union of India in the Ministry of Finance, Department of Economic Affairs and the
second is the Controller of Capital Issues (CCI) exercising its functions under the
Capital Issues (Control) Act, 1947 (for short 'the Act).
2. The petitioners have sought a writ of certiorari, or any other writ, or direction for
setting aside the issue of Debentures Series IV of the Company, and for setting aside
the amended consent order dated 8 November 1991 of the CCI amending the earlier
consent order dated 29 August 1989. The petitioners also seek a restraint on the
respondents from giving effect to the impugned amendment order, or acting in
furtherance of that amendment order.
3. The amendment order which is impugned may be reproduced here:-
No. M. 582/ 7/ CCI/ 89
Government of India
Ministry of Finance
Department of Economic Affairs
Office of the Controller of Capital Issues
New Delhi, the 8-11-91.
To
M/s. Larsen & Toubro Ltd.
L & T House,
Ballard Estate
P.O. Box 278,
Bombay-400038
Subject:- Consent Order No. R.552/7/ CCI/89 dated 29-8-1989 - Amendment
to.
Gentlemen,
I am directed to refer to your letter No.SSC/504/KS dated 9-7-1991 on the
subject mentioned above and to say that the Conversion terms of the
Debentures Con- in this Office Consent Order of even' No. dated 29-8-89 as
amended, may be amended as follows:-
"Rights Issue:- Out of Convertible Debenture of Rs. 290/- each
offered on rights basis, Rs. 100/- will be converted into two equity
shares of Rs,. 10/- each at a premium of Rs. 40/- per share within 3
months from the date of this order. Another Rs. 60/- per debenture
will be converted into one equity share of Rs. 10/- at a premium of
Rs. 50/- per share within 3 months from the date of first call to be
decided by IDBI The balance of Rs. I 10/ - per debenture will be
converted into two equity shares of Rs. 10/- each at a premium to be
fixed by CCI but not exceed ing Rs. 55/- per share on 1-7-1992 or
within 3 months from the date fixed by IDBI for final Call.
Public Issues:- Out of Convertible' Debenture of Rs. 300/ - each
offered to Public Rs. 100/- will be converted into two equity shares

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 of Rs. 10/- each at premium of Rs. 45/- share within 3 months from
the date of this order. Another Rs. 60/- per debenture will be
converted into one Equity share of Rs. 10/- at a premium of Rs. 50/-
per share within 3 months from the date of first call to be decided by
IDBI. The balance of Rs. 110/pet debenture will be converted into
two equity shares of Rs. 10/ - each at a premium to be fixed by CCI
but not exceeding Rs. 551 -per share on 1-7-92 within 3 months
from the date fixed by IDBI for final call."
2. The change in the scheme of deployment of issue proceeds as mentioned
in your letter dated 9-7-91 addressed to this office is noted,
3 . It is a condition of this order that those Debenture holders who do not
agree to the above variations/ modifications to the consent would be paid
back their application and allotment money along with the interest due in
terms of the Resolutions passed by the Shareholders and Debenture-holders.
4. The Consent order under reference may be deemed to have been amended
to the above extent only.
Yours faithfully,
Sd/-
(R. R. Jha)
Deputy Controller of Capital Issues Copy to:-
1. The ROC, Maharashtra, Bombay.
2. RBI, SCD, Co, Bombay.
3. S.E. Section.
4. Guard File
5. Reliance Industries Limited.
(R. R. Jha)
Deputy Controller of Capital Issues"
How this amendment order came to be issued, it will be necessary to
understand the background of the Debenture Issue (Series IV) in brief. For
details one can conveniently refer to the decision of the Supreme Court in N.
Parthasarathy v. Controller of Capital Issues MANU/SC/0592/1991 :
[1991]2SCR329 , where the original consent order dated 21 August 1989 of
the CCI was upheld. We may also note at this stage that first petitioner holds
589 equity shares and 100 Debentures Series IV; second petitioner holds 40
Debentures Series IV; third petitioner holds 40 Debentures Series IV- and
fourth petitioner holds 100 shares of the Company.
4 . Board of Directors of the Company resolved on 22 July 1989 to raise additional
funds by issue of 12.5% Full Convertible Secured Debentures amounting to Rs. 920
crores, namely, (1) Right Issue to the extent of Rs. 200 crores and (2) Public Issue of
Debentures to the extent of Rs. 720 crores, and for that purpose to call an
Extraordinary General Meeting of the Company. On 22 July 1989 notices were issued
to the shareholders convening extraordinary general meeting for approving the said
issue. It was mentioned in the notice that the need for additional funds was caused

