SC rejects Bhushan Energy plea to direct OSIL to convert warrants

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NEW DELHI: The Supreme Court has dismissed the plea of Neeraj Singal-led Bhushan Energy to direct Orissa Sponge Iron & Steel Ltd (OSIL) to convert its 35 lakh warrants into equity shares.

Singal’s group is in tussle with P K Mohanty-led TRFI Investment, Monnet Ispat and Bhusan Power, promoted by Neeraj’s elder brother Sanjay Singal, over the management control of OSIL, a loss making company.

Companies raise funds by issuing warrants, usually part of financial instruments like bonds, which can be converted into shares at pre-determined price.

A bench headed by Chief Justice S H Kapadia dismissed the petition, observing that there was no substance in the claims of Bhushan Energey Ltd (BEL) that there was suppression of minority shareholders by OSIL by not converting Neeraj Singal group firms warrant into equity.

However, the apex court allowed BEL to approach the appropriate forum on the issue. “BEL is allowed to adopt appropriate proceedings before the appropriate forum with regard to conversion of its 35 lakhs warrants into shares,” the bench said.

It also gave the company liberty to raise the allegations under sections 397/398 (suppression of minority shareholders and oppression and mis-management of a company).

However, the other petition filed by the Bhushan group firm BNS Steel Trading, in which issue regarding fiduciary duties of OSIL directors was raised, was not dismissed and the apex court directed to list it after two weeks.

OSIL, incorporated in 1979, has iron ore reserves of around 120 million tonnes and coal reserves of the similar level. The company has sponge iron and steel billet plants in Palaspanga (Orissa) with an installed capacity of 250,000 tonnes.

Promoter Mohanty family along with Monnet Ispat hold more than 65% shares in OSIL.

Bhushan group, which had 14.5% share in OSIL had acquired 35 lakh warrants from Chandra family of Unitech promoters in its bid to acquire the company.

However, they were not converted into shares as OSIL is of the view that if Bhushan Group is allowed to convert the warrants, its holding in it will go up to around 25%, which would amount to an indirect takeover of the company.

If its holding exceeds 15%, it would trigger an open offer.

BEL and BNS Steel had moved apex court on July 5 against the order of the Orissa High Court, which had set aside the directions of the Company Law Board (CLB) to OSIL to convert the warrants.

(Press Trust of India)

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