L&T Fin, Dalmias spar over sale of GTC’s pledged shares
GTC Industries’ promoters are embroiled in a legal battle with India’s largest-engineering company Larsen & Toubro (L&T). This follows the sale of pledged shares of GTC Industries by L&T’s subsidiary L&T Finance.
By Dev Chatterjee, ET Bureau |
MUMBAI: GTC Industries��� promoters are embroiled in a legal battle with India���s largest-engineering company Larsen & Toubro (L&T). This follows the sale of pledged shares of GTC Industries by L&T���s subsidiary L&T Finance. The matter is pending before the Bombay High Court.
According to legal sources, two Dalmia group companies ��� Dear Investments and Antarctica Investments ��� had taken a loan of Rs 20 crore from L&T Finance. The Dalmias are the promoters of GTC and have a 38.31% stake. These two companies and five investment entities belonging to the Dalmia group pledged 17.5 lakh shares, representing a 9.9% stake of GTC Industries, to L&T Finance.
The declining valuations of GTC in wake of the stock market turmoil had prompted L&T to seek higher margins in March this year.
After the Dalmia companies failed to pay the margins, L&T Finance sold shares representing a 5.45% stake in GTC, but still holds a 4.51% stake. It has offered to return the shares to the Dalmias, provided they withdraw the suit. L&T Finance puts the total outstanding at Rs 20 crore, which is double the claim made by the
Dalmia companies.
When contacted, a L&T spokesperson declined to comment on the matter as it was sub-judice. Sanjay Dalmia, chairman of GTC Industries, refused to comment as well. An insider told ET that GTC has filed contempt of court against L&T Finance and the directors of its parent company, L&T, for selling the GTC shares on bourses inspite of a Bombay High Court injunction on June 17. The court will hear GTC���s contempt petition on Friday, he added.
According to legal sources, two Dalmia group companies ��� Dear Investments and Antarctica Investments ��� had taken a loan of Rs 20 crore from L&T Finance. The Dalmias are the promoters of GTC and have a 38.31% stake. These two companies and five investment entities belonging to the Dalmia group pledged 17.5 lakh shares, representing a 9.9% stake of GTC Industries, to L&T Finance.
The declining valuations of GTC in wake of the stock market turmoil had prompted L&T to seek higher margins in March this year.
After the Dalmia companies failed to pay the margins, L&T Finance sold shares representing a 5.45% stake in GTC, but still holds a 4.51% stake. It has offered to return the shares to the Dalmias, provided they withdraw the suit. L&T Finance puts the total outstanding at Rs 20 crore, which is double the claim made by the
Dalmia companies.
When contacted, a L&T spokesperson declined to comment on the matter as it was sub-judice. Sanjay Dalmia, chairman of GTC Industries, refused to comment as well. An insider told ET that GTC has filed contempt of court against L&T Finance and the directors of its parent company, L&T, for selling the GTC shares on bourses inspite of a Bombay High Court injunction on June 17. The court will hear GTC���s contempt petition on Friday, he added.
ADVERTISEMENT
Bharatpur Investments, the holding company of the Dalmias and the guarantor to the loan, had also sued Dear Investments and Antarctica Investments. Bharatpur contends that it is not bound by any margin norms agreed between L&T Finance and Dear Investments and Antarctica. It does not have to maintain any margin and the pledged shares could not be invoked for any default. In its petition, Bharatpur has denied any loan default. However, in the pledge agreement, the margins are defined as the difference in value between the security and loan balance. The agreement had stipulated that the securities should be valued at double the loan balance. The Dalmias had to maintain margins with L&T Finance on the basis of GTC���s share prices.
L&T Finance granted the loans between December 2005 and April 2006. With GTC���s share prices declining from March this year, L&T Finance sought higher margins and invoked 10.55 lakh shares from the pledged securities. Of these, L&T sold 9.51 lakh shares during the June 10-18 period.
Meanwhile, on June 17, the Dalmias obtained an ex-parte ad-interim injunction against the sale of shares. L&T Finance, however, continued to sell the shares of GTC, as it was not informed of the injunction in time, said legal sources.
In an order dated July 18, Justice Roshan Dalvi rejected Bharatpur���s petition and maintained that the sale of shares by L&T Finance was not illegal. The Dalmias now argue that L&T Finance sold shares, ignoring the previous injunction imposed by the Bombay High Court.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
