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TMI Blog1993 (2) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... y be restrained from utilising the money so realised until further orders of the Commission. 2. Shortly stated the material facts relevant for the disposal of the injunction application are that the respondent-company, which is a public limited company incorporated on 31 -3-1982 under the Companies Act, 1956, is engaged in the business of running courier service both within and outside India. The second and third respondents are the directors of the respondent-company. The company has floated a public issue offering 4,50,000 equity shares of Rs. 10 each for premium of Rs. 30 per share aggregating to Rs. 5,80,00,000 opening on 15-2-1993. 3. Shri K.G. Arora, claiming to be a prospective shareholder, submitted a complaint before this Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue the respondents have deliberately omitted to mention in the prospectus that serious and substantial litigations have been launched against them by the TNT International Skypak Ltd. in the Bombay High Court. The litigations are first a winding up petition filed by the TNT International Skypak Ltd. on 16-10-1992 and a suit filed in the same High Court by the same TNT Skypak International Pvt. Ltd. (TNT Skypak, for short) against the respondent for the recovery of 7.824 million US dollars equivalent to Rs. 23,47,25,000. Besides this litigation, there was also the fact of the aforesaid agreement between the respondents and the TNT Skypak having been terminated in September 1992 which it is alleged was a material fact relevant to the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the aforesaid winding up petition and the suit of the TNT Skypak were served on them on 17th November and 26th November. It is asserted that on receipt of the notice the respondent-company obtained legal advice and were informed that neither the winding up petition nor the suit could affect the operations and finances of the respondent-company and that, therefore, it was not necessary to mention these litigations in the prospectus. The prospectus was filed before the Registrar of Companies on 1-1-1993, and the allegation is that as part of the corporate was strategy employed by the TNT Skypak, the latter fired a letter dated 22-1-1993 to the lead manager to the issue, namely, ANZ Grindlays Bank, mentioning the pendency of the suit and win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the respondent-company has already spent more than 50 lakhs on the promotion of public issue and towards printing, stationary, press conferences, brokers, conferences and corpo- rate advertisements, etc. They would, therefore, suffer irreparable loss should the public issue be stayed. 11. We have heard the learned counsel for the complainant and the learned counsel for the respondents at some length and given the matter our anxious consideration. Having done so and having perused the material brought on record both by the complainant and the respon- dents, we are clearly of the view that a case for enquiry into the complaint under section 36A has been clearly made out. We have no doubt that the omission to mention the fact of the liti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de for themselves whether to purchase the shares offered by the company or not. And in our opinion the winding up petition was such a material fact falling in that category which should have been mentioned. It is another matter that after thorough analysis and scrutiny of all the relevant facts bearing on the solvency and soundness of the company, we may ultimately find that these litigations launched against the respon- dents may not have a material bearing on the operation and finances of the company. But we have to examine the matter from the perspective of an ordinary buyer who may be untrained in law, that is, from the viewpoint of unsuspecting prospective buyers. As the Supreme Court has observed in the matter of Lakhanpal National L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the possibility of any mischief being caused by the initial omission to mention these facts in the prospectus is also not acceptable to us for the simple reason that the public notice came at a belated stage. The issue was opening on 15-2-1993. Any public notice issued on that date or a day earlier could not wipe out the charge that the respondents had attempted to keep back from the public an important fact having a direct bearing on the issue at the initial stage. To sum, we are prima facie of the view that the failure to mention the winding up petition and the suit pending before the Bombay High Court in the prospectus amounts to adoption of unfair method or unfair or deceptive practice within the meaning of section 36A. The representa- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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