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by the expansion of the company's business and new growth strategy for undertaking
large turnkey projects. At the same time on 26 July 1999 the Company made an
application for consent of the CCI for issue of the said debentures. The application
was made on the form prescribed under the Capital Issues (Application for Consent)
Rules 1966 (for short the Rules) framed under the Act. The extraordinary general
meeting of the shareholders of the Company was held on 21 August 1989 in which a
special resolution was passed authorising the Board of Directors of the Company to
issue debentures for cash at par for an aggregate value of Rs. 820 crores subject to
the consent of the CCI. As noted above, earlier the Board of Directors had passed a
resolution for issue of debentures of the aggregate value of Rs. 920 crores but this
was changed to Rs. 820 crores. The amendment was proposed by the Board of
Directors at the meeting itself. In its application to the CCI the Company gave the
fund requirement for the period I October 1989 31 Mar 1992 amounting to Rs. 1425
crores with details as under:
Rs. In cross
1. Assistance to Turn-key Projects : Rs. in Crores,

Reliance Industries Limited (RIL) Cracker 510

Reliance PetroChemicals Limited (RPL) Caustic Chlorine 70

Reliance Industries Limited Acrylic Fibre 55 635

2. Capital Expenditures;

Projects 228

Normal Capital Expenditure 220 448

3. Additional W orking Capital 187

4. Repayment of Loans 155

Total : 1,425

As to now the Company w as to meet the requirement during this period, it

w as mentioned as under:--

1. Issue of Convertible Debentures 920

2. Proceeds of previous debenture issue 73

3. Internal Accruals 432

Total: 1425

5 . CCI by its letter dated 29 August 1989 granted consent to the Company to the
issue of debentures to the extent of Rs.820 crores as stated in the resolution of the
Company subject to certain conditions set out in the annexure to the consent order.
Conditions (d) and (v) are relevant as these were referred to during the course of
arguments and may be set out as under:
(d) The proceeds of this issue must not, without the further permission of
the Central Government in writing, be used for any other object of
expenditure than those described in the application to which this order
relates.

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 xx xx xx xx xx xx xx

(v) It is a condition of this consent order that the proceeds from issue of
Debentures till deployment in the proposed activities can be invested in fixed
duration deposits/ instruments with the Cooperative/ nationalised banks,
UTI. Financial Institutions, Public Sector Undertakings (other than Public
Sector Bonds) and be used strictly for the requirements of the projects
mentioned in the application and not for any other purpose."
6 . On 15 September 1989 CCI wrote another letter amending the earlier consent
order dated 29 August 1989 to the effect that the utilisation of the funds to be raised
on the issue shall be monitored by the Industrial Development Bank of India (IDBI).
Again by another letter of the same date CCI advised the Company that 50% of the
money to be raised on calls on the debentures should be available for utilisation by
IDBI.
7. This consent order led to spate of litigations in various courts and were ultimately
transferred to the Supreme Court which gave its judgment on 16 April 1991
MANU/SC/0592/1991 : [1991]2SCR329 (N. Partha v. Controller of Capital Issues).
During the course of proceedings before the Supreme Court the court passed an
order allowing the Company to open the debenture Issue subject to the condition that
allotment would abide by the decision of the Court. The Issue was opened and was
over subscribed. As already noted above, the validity of the consent order was upheld
by the Supreme Court.
8 . On 9 July 1991 the Company applied to the CCI for modification of the original
consent detailing the circumstances as to why it was necessitated. The Company said
that the board of Directors in Its meeting on 5 July 1991 had decided to utilise the
proceeds of the Debenture issue for setting up new projects, expansion/
diversification of existing pro- financing normal capital expenditure, additional
working capital requirements, repayment of loans except that no part of the proceeds
of the Debenture Issue would be utilised for granting suppliers credit to RIL and RPL.
The Company also wanted modification of conversion schedule of the debentures.
The Company said that projected fund requirements for suppliers credit to RIL and
RPL would be reduced by 635 crores and the Company now had plans to implement
six projects mentioned in the letter over the next four years which would involve a
capital outlay of around Rs. 1000 crores and out of this Rs. 493 crores would be
spent during the period 1991-92 and 1992-93 and further that Company would also
need Rs. 364 crores for normal capital expenditure making a total capital expenditure
of Rs. 857 crores up to 31 March 1993. The Company also said that it had been
having discussions with IDBI, the lead financial institution and the monitoring agency
appointed by CCI for these debentures as to its fund requirements. Reference was
also made to a meeting held with the CCI in his office on 3 June 1991 when it is
stated the Company was asked to submit to IDBI for its revised proposal for
utilisation of the debenture monies. By this time the Company had already collected
the application and allotment money which amounted to 50% of the face value of
each debenture. For getting approval to these modifications the Company called
separate meetings of the shareholders and debenture holders on 20 September 1991.
Notices for these meetings were issued on I August, 199 1.
9. On I August 1991 CCI in reply to letter dated 9 July 1991 of the Company required
certain information's /clarification in order to enable him to process the Company's
application for consent to the proposed modification of the original consent order and

