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LIC moves HC to annul Modi Rubber deal

BS Bureaus

Life Insurance Corporation of India on Tuesday filed a suit in the Bombay High Court seeking the withdrawal of "the unauthorised and illegal transaction" of LIC's 12 per cent holding in Modi Rubber Ltd. LIC maintained that as the instructions offering the shares under the open offer were by word of mouth and were without the approval of a competent authority, the transaction ought to be held null and void.

Meanwhile, the promoters of Modi Rubber have picked up about 36 per cent additional stake in the tyre company via the open offer which closed on Monday. This includes LIC's 12 per cent stake as well as the stakes of the general public and other investors. Other financial institutions have stayed away from the offer. "We have not sold any stake. We will consider selling stakes only after the promoters of the company come forward with a concrete plan fulfilling all the conditions put forward by us," said an FI source.

A top LIC official said: "The shares were not meant to be sold, and we will take all possible steps to protect our interests." The High Court will now decide on the transfer of LIC's shareholding in MRL. The hearing is expected to take place later this week.

LIC has written to HSBC Securities and Capital Markets (I) Pvt Ltd, managers to the offer and Karvy Consultants, registrar to the issue, "repudiating and rescinding the unauthorised and illegal transaction" on the last date of the open offer.

A detailed internal investigation and enquiry is on to find out what exactly transpired on July 16. LIC officials told Business Standard that the sale of the 12 per cent stake in MRL was undertaken by two officers -- Sridhar Rao (deputy secretary of investment) and P Sen (assistant secretary)-- at 12 noon on July 16, what was previously the last day of the open offer. These two "middle level officers" have since been suspended and an internal committee is enquiring into the matter.

The sale was not reported to the management until much later, at 4 pm on July 16. "It was too late. We did not succeed in nullifying the transaction on that date," said a top official. "However, we suspended the two concerned officers on Saturday," he added.

LIC maintains that the chairman and managing director in charge of investments were away on tour and came to know of the "unauthorised transaction" only on July 18.

Unit Trust of India, General Insurance Corporation of India, Industrial Finance Corporation of India, Industrial Development Bank of India and Life Insurance Corporation of India have stakes in Modi Rubber.

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