The Gujarat High Court has stayed its judgment of January 15 for a period of eight weeks giving time to the Gujarat state and Sardar Sarovar Nigam Ltd (SSNL) to appeal against the judgment in the Supreme Court.
The Gujarat High Court has stayed its judgment of January 15 for a period of eight weeks giving time to the Gujarat state and Sardar Sarovar Nigam Ltd (SSNL) to appeal against the judgment in the Supreme Court.
On January 15, the HC said that it was beyond the legal jurisdiction of the state legislature in conferring the right to SSNL for lowering the committed rate of interest and seeking premature redemption of a deep discount bond issue. dna was the first to report on the judgment that termed the state-legislature enactment “ultra-vires” on January 21 before the copy was made available on public domain 10 days later.
After the pronouncement of the order an oral plea was made by the Advocate General and senior counsel, Mihir Joshi, requesting the operation of judgment to be stayed for some time so as to enable the Gujarat government and SSNL to approach the higher forum. The requested was granted on the same day of the judgment.
A detailed understanding of the order released on the public domain now reveals only investors who have accepted the redemption amount under protest and subsequently filed the petition before the HC can now approach the civil court for recovery.
The case dates back to SSNL's Rs 250-crore IPO through 20-year deep discount bonds in November 1993. The money was raised to fund the Sardar Sarovar dam project. The bonds were backed by a state guarantee and priced at Rs 3,600 with redemption value of Rs 1.11 lakh at the end of the tenure. For the company, the outflow at the end of the 20-year tenure was estimated at Rs 7,500 crore but it subsequently changed the terms of agreement and forced early redemption at lower rates. With premature redemption, the outflow stood reduced to Rs 4,500 crore, said a legal expert.
The recourse to approach the civil court was also not available to investors because of the state enactment that empowered SSNL in March 2008 to do so.
SSNL subsequently redeemed the bonds prematurely in 2009 at Rs 50,000 when the secondary market rates on the bourses were above Rs 60,000.
Speaking to dna, advocate Masoom Shah, who represented the Maharashtra State Electricity Contributory Provident Fund case through Little & Co, said: “The HC has struck down the SSNL Act but at the same time it has given the remedy to file a civil suit to only limited investors who had protested and approached the court later. The HC has not given the same remedy to the remaining investors for recovery. Aggrieved investors will now need to approach the Supreme Court.”
Many investors have cried foul over SSNL's high-handedness in not only redeeming the bonds prematurely at lower-than-committed interest rates but also refraining them from approaching the civil court after the state-legislature enactment took away this right.
“The bonds from my demat account one fine day just vanished without my consent and an amount of Rs 50,000 per bond was credited directly into the account by SSNL. So where is the question of protest,” said an aggrieved investor who planned to approach the Supreme Court along with several other small investors.
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