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also asking for details of fund requirements of the Company for the new six projects
mentioned by it in its application. This was replied to by the Company on 5
September 1991 giving some details and enclosing therewith certain certificates and
giving other particulars. In the meanwhile, the company had also written a letter
dated 9 August 1991 to the CCI sending therewith a letter dated 2 August 1991 by
the IDBI to the Company. IDBI in this letter approved the modifications sought by the
Company to the original consent order both as regards Board of Directors of the
Company's decisions to maintain the issue amount at the original level of Rs. 820
crores and to make the first call on 15 January 1992 and the final call on 30 June
1992, and that no par of the proceeds of the debenture issue would be utilised for
granting suppliers credit to RIL and RPL and to utilise the entire proceeds of the issue
only for 1, & T projects. IDBI also noticed that dates of conversion of debentures into
equity shares would also undergo changes than those envisaged in the prospectus.
IDBI said that these approvals were on behalf of other financial institutions as well,
but these were, however, subject to the company getting approval from the CCI
amongst other required approvals. Yet another letter dated 20 August 1991 was
addressed by the Company to the CCI. With this certain other details were sent and
also copies of notices to shareholders and Debenture for their meetings on 20
September 1991. By letter dated 28 September 1991 the Company informed the CCI
that the shareholders and debenture holders at their respective meetings held on 20
September 1991 approved the variations to the terms of issue of debentures. Then
the CCI issued on 8 November 1991 the amendment to the original consent order
which has been reproduced above and on I I November 1991 the CCI wrote the
following letter to the Company: -
"Gentlemen,
With reference to this office letter of even number dated 8-11-91 on the
above subject I am directed to say that the third stage conversion of both
Rights issue and Public issue of convertible Debentures mentioned as Rs. I
10 / - in this office letter of even no. dated 8-11-91 may be amended to read
as Rs. 130/ -.
2 . The amendment letter to the consent order dated 29-8-89 shall stand
further amended to the above extent only.
Yours faithfully,
Sd/-
(R. R. Jha)
Deputy Controller of Capital Issues."
10. Thereafter, on 14 November 1991 the Company issued a public notice intimating,
inter alia, that the CCI had accorded his consent to the conversion of Debenture Issue
of the Company -as approved by the debenture and shareholders at their respective
class meetings held on 20 September 1991 and that the Company would be sending
first call notice during the second half of January 1992.
1 1 . Now this amended consent order is under challenge in the present petition.
Petitioners say it is against the law as laid down by the Supreme Court in N.
Parthasarathy case , MANU/SC/0592/1991, and the provisions of the Companies Act
and the Capital Issues (Control) Act, and further that there has been non-application
of mind by the CCI in issuing the same.
12. There was another development in between. RIL group did not now want to avail
of suppliers' credit amounting to Rs. 635 crores. It separately approached the CCI for

