2003 (4) TMI 434 - HC - Companies Law

Summary

Issues:
- Restraint on transfer of shares and voting rights
- Declaration of void Board resolution
- Fraudulent actions and tainted transactions
- Maintainability of the application under section 536
- Shareholding patterns and voting rights at the Annual General Meeting

Restraint on Transfer of Shares and Voting Rights:
The application filed sought a restraint on transfer of shares, voting rights, and a declaration that a Board resolution making disputed shares fully paid up is void. The court considered the findings of a previous judgment and the ownership structure of the respondent companies. The court granted interim orders suspending rights related to the disputed shares until further directions and specified a separate counting of votes for the disputed shares at the upcoming Annual General Meeting.

Declaration of Void Board Resolution:
The application challenged the validity of a Board resolution making disputed shares fully paid up, citing fraudulent actions and tainted transactions. The court noted the findings of a previous judgment regarding convoluted transactions and raised doubts about the legitimacy of the actions taken. The applicant sought orders declaring the actions void under section 536(2) of the Companies Act, emphasizing the need to protect the interests of creditors.

Fraudulent Actions and Tainted Transactions:
The court considered the fraudulent nature of the actions, as highlighted in a previous judgment, and the involvement of the SK Modi Group in questionable transactions. The court expressed concerns about the methods used to make shares fully paid up and the potential impact on creditors. The applicant argued that transactions tainted by the court's findings should be deemed void, seeking interim orders to prevent further harm.

Maintainability of the Application under Section 536:
The respondent contested the maintainability of the application under section 536, raising multiple grounds including lack of locus standi, absence of proper affidavit, and questions about authorization. The respondent argued that the relief sought did not fall within the purview of section 536 and that the application was an attempt to influence the upcoming Annual General Meeting. The court scheduled further directions to address these issues.

Shareholding Patterns and Voting Rights at the Annual General Meeting:
The court examined the shareholding patterns of the parties involved, with the RHSL Group holding a majority of shares compared to the SK Modi Group. The disputed shares represented a smaller percentage, leading the court to propose separate counting of votes for these shares at the Annual General Meeting. This measure aimed to assess the impact of the disputed shares on the meeting's outcomes, pending further directions.

In conclusion, the judgment addressed various issues related to the restraint on transfer of shares, declaration of void Board resolution, fraudulent transactions, application's maintainability, and shareholding patterns at the Annual General Meeting, providing interim orders and scheduling further directions to resolve the disputes effectively.