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TMI Blog2010 (12) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the appellants is as follows : The appellants are the petitioners in C. P. No. 44 of 2010. They are the original promoters of the first respondent-company. The first respondent-company is incorporated under the Companies Act, 1956 and it is a public limited company. It is a listed public company and it is engaged in equity, commodity and insurance broking business. Appellants Nos. 1 to 3 are the original promoters of the company. Respondent No. 2 is a financial investor. The second respondent had agreed to subscribe 1,03,82,174 equity shares of Rs. 10 each at a premium of Rs. 38 per share. Annexure A2 is the agreement between appellants Nos. 1 to