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2014 (9) TMI 1279 - Board - Companies LawPreferential allotment - Under valuation of shares under Section 397/398 proceedings - major thrust of the submissions of the petitioners is based on the concept of equal shareholding of the parties, which has been claimed to exist since the inception of the company - HELD THAT:- The original partnership for running Glamor Polish Industries (GPI) which was subsequently taken over by the respondent company was not set up by joint participation of Late father of petitioner No. 1 and Late father of respondent No. 2. Further, the father of petitioner No. 1 became director in the company only on 14.10.1958, while the company was established in 1950. No further evidence has been brought on record by the petitioners to justify setting of the company jointly by the Late father of petitioner No. 1 and Late father of respondent No. 2. Therefore, the contentions of the petitioners that the company has been run on quasi-partnership principle having equal shareholding between the petitioners group and the respondents group are not acceptable. Allotment of shares - HELD THAT:- There is no loss of negative control of the petitioners group as a result of impugned allotment. The case of Clemens is distinguishable because in that case, there were only two shareholders and a closely held family company between an aunt (55%) and a niece (45%) unlike the present case where there are numbers of shareholders and also directors, some of whom are outsiders. It is also pertinent to mention that the Articles of Association in the Clemens case, contained a negative covenant that provided non-transfer of shares unless a family member declines to accept the same which is not the case in the instant petition. Thus, the relevant case is of no assistance to the petitioners. Time limitation - HELD THAT:- The petitioners did not challenge the impugned allotment within the limitation period as prescribed in law which is three years. In the case of ABP [2008 (1) TMI 967 - COMPANY LAW BOARD], it has been held that wrongful allotment of shares can have continuous effect so as to support a case of this nature. However, it is an admitted position in the instant case that post 1995 allotment, petitioner No. 1 and petitioner No. 2 have continuously accepted dividends based on their changed shareholdings without any opposition and thus, have acquiesced to the same and accordingly, are now estopped from raising any contention to the contrary - the petitioners have failed to make out any case against the rights issue of shares made in 1995 and therefore, no interference is called for on this aspect. Preferential allotment of 4,00,000 equity shares of₹ 10/- each in consequence of an EoGM dated 21.08.2009 for cash at a premium of ₹ 5/- per share - HELD THAT:- With the evidence placed on records, it can be safely presumed that notice was received by petitioner No. 1 who chose not to attend as has been his practice of not attending any general meeting since 1999 - there is no plausible reason available to the petitioner to contend that notice was not received in 2009. Further emphasis has been placed by the respondents on the fact that majority of other shareholders have received such notices under UCP and had attended the meetings. Allotment of 2,00,000 equity shares made on 23.03.2011 - HELD THAT:- The notices for convening of EoGM dated 23.03.2011 were duly received by petitioner No. 1 and petitioner No. 2 and the explanatory statements were also sent along with such notices. Special Resolution under Section 81(1A) of the Companies Act, 1956 was adopted in EoGM held on 23.03.2011 and the minutes in this regard clearly show that special resolutions were passed unanimously. Petitioner No. 1 and petitioner No. 2 did not attend such EoGM in spite of receipt of notices and did not place any objection to the passing of resolutions in the said meeting. Valuation of shares arrived at by the company - HELD THAT:- Since the special resolutions have been passed by requisite number of shareholders and there has been strict compliance of Unlisted Public Companies (Preferential Allotment) Rules, 2013, duly certified by statutory auditors towards the allotment of shares and in absence of any ulterior motive which can be imputed on the respondent group of shareholders, no interference is called for towards preferential allotment of shares as per EoGM dated 23.03.2011. Issue of bonus shares - HELD THAT:- There cannot be any complaint with regard to bonus shares as it was issued to all shareholders including petitioners. The bonus shares appear to have been issued in accordance with law and no ground has been made out by petitioners to show that issue of such bonus shares are in violation of the provisions of the Companies Act, 1956. Accordingly, no Interference is called for against such issue of bonus shares and the ground raised by the petitioners in this respect fails. Allegation of lack of fiduciary duty on the part of the respondents to acquire a BMW car costing ₹ 51 lakhs when the average profit of the company was ₹ 35.06 lakhs per year - HELD THAT:- The necessary explanation has been provided by the respondents as recorded in para 3 (xxiv) of this order and there are no irregularity or defect in acquiring such BMW car for official use in running the business affairs of the company and there has been no financial impropriety or lack of probity in such acquisition of car resulting in alleged mismanagement of the company. On determination of the value, in case the respondent group is willing to purchase the shares held by the petitioner group, they should pay the consideration within four weeks thereafter. Otherwise, the respondent company will purchase the shares and reduce the share capital of the company to the extent of the face value of the shares. On receipt of consideration, the petitioners shall hand over the shares along with transfer deeds duly signed for further necessary action in accordance with law. After carrying out the mutual obligations cast on the petitioners and respondents as per this order, an affidavit of compliance shall be drawn by both the parties within 7 days of such compliance and the same should be produced before the Bench Officer for taking the same on record. The statutory auditor, after complying with the directions contained in this order, shall draw an affidavit to the said effect and furnish the same to the Bench Officer within 7 days of such compliance for keeping the same on record also. Petition disposed off.
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