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consent to the issue of capital of the value of Rs. 858.30 crores. CCI gave his consent
to this on 26 August 1991. One of the conditions to which this consent was subject to
that the issue would be proceeded with only after obtaining resolution of the
shareholders and debenture-holders of M / s. L & T (respondent No. 2) in accordance
with the provisions of the companies Act, 1956. If we refer to the Letter of Offer
issued by RIL for subscribing to its Debenture Issue, Note (c) is quite relevant and is
reproduced as under:-,
"c) The CCI in his consent order dated 26th August, 1991 and as amended by
his letter dated 8th November, 1991 stipulated under condition (t) that the
issue shall be proceeded with only after obtaining resolution from the
shareholders and Debenture-holders of Larsen & Toubro Limited (L & T) in
accordance with the provisions of the Companies Act, 1956, as amended up
to date, (hereinafter referred to "the Act") approving the revised scheme of
deployment of proceeds of L & T's Issue of Debentures of Rs. 820 crores and
after modifications are made in L&T's said Issue.
The Shareholders and the Debenture-holders of L&T in accordance with the
provisions of the Companies Act, 1956 as amended up to date, have passed
the necessary resolutions at their respective meetings held on 20th
September, 1991.
By a letter No. R. 552/ T/ CCI/ 89 dated 8th November, 1991 of CCI
addressed to L & T, modifications have been made in L & T's said issue of
Rs. 820 crores consented to vide Consent Order dated 29th August, 1989. A
copy of the said letter dated 8th November 1991 has also been endorsed by
CCI to the Company. The Company having complied with the said condition
(t) imposed by CCI, as aforesaid, as also condition (u) in obtaining credit
rating, is now eligible to proceed with the present issue".
13. The request of the company for amendment to the original consent order was
examined in the office of the CCI both as regards date of conversion as proposed by
the Company as well as premia on conversion, and the object of the issue. It was
noticed that earlier out of Rs. 820 crores, the company had sought to raise Rs. 635
crores for extending suppliers' credit to RIL and RPL and that subsequently the RIL
group decided not to make use of the suppliers' credit. The company now proposed
with the approval of the shareholders/ debenture holders and IDBI that all the
proceeds of the Issue would be used by the Company for its own projects and
suppliers' credit could not be given to Reliance Industries. Reliance was made to
letter of IDBI approving the proposal of the Company. CCI also noticed that on this
basis he had already issued consent order (on 26 August 1991) for Reliance
Industries Ltd. for raising the funds for those projects for which it was to get
suppliers' credit from the company. All this is recorded in the note of Mr. H. N.
Gupta, Director (Inv), dated 29 October 1991 and in the end of this note he
suggested as under:
"8. We may, Therefore, consider approving the revision of the dates and the
terms of the conversion of L & T Issue as proposed by the company subject
to the following:
i) The first conversion premium for two shares in case of the Rights
and the Public Issue would be identical at Rs. 40 and Rs. 45
respectively.

