TMI Blog1995 (8) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... nting inks at their units located in Bombay, Calcutta, Madras, Ahmedabad and Delhi. There are five families in control of the company, namely, ( a ) Mirchandani ( b ) Advani ( c ) Malkani G.H. ( d ) Malkani T.L. and ( e ) Lalwani. The families of Advani and Lalvani hold about 62 per cent of the shareholdings and the remaining shares are held by the other families. Each of the aforesaid families also hold equal shares in a company called J.B. Advani Co. Ltd., which was a holding company of Advani Oerlikon Ltd. The petitioners who are the members of Lalvani family have filed the company petition under sections 433, 439, 397, 398, 402 and 403 of the Companies Act, 1956 ('the Act') on various grounds set out in the petition. Broadly it is the case of the petitioners that the respondents by a series of actions have sought to oppress the minority shareholders and have been acting against the interest of the company. 3. First I will deal with certain development which took place during the pendency of the petition which has important bearing on the controversy raised in the present application. A notice dated 5-4-1989 was issued by the company for an extraordinary general meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for issue of rights to the equity shareholders. In the proposed resolution it is inter alia provided that the offer of rights shares shall include the right exercisable by the shareholders concerned to renounce the shares offered to them in whole or in part in favour of any other person subject to the approval of the Board. The resolutions were passed in the E.G.M. held on 17-4-1995. 6. The petitioners seek to challenge the resolutions passed in the meeting of 17-4-1995 mainly on two grounds. Firstly they say that the resolutions are passed in the E.G.M. of 17-4-1995 on the basis that the company has already become a public limited company by virtue of the resolution passed in E.G.M of 12-5-1989, but since the said resolution in E.G.M. of 12-5-1989 is invalid, the resolutions in E.G.M. of 17-4-1995 are also liable to be declared as illegal and invalid. The 2nd ground is that the passing of such resolutions is mala fide and the only object is to compel the minority to relinquish their shareholding in the company. 7. Before I deal with the main grounds agitated by the petitioners, it will be necessary to refer briefly to the defences raised by the respondents. It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consolidated Trust Ltd. v. Ceylon Amalgamated Tea Rubber Estates Ltd., 1943 2 All ELR 567. 9. There is no dispute that the E.G.M. of the company which was held on 12-5-1989 was attended by 4 persons, namely, T.L. Malkani, A.B. Advani, Nina Mirchandani and T.J. Lalwani, i.e., petitioner No. 2 Ms. Advani proposed the name of Mr. Malkani to be in the chair in the absence of Mr. G.H. Malkani, Chairman of the company, which was seconded by Mrs. Mirchandani and approved by the 2nd petitioner. Ms. Advani proposed the following resolution as a special resolution which was seconded by Mrs. Mirchandani: "Resolved that the authorised capital of the company be increased from Rs. 25,00,000 divided into 25,000 equity shares of Rs. 100 each to Rs. 5,00,00,000 divided into 50,00,000 equity shares of Rs. 10 each ranking pari passu with the existing shares of the company." The resolution was put to vote. Mr. Malkani and Ms. Advani and Mrs. Mirchandani voted for it while the 2nd petitioner voted against the resolution. The Chairman declared the special resolution carried with requisite majority. Section 177 provides that at any general meeting, a resolution put to the vote of the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irman of the meeting. It is not possible to agree with Mr. Cooper that in every meeting it is not necessary for the Chairman to ascertain the sense of the meeting by ordering a poll, although on a given case the situation may be such that obligation on the part of the Chairman could be spelt out. In my opinion, the reliance placed on the decision in the Second Consolidated Trust Ltd.'s case ( supra ) is misconceived. The facts of the said case were rather peculiar and, therefore, I am reproducing the same in detail. There the defendant company wished to alter the condi- tions under which its debenture stock was held, pursuant to the provi- sions of the Trust deed securing that stock. In order to do so it was necessary to pass an extraordinary resolution which was a resolution which had to be passed by a three-quarters majority at a duly convened meeting at which the holders of a clear majority in value of the stock were present in person or by proxy. The trust deed further stated that on a show of hands a stockholder present only by proxy should have no vote. The meeting was duly convened and with the notice thereof was sent a form of proxy to all the stockholders whereby they co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 397 of the Companies Act, 1956; a resolution passed by the directors may be perfectly legal and yet oppressive and conversely a resolution which is in contravention of the law may be in the interests of the shareholders and the company. An isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful. But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed." 12. In my opinion, the first and the foremost question to be considered in such cases is whether the impugned resolution is passed in the interest of the company. On a careful scrutiny of the record I am fully satisfied that there is no oblique motive behind the resolution and the company is compelled to increase its share capital in view of the changing times. It has been pointed out by the respondents that they have to keep with the market requirements otherwise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prices which gave them large profits." Palmer's Company Law, 18th Edn., p. 183, says: "in exercising their powers, whether general or special, directors must always bear in mind that they are in a fiduciary position, and must exercise their powers for the benefit of the company, and for that alone." Therefore, to my mind, the true test is whether the resolution is in the interest of the company and I have no hesitation to hold that the impugned resolution is in the interest of the company. Merely because the minority shareholders are required to make substantial payments for buying the shares, is no ground for branding the resolution as oppressive of the minority unless it is shown that the Board of Directors has acted with some oblique motive. 15. I may also mention that the decision in Re a Company's case ( supra ) of the Chancery Division relied upon by Mr. Cooper does not assist the petitioners. The facts of that case were: One L was a member of a company and had also been a director, but was removed from the board by a vote of the shareholders. Immediately after his removal, L presented a petition for relief under section 75 of the Companies Act, 1948 or alternat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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