Interim injunction in rights issue disputes refused where delayed challenge and SEBI remedies defeated civil court restraint.

Interim injunction against a rights issue and allotment process was declined where the plaintiffs alleged wrongful exclusion from promoter and promoter group disclosures and misstatements in the letter of offer. The Court held that the plaintiffs had not acted with diligence, since the non-inclusion had been reflected in shareholding patterns from 2013 onwards and the challenge was brought only when the issue was near completion. It further held that disputes over the letter of offer and related disclosures fell within SEBI's regulatory framework, for which the Securities and Exchange Board of India Act, 1992 provides alternate statutory remedies. On the facts, the rights issue had substantially progressed and the balance of convenience did not support restraint.

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Issues: Whether the plaintiffs were entitled to interim injunction restraining the rights issue and allotment process on the grounds of alleged wrongful exclusion from promoter and promoter group, alleged misstatements in the letter of offer, delay and laches, and lack of maintainability before the civil court.

Analysis: The plaintiffs sought to challenge the rights issue on the basis that their shareholding and that of certain related entities had been wrongly omitted from the promoter and promoter group disclosures, thereby affecting the conduct of the issue. The Court found that the plaintiffs had not pursued any timely remedy after their non-inclusion appeared in the shareholding pattern from 2013 onwards, and that they approached the Court only at the stage when the rights issue process was near completion. The Court also held that the challenge to the letter of offer and related disclosures fell within the regulatory domain of SEBI, for which the Securities and Exchange Board of India Act, 1992 provided an alternate statutory mechanism, including adjudicatory and appellate remedies. On the facts, the Court further found that the rights issue had progressed substantially, the offer structure had been approved through the prescribed process, and the balance of convenience did not justify injunctive relief.

Conclusion: Interim injunction was refused and the plaintiffs were held not entitled to restrain the rights issue or allotment process.

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