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 ii) The concurrence of the Department of company Affairs is received
to the opinion given by the Law Ministry on the validity of the
resolutions passed by the shareholders/ debenture-holders in terms
of the Supreme Court Order.
iii) Those Debenture-holders who do not agree to the revised terms
of the Issue would be refunded their money back along with the
interest due thereon in terms of the Resolutions passed by the
company.
Submitted for the approval of the Empowered Committee."
14. Ultimately, this was approved by the Finance Minister on 6 November 1991 and
the amended consent order issued on 8 November 1991.
15. To us it would appear that the Central Government in terms of sub-section (6) of
section 3 of the Act has allowed the Debenture Issue to go through as per original
consent order modifying the condition, (i). as to how the proceeds of the Issue would
be used by the Company-now for its own projects rather than giving suppliers 'credit
to RIL group, and (2) dates and terms of conversion of the Debentures. When in the
letter dated 8 November 1991 it is stated that "the change in the scheme of
deployment of issue proceeds as mentioned in your letter dated 9-7-1991 addressed
to this office is noted" it would atleast amount to saying that CCI has no objection to
the new scheme proposed by the Company. In para 3 of this letter it is clearly
mentioned that it is condition of the order that those debenture-holders who do not
agree to the above variations/ modifications to the consent would be paid back their
application and allotment money along with interest due in terms of the resolutions
passed by the shareholders and debenture-holders.
16. Principal attack of Mr. Sen, appearing for the petitioners, Therefore, and rightly
so, on this letter of CCI dated 8 November 1991 has been that though this modified
consent order varies the conversion terms of the debentures it does not change the
scheme of deployment of the Issue proceeds as mentioned in the original consent
order. Mr. Sen said that he was not challenging the modified consent order as such
but sought restraining the Company from deployment of funds has to be in
accordance with the except that mentioned in the original consent order. He said
though he was also objecting to the conversion terms of the debentures now
consented to by the CCI, but his objection was more of a technical nature as
according to him such variation of conversion terms should have been sought from
the Supreme Court by the Company. Mr. Sen referred to the affidavit filed on behalf
of CCI where he said that the CCI admitted that no consent was given modifying the
original consent order for deployment of proceeds of the Issue. He, particularly
referred to para XXI of the affidavit which is as under:
"The modifications to the conversion terms issued vide letter dated 8-11-
1990 are not beyond the statutory powers of Respondent No. 2 because
share-holders and debenture-holders had already approved the modifications
and the company had applied to respondent No. 2 for modification as
envisaged in Hon'ble Supreme Court Order dated 16-4-1991. As regards
"noting change in the scheme of deployment", it is submitted that the
condition (d) of the earlier consent "the proceeds of this issue must not
without the further permission of the Central Govern- in writing be used for
any other object of expenditure than those described in the application to

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 which this order relates" has not been amended. Since the object of the issue
has been changed by Respondent No. 3, the Respondent No. 2 has noted the
change of the object of the issue and the earlier condition referred to above
has not been deleted. Hence the allegation that the amendment order dated
8-11-1991 is "highly dubious and is tantamount to consent being given for
objects and purposes which have no binding effect or even meaning" is
denied."
17. At various places in this affidavit CCI has denied that he acted as a mere rubber
stamp in modifying the original consent order or that he had given his consent
permitting change in utilisation of the said issue for "vague, different diverse"
purposes. We are somewhat quite mystified by the stand taken by the CCI. How can
CCI say that deployment of funds had to be in terms of original consent order, i.e.,
for giving suppliers' credit to RIL group, when by a separate order on the request of
RIL, CCI had already given consent to RIL for capital issue for those very projects for
which the original consent had been given to the company. In fact it had been the
stand of the petitioners that the phraseology used by the respondents I and 2 in para
2 of the modified consent letter was highly dubious and tantamounted to consent
being given for objects and purposes which had no binding effect or even missing.
When the company applied on 26 July 1989 to the CCI for consent to its Public-cum-
Rights Issue of Rs. 820 crores, it again by letter dated I I August 1989 also sent to
CCI two letters both dated I I August 1989 from RIL and RPL to the Company wherein
total amount of sup- estimated was given. The content of one of such letter is as
under:
"Dear Sir,
We refer to your letter No. VP(F)/ SDK dated 10-8-89 and note that CCI
would like us to give an assurance that we will not raise monies from the
public for the purpose for which you are providing us credit assistance.
In this connection we undertake that we will not raise monies from public for
financing the costs of the undermentioned projects to the extent you have
extended suppliers' credit to us........"
1 8 . Original consent of the CCI was , Therefore, linked to deployment of funds
amounting to Rs. 665 crores of suppliers' credit to both RIL and RPL. Now when RIL
group did not want any suppliers' credit from the company and RIL applied of its own
for raising funds and sought permission of the CCI for issue of capital, then before
granting such permission the original consent to the Company certainly needed
reconsideration. Moreover, consent to RIL for issue of capital was also dependent on
the Company passing necessary resolutions and also for the CCI to take into account
the assurance given by RIL and RPL in their letters dated I I August 1989 to the
company. Now when the application of the company for modified consent order was
being examined in the office of CCI right from 29 July 1991 it was being noticed that
RIL and RPL did not want and suppliers' credit from the company. In the note dated
29 October 1991, which had been ultimately approved by the Central Government,
after discussing the new proposal of the company for conversion of debentures and
change in dates and also modification in the object of the Issue, in Paras 6 and 7
legal angle was examined. It will be useful to reproduce this legal angle:
"Legal Angle:
6. While allowing the Reliance Industries Ltd., to raise funds for the Cracker

