Armed with the BIFR orders, Dunlop has gone ahead and announced plans to open its rights issue without reference to the market regulator or intimation to the stock exchanges on which the shares will be listed. Many investors say that they have not even received intimation of the Rights Offer, which opened for subscription on 2 April and was set to close on 6 April, which is a bank holiday. Clearly, the company’s new management headed by Pawan Kumar Ruia does not really want existing shareholders to infuse funds for its revival. But since the new shares are being issued at par, the company has a good chance of revival and a well-known brand name, the rights offer is probably attractive to many investors. Why then should the BIFR exempt it from all listing processes?

Meanwhile, Sebi has responded to the investor complaint and asked Dunlop to “consider” extending its offer period by at least 15 days, in order to give shareholders a chance to participate in the issue. We also learn that the regulator plans to file an appeal against the BIFR order. If the order is not stayed, will Dunlop be able to bypass stock exchange and depository rules? Indeed it will; except that bourses and depositories may go-slow on listing processes in order to give the regulator a chance to file an appeal.

It is anybody’s guess which way this case will go and whether Dunlop will actually manage to cut through the rules with the help of a statutory order. But this is neither the first nor the last time that India’s judicial system will fail to understand the financial markets and issue orders based on the petition of only one section of the stakeholders.

... contd.