INDIA'S Supreme Court has stalled the bid of Hindustan Lever (HLL), a subsidiary of the Anglo-Dutch multinational Unilever, to absorb Tata Oil Mills Co (TOMCO), formerly part of the Tata industrial group. The employees' union of HLL had filed a writ challenging the merger of the two consumer product companies on the grounds that acquiring the loss-making TOMCO would be harmful to the fortunes of the highly profitable HLL. The case has been posted for a hearing today. TOMCO, which like HLL sells a number of soaps, detergents and toothpaste in India, has been making heavy losses for the past four years, inducing Tata group chairman Ratan Tata to consider divestment. HLL chairman S M Datta had shown interest in buying the company to strengthen HLL's own brand equity and the deal was struck in March last year, subject to approvals from the shareholders of both firms. The approvals were obtained at the annual general meetings of the two companies in June last year. At the time, Unilever had also shown interest in raising its equity stake in its Indian subsidiary to a controlling 51 per cent, following the liberalisation of ownership in India. Accordingly, it had filed an application with the Reserve Bank of India (RBI) that it would be taking a preferential allotment of shares in TOMCO at a rate of 105 rupees per share, as laid down at the time by the RBI. Subsequently, however, the RBI decreed that any such allotments would have to be made at the prevailing market price of the share. In view of the proposed merger, TOMCO's share has been climbing steadily, now at 356 rupees. The RBI claimed that Unilever's application would not be considered at the price of 105 rupees per TOMCO share, but at 356 rupees per share. Therefore, a revised application should be filed. Unilever took RBI to court, claiming the latter's procrastination had led to a situation where it would be incurring substantial losses if it procured the preferential block of TOMCO shares at 356 rupees instead of 105 rupees. Unilever, however, petitioned that the merger be allowed to go through, that it would bring in foreign exchange at the rate of 356 rupees per share for the time being. Of this amount, 105 rupees would be immediately adjusted, while the balance, 251 rupees per share, would be kept in a suspended account until the case was decided. The multinational is worried that unless the TOMCO brands are put out into the market again, they will lose their market share, and their main rival, the strategic alliance between Procter & Gamble and Godrej will be the beneficiary.