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 Project in lieu of the Suppliers' Credit we had imposed condition (t) saying
that the approval of all the shareholders/ debenture-holders of L & T would
be obtained and L & T Issue terms revised before the consent Order for
Reliance Industries Ltd. can be acted upon. On this basis, the Resolutions
passed by the shareholders / debenture-holders as mentioned above were
not found to be adequate. The matter was then referred to the Law Ministry
for advice on the representation of Reliance Industries Ltd., for deletion of
condition (t). The opinion of the Department of Company Affairs in the Law
Ministry may be seen at F/Y. The Law Ministry has suggested that condition
(t) may be modified as follows:
"(t) The issue shall be proceeded with only after obtaining
Resolution of shares and Debenture-holders of M/s. L & T in
accordance with the provisions of the Companies Act 1956 as
amended up todate .........
However, as suggested by the Law Ministry the file has been referred back to
the Department of Company Affairs and their concurrence is awaited very
shortly.
7. Since RIL are keen to proceed with their Issue and this can be done only
when L & T terms are revised by us, it was considered appropriate to process
this case at this stage. This will, however, be subject to the concurrence of
the Department of Company Affairs to the opinion given by the Law Ministry
mentioned above."
19. Last paragraph 8 of the note we have already referred to in earlier portion of this
judgment. So on 8 November 1991 when modified consent order was issued and
when we accepted the stand taken by the CCI before us, there were two Issues of
capital, one by the company and the other by RIL, for the same purpose. How could
CCI act in such a way? It is really strange to us.. It appears some ghost has been
working in his office. We find CCI has failed in his elementary duties which duties
have been pointed out by the Supreme Court in Narendra Kumar Maheshwarl's case
MANU/SC/0388/1989 : [1989]3SCR43 .
20. We were quite inclined to interfere in the matter on account of the stand taken by
respondents I and 2 in their affidavit. But then we find there has been no specific
prayer for a writ or direction requiring respondents I and 2 to see that the company
deploys funds in terms of the original consent order which certainly it could not do
so because of changed circumstances and when RIL group had been allowed to issue
capital of its own. We certainly could not issue any writ or direction to the company
to deploy funds in terms of the original consent order. Remedy of the petitioners,
Therefore, lies elsewhere. In Narendra Kumar Maheshwari v. Union of India,
MANU/SC/0388/1989 : [1989]3SCR43 , the Supreme Court while dealing with a
certain argument said as under (at p. 2169 of AIR):-
"Shri Ganesh tried to urge that the CCI ought to have been aware of the fact
that he had sanctioned a capital issue of Rs. 400 crores (subsequently
enhanced to Rs. 500 crores) to RIL for the same project and that the said
issue had been implemented and capital of Rs. 500 crores had been mopped
up from the public by RIL. The CCI ought to have withheld permission for a
fresh capital issue in the name of RPL for the very same project. However,
the CCI did not appear to have applied his mind, according to Shri Ganesh.

