The HC has rejected a plea of MP Birla group owner, the Lodhas, which wanted an injunction on the demerger process
Just before the Kumar Mangalam Birla group goes for voting on Wednesday for the demerger of cement division of Century Textile and Industries and merging it with UltraTech, a major stumbling block has been removed.
The Calcutta High Court has rejected a plea of MP Birla group owner, the Lodhas, which wanted an injunction on the demerger process, claiming that the demerger would hurt its interest. The Lodhas have a significant stake in Pilani Investment and Industries Corporation Ltd, which in turn own a stake in Century Textile.
Punjab Produce and Trading Co, an investment company held by the Lodhas, owns 17.52% in Pilani Investment, the Kumar Mangalam Birla-owned holding and investment entity of the BK Birla group, and had argued that the demerger would leave Century poorer with its most profitable division gone.
The demand, however, has been rejected by the court thus paving the way for the demerger.
BK Birla is the nonagenarian grandfather of KM Birla whose business empire spans Kesoram Industries to Century Textile, most of which are now either fully or partly controlled by his grandson.
Pilani Investment, in turn, holds 33% in Century Textile, which was made one of the defendants.
The cement business consists of three integrated units in Madhya Pradesh, Chhattisgarh and Maharashtra with a total capacity of 11.4 mtpa besides a grinding unit in West Bengal of 2 mtpa with aggregate revenues of Rs 4,306 crore as on March end.
By virtue of shifting the cement division of Century Textile to a "stranger company" , UltraTech, by way of a scheme of demerger, "the primary profit-earning section" of Century Textile is being sought to be shifted, Punjab Produce said. The investment company had demanded an injunction on the demerger arguing that interest of Century Textile "would be adversely affected if the shareholders" vote in favour of such scheme.
It had submitted that a proceeding was previously taken out by Punjab Produce before the Company Law Board, which was turned down on the ground that it didn't have a qualifying share-holding in Century Textile.
Three appeals preferred from such order also met with the same fate.
"In the event the plaintiff as a shareholder of the defendant no. 11 (Century), was to participate in the voting for the demerger, which is under challenge, the plaintiff would wield little or no power to exercise an option worth the name, in view of the shareholding of the plaintiff in defendant no. 11 company being only 0.06%. As such, the effect of the interlocutory orders prayed for, if granted, would confer upon the plaintiff a benefit with the blessings of the court, which the plaintiff could not otherwise get in accordance with law," Justice Sabyasachi Bhattacharyya said.
The Judge termed the move of Punjab Produce as "forum-shopping" having failed to obtain a relief in a previous proceeding which went up to the Supreme Court which however allowed appellant taking steps "in appropriate proceedings in accordance with law."
CONCRETE DEAL
- The HC has rejected a plea of MP Birla group owner, the Lodhas, which wanted an injunction on the demerger process
- Pilani Investment, the KM Birla-owned holding and investment entity, holds 33% in Century Textile and Ind
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