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2005 (7) TMI 354 - HIGH COURT OF DELHISeeking review of the Company Law Board's order - Opression and mismanagement - Transfer to shares - Power to refuse registration and appeal against refusal - HELD THAT:- it was not a case where the outsiders were going to be inducted for the first time. In any case, due to financial crisis the company was unable to repay the borrowings of the financial institutions with the result even notice under section 29 of the State Financial Corporations Act were issued. Sisters were also not having cordial relations among them. The two sisters (respondents Nos. 2 and 3), in these circumstances, decided to part with their shareholdings and in view of the family arrangement, they offered to sell their shares to the appellant and respondent No. 4 way back in the year 1997, although under the provisions of the Companies Act they were under no such obligation. The fact remains that till February 2000, the appellant could not respond to this offer by taking any positive steps. The appellant has herself admitted the same, although she has tried to explain away by giving her own reasons and stating that she got involved in the illness of her daughter-in-law, which was of serious nature and, therefore, she could not arrange the funds. Be that as it may, fact remains that shares were offered to her in the first instance before selling it to the outsiders after waiting for three years and these shares were ultimately sold to respondents Nos. 5 to 9 in February 2000. Even respondent No. 4 joined other two sisters in selling her shareholding. This significant shift in the attitude of respondent No. 4 would signify that offer of respondents Nos. 2 and 3 to the appellant and respondent No. 4 had fizzled out. Therefore, I am of the view that sale of shares by respondents Nos. 2 to 4 to outsiders is perfectly valid and is not an act of oppression. The grievance about induction of three new directors in the board meeting held on February 10, 2000 also does not hold any water. Once new management took over the control, recast of the board was inevitable. The controlling group had the requisite power and authority to appoint its own directors. Non-interference by the Company Law Board is, therefore, justified. I do not find any infirmity in the aforesaid approach of the Company Law Board. As noted above, the basic premise of the entire petition was the transfer of shares by respondents Nos. 2 to 4 to outsiders which was unpalatable to the appellants who wanted right to pre-emption. This challenge of the appellant failed before the Company Law Board and I also do not find any merit therein. Once the majority shareholding has come to respondents Nos. 5 to 9, who have the control of the company, they would naturally appoint their directors as well. The Company Law Board has, none the less adopted a fair approach in not only maintaining the same shareholding pattern qua appellant by directing that she be given offer to buy further shares so as to restore shareholding worth 14.7 per cent. Even she is allowed to remain director so long as she continues to be the shareholder, although she could be retired by rotation as per the articles. Therefore, the Company Law Board has passed necessary directions to secure the interest of the appellant. It is a different matter that the company had offered additional equity shares to the appellant on January 25, 2001 as per the directive of the Company Law Board, but till date she has not chosen to accept the same. I, therefore, do not find any merit in this appeal. An objection was taken to the maintainability of the appeal against order dated January 12, 2001 on the ground that this order was challenged earlier and as the said appeal was withdrawn, no fresh appeal is permissible to impugn the same order. However, as the appeal is dismissed on merits, I do not propose to go into this question. The appeal is accordingly dismissed. However, as the appellant has not given any option for purchase of further equity as offered to her presumably because of the pendency of this appeal, I give further four weeks’ time to the appellant to signify her intention in this behalf failing which the said offer shall be treated as lapsed.
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