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 Consent Order, Therefore, according to Shri Ganesh, was bad. We are,
Therefore, unable to accept this submission. The CCI was not performing the
role of a social mentor taking into account the purpose of RIL. If RIL has
misutilised any of its funds or the funds had not been utilised for G series,
then RIL would be responsible to its shareholders or to authorities in
accordance with the relevant provisions of the Companies Act, 1956 .........."
21. Mr. Sen then said if for certain reason it becomes impossible to deploy the funds
as per the original consent order the only alternative left with the company is to
return the application money to the debenture- and to apply afresh for a new issue
He said effect of issue of debentures was disastrous for the petitioners inasmuch as
equity base of the company was enlarged reducing the return of the original share
holders. He said perhaps the petitioners would not have complained if the projects
were completed within a period of 30 months as per the original consent order.
22. We have already seen above that respondents I and 2 did examine the need of
the Company for utilisation of the funds and they were supported in their stand by
the IDBI and other financial institutions. Complaint of Mr. Sen, however, is that the
company in answer to letter dated I August 1991 of the CCI never gave any further
details respecting the new projects and the CCI in a most casual manner dealt with
the case. The fact, however, remains when the company was asked to seek advice of
IDBI about IDBI's assessment of the funds requirements of the Company, the IDBI by
its letter dated 14 August 1991 informed that LIC had constituted an informal task
force to examine the request of the company for reducing the size of debenture at Rs.
820 crores as originally envisaged, but that task force which went into the
requirements of funds for various new projects approved the requirements of funds
for various new projects proposed by the Company. Mr. Sen, however, said CCI
should himself have examined the deployment of the capital issue to new projects.
We find this situation to be piquant. On the one hand, the contention is that the
modified. consent was given without application of mind and, on the other hand, it is
contended that there was no consent for deployment of funds to new projects. From
the tenor of the modified consent order one could perhaps assume that respondents I
and 2 gave their consent even to the deployment of the funds for the new projects.
The company was perhaps misled to take this view and in the circumstances we
cannot find any fault in this.
23. Mr. Sen also referred to decision of the Supreme Court in N. Parthasarathy case,
MANU/SC/0592/1991 where it was held that the consent given by the Central
Government, nay CCI, on a consideration of the special resolution adopted in the
extraordinary general meeting of the shareholders of the company on 28 August 1989
could not be varied, changed, or modified both as regards the reduction of the
amount of debentures as well as the purpose for which the funds would be utilised
contrary to what had been embodied in the prospectus and approved by the CCI on
the basis of the special resolution adopted at the general meeting of the shareholders
of the Company, and further that the consent order could not be varied by the Central
Government or CCI after the said order had been made public and third parties had
acted on it and acquired rights thereon. But then one has to examine the issue with
reference to the relevant provisions of the Companies Act and the Capital Issues
(Control) Act. The Supreme Court did refer ,to sections 61, 62 and 63 of the
Companies Act and then stated that the terms of the contract mentioned in the
prospectus could not be varied except with the approval of and on the authority given
by the Company in general meeting. The Court also referred to sub-sec. (6) of S. 3 of
the Capital Issues (Control) Act, 1947. We do not think that the Supreme Court ever

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said that once the consent was given the curtain was drawn finally and issue stood
foreclosed for all times to come. Situation may change and circumstances may
intervene which necessitate change. We have already noticed in the present case RIL
group decided not to make use of the suppliers' credit. The Issue had already been
opened and was over subscribed.-Both the shareholders and debenture holders in
their separate meetings agreed to fresh deployment of funds for the new projects of
the Company. The matter was then referred to the CCI. Sub-sec. (6) of S. 3 of the
Capital Issue (Control) Act does envisage such a contingency. The resolutions in the
shareholders and debenture holders meetings were passed with overwhelming
majority. The third parties whose rights were affected were consenting parties to the
change. Persons falling in the categories of the petitioners are quite insignificant in
number. Having reached such a stage any order by this Court that the Debenture
Issue may be recalled would have unsettling effect on the capital market and would
affect the right of almost whole of the investing public. We are told there are about
one lakh debenture-holders who certainly think otherwise than the petitioners.
24. Yet two subsidiary points were raised by Mr. Sen, (1) that the application for
modification of the original consent order was not made in the form prescribed, and
(2) that the original consent itself lapsed on the expiry of 12 months from 29 August,
1989 as provided in condition (b) to the consent order. We do not think either of
these submissions has any substance. In Narendra 'Kumar Maheshwari case
MANU/SC/0388/1989 : [1989]3SCR43 , the Supreme Court has held that proforma
prescribed under the Rules was not rigid. It is one thing to say that CCI did not get
all the particular& in terms of the form prescribed and entirely different thing to say
that the particulars should have been furnished only in the form prescribed. Offer to
Public had been issued and all necessary steps taken within the stipulated time and
by a modified consent order CCI approved fresh conversion terms of the debentures
and to the time schedule.
25. But then we are not quite satisfied with the bona fides of the petitioners in filing
the present petition. Total value of the shares and debentures which they hold is
around Rs. 26,500/- though they contend that the market value is about Rs. I lakh.
First petitioner has already challenged whole of the Debenture Issue under. the
original consent order and we are told that the suit is pending in the City Civil Court,
Bombay. There are lakhs of debenture-holders whose rights would be adversely
affected if we accept the contention of the petitioners. Petitioners have nothing to
lose. As per the resolutions and the amended consent order they have right to refund
of the money with interest. Still if they suffered any damage they can recover the
same under ordinary law of the land. Also if the petitioners feel oppressed being
minority shareholders they have enough remedies under the Companies Act. Some of
the petitioners are also beneficiaries for having sub- scribed to the debentures under
the original consent order.
2 6 . The Company is doing well. We are told that its shares and debentures are
quoted at a much higher value in the stock market and each debenture-holder will
ultimately get 5 shares of the Company. We do not think that the petitioners are such
public spirited persons to spend much more in litigation than the total value of their
shareholding and debenture-holding in the Company and their complaint that
otherwise there is going to be inflated equity base to their prejudice is merely a
myth. There are no particulars, Mr. Sen did admit before us that petitioners were
acting in concert with certain other persons. But we do not know if these other
persons are some other shareholders or debenture-holders or some third parties. We
cannot permit the Court to become an arena for fighting battle by proxies. No

