Home Case Index All Cases Companies Law Companies Law + HC Companies Law - 2016 (3) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (3) TMI 929 - HC - Companies LawNon providing of opportunity to subscribe to Rights issue - increase of share capital - Whether the alleged resignation of Appellant No. 1 & 3 from the directorship of the Company could be held to be valid, when specific case of the Appellant Nos. 1 & 3 was that they never resigned and in the absence of any such resignation in writing being brought on record by the Respondent? - Held that:- The appellants did not impugn either the allotment of the Rights Issue or their removal from the Board of Directors at the relevant time; coupled with the fact that, admittedly, there is no challenge to the company’s requirement for funds through the offer of rights, as well as by way of a bank loan, alongwith the explanations being offered by the respondent in this regard; as also the real likelihood of the appellants having been persuaded to raise all these grievances once the company’s economic difficulties were over, and the company was clearly on the path of substantial progress; makes it clear that these allegations need not be probed further. Obviously if the company’s affairs had taken a down turn after the Rights Issue as well as the loan from the bank, there would have been no question of the appellants’ raising any grievance whatsoever even in June, 2007. To enable the appellants to now reprise their role as directors, whilst also giving them the opportunity to avail the Rights issue at this stage would, in effect, amount to handing them the prize without having played the game at all, because the appellants never ran the risk normally associated with business expansions or personal guarantees. To my mind, once it is clear that the decision to infuse capital through the issue of Rights as well as Loans on personal guarantees was bonafide; and the appellants failed to raise any protest in a timely fashion; then regardless of the reasons for the non subscription to the Rights issue, or for not being required to furnish the necessary personal guarantees to the bank; it would be grossly inequitable to now reward the appellants with the rewards sans the risk; and that too at the expense of the respondents who actually did run that risk by putting in their own moneys and personal guarantees on the line, thus facilitating the increase in the company’s valuation from ₹ 30 lakhs in 1996 to ₹ 12 crores in 2008. Had the appellants been responsible and conscientious participants, both as directors and shareholders; fully able and ever willing to shoulder their burden of the increased business risk under contemplation, nothing stopped them from taking the required steps; and also approaching the Company Law Board if necessary; in a timely fashion, but they chose not do so. That they chose not to protest the lack of any information about any Board meeting, despite the belief that they were indeed directors, for years together; while duly receiving the annual accounts and dividends throughout; can only lead one to conclude that their interest in the company was limited to their initial shareholding and nothing more. After the venture has clearly fructified; and the associated risks run successfully; to enable the appellants to now claim that they would certainly have subscribed to their share of the Rights issue to finance the venture in the first place, and consequently direct the allotment of proportionate shares to the appellant at the initial offer price; while divesting others, who had put down their own moneys at the crucial juncture for those shares; and that too when their current price and future prospects are much more, would not only ensure an undeserved windfall to the appellants; it would, to my mind, also demonstrate an extremely unjudicious naivety on the part of the Court.
|