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Issues: (i) Whether the transfer of 39 lakh shares of Larsen & Toubro through BOB Fiscal Services Ltd. to Trishna Investments was arbitrary, illegal, mala fide, or contrary to public interest and constitutional limitations. (ii) Whether the consent granted by the Controller of Capital Issues for the mega debenture issue, including the preferential reservation in favour of the Reliance group, was invalid for non-application of mind, illegality, or breach of statutory and constitutional requirements.
Issue (i): Whether the transfer of 39 lakh shares of Larsen & Toubro through BOB Fiscal Services Ltd. to Trishna Investments was arbitrary, illegal, mala fide, or contrary to public interest and constitutional limitations.
Analysis: The transfer was examined against the backdrop of the sequence of transactions, including the role of the bank subsidiary, the timing of the purchases and onward transfer, the entry of nominees of the Ambani group on the board, and the surrounding circumstances indicating a circuitous arrangement. The Court treated public financial institutions as subject to scrutiny when disposing of large blocks of shares if such disposal could facilitate concentration of control in a private group. The Court also noted that the writ relief seeking recovery of the shares had become unnecessary because the shares had already been bought back by the financial institutions.
Conclusion: The challenge to the transfer did not survive for effective relief and was not accepted as a basis for granting any operative direction in favour of the petitioners.
Issue (ii): Whether the consent granted by the Controller of Capital Issues for the mega debenture issue, including the preferential reservation in favour of the Reliance group, was invalid for non-application of mind, illegality, or breach of statutory and constitutional requirements.
Analysis: The Court considered the statutory framework governing capital issues, company prospectus requirements, special resolution in general meeting, and the limited scope of scrutiny of the Controller of Capital Issues. It held that preferential reservation under a special resolution was permissible, that L&T and the Reliance group were interconnected for the purpose of the regulatory framework, and that the consent order was not shown to be vitiated by arbitrariness, haste, or absence of application of mind. The Court also emphasized that, once debentures had been issued and third-party rights had intervened, the matter could not be disturbed by selective invalidation of parts of the composite consent.
Conclusion: The consent accorded by the Controller of Capital Issues was upheld as valid and the challenge to the mega issue failed.
Final Conclusion: The transferred cases and connected proceedings were dismissed, the interim applications stood disposed of, and the impugned consent order was sustained.
Ratio Decidendi: A statutory consent for a public issue is not liable to interference unless it is shown to be vitiated by illegality, bad faith, or patent disregard of relevant public interest considerations, and a preferential issue approved by special resolution within the governing corporate and capital-issues framework cannot be disturbed merely because it may advantage a particular shareholder group.
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