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exceptional circumstances exist for us to interfere in this matter in this jurisdiction
when matters relating to issue have gone so far.
27. To us it appears that rather than serving a public good by filing this petition the
petitioners are acting against the interest of almost whole body of the shareholders
and debenture holders of the Company, though they have certainly served a public
purpose by bringing out the anomalies in the working of the CCI. We will not,
Therefore, like to interfere in this writ jurisdiction and if we do that our action will be
both unjust and unfair We do think Mr. Andhiyarujina for the Company is right when
he said that the petitioners had no cause of action to invoke writ jurisdiction and the
petition did not serve the interest of any genuine investors and had been filed for a
collateral purpose 6 f some other person, and that discretion should not be exercised
in such a case in favor of the petitioners. In writ jurisdiction it is not necessary that
Court must always interfere when ever the impugned action is found to be unlawful
or where a statutory authority re fuses to exercise a jurisdiction vested in it or there
is excessive exercise of jurisdiction. As to when the Court will not interfere would
depend upon the circumstances of each case though in the very nature of things the
exercise of discretion has to be rare. Present is a case where Court will not interfere.
28. Wade, J. in his treatise on the Administrative Law had opined that even where
the Court finds some act to be unlawful it may nevertheless decline to intervene. It
will be appropriate to quote the following passage from that book (Sixth Edition,
page 709):
"The most important remedies discussed in this book - declaration,
injunction, certiorari, prohibition, mandamus - are discretionary and the
Court may Therefore withhold them if it is thinks fit. In other words, the
Court may find some act to be unlawful but may nevertheless decline to
intervene.
Such a discretionary power may make inroads upon the rule of law, and must
Therefore be exercised with the greatest care. In any normal case the remedy
accompanies the right. But the fact that a person aggrieved is entitled to
certiorari expedite justified does not alter the fact that the Court has power
to exercise its discretion against him, as it may in the case of any
discretionary remedy. This means that he may have to submit to some
administrative act which is ex hypothesis unlawful. For, as has been
observed earlier, a void act is in effect a valid act if the Court will not grant
relief against it.
Nevertheless distinctions may have to be drawn according to the nature of
the remedy sought, and according to the differences between public and
private law remedies. Certiorari and prohibition have as their primary
purpose the preservation of order in the legal system by preventing excess
and abuse of power, rather than the final determination of private rights. If
certiorari is refused in discretion, the applicant is not prevented from
disputing the legality of the administrative decision in other proceedings,
e.g. by suing his tenant for the original rent after a rent Tribunal has ordered
a reduction and an application for certiorari has failed. In other words, he
cannot be met with a plea of res judicata , and he may always show, if he
can, that the Tribunal has no jurisdiction. It would be logical to extend the
same doctrine to all the remedies now obtainable by judicial review."

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The author in his book has given examples where the Court has refused to grant
relief in such matters.
2 9 . For all these reasons we will dismiss the writ petition, but since substantial
questions have been raised by the petitioners, we will leave the parties to bear their
own costs.
30. Petition dismissed.

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