Reliance Power open market sale dispute dragged to HC; no interim relief yet
Anil Ambani-led Reliance Power (RPL) Wednesday moved the Bombay High Court seeking to reverse the sale of its pledged shares by the Edelweiss group, but the court refused to grant any interim relief to the embattled group. A single judge bench headed by KR Shriram refused to order the reversal of the sale process or grant any other relief to the company and posted the matter for the detailed hearing Thursday.
Significantly, the petition does not name L&T Finance as a respondent in the case, though Reliance group had also named it in a public statement last Sunday. The move comes after a war of words between the two companies last week after the Edelweiss and L&T Finance had sold pledged shares of Reliance Power and other group companies following steep correction in stock prices after Reliance Communication decided to file for bankruptcy on February 1. Since then the group companies have lost around 70 per cent of their market value.
The judge said he will hear the petition in details on merit over other prayers made by RPL such as declaring the above sale illegal and void and seeking compensation from Edelweiss for the financial and reputational losses following the liquidation of its shares. RPL in its plea said it along with group company RCom had pledged some shares of various promoter companies to the Edelweiss group in lieu of a loan it had borrowed.
On February 4, RPL received a notice from Edelweiss ECL Finance notifying the sale of its shares by the debenture holding companies of Edelweiss group. And the next day, shares worth Rs 5.96 crore were sold. Some shares were also transferred to the debenture holders the same evening by the debenture trustee at a much lower value. ECL counsel Janak Dwarkadas said it was well within its rights to sell the pledged shares. Dwarkadas also said in August 2018 RPL shares had plummeted and as per their contract, the company was required to pay an additional 2 per cent interest on the loan. But, it refused to pay the additional amount so far.
"And on February 1 this year, RCom had filed for bankruptcy following which share prices plummeted again. But RPL never bothered to communicate with us. We needed to protect our debenture holders and, therefore, sold the pledged shares," Dwarkadas said. RPL counsel Aspi Chinoy, however, argued that as per its contract, share sale can have been initiated only by the trustee of the debenture holders and not the debenture holders themselves.
Chinoy further argued that the notice given just a day prior to the sale was inadequate and therefore, owing to the above reasons, the sale must be declared void by the court. It further said such sale also led to its share prices plummeting and causing Rs 274 crore losses. RPL also accused the debenture trustee of having ignored its fiduciary obligations to realise fair value for the pledged shares. It argued that RPL must be compensated by ECL for the loss.
The bench, however, said during the detailed hearing, RPL will have to prove that in giving just a day's notice before the sale, ECL committed a breach of contract. "Your contract provides for a 24-hr notice so you will have to prove that under some existing law it was illegal. Why did you agree for a 24-hour notice in the first place while borrowing money?" the bench asked and said he was not inclined to pass any interim orders granting relief to RPL. "Ad interim relief rejected. Reasons for the same will be recorded separately," he said, adding a detailed order is likely to come by Thursday evening.
(With inputs from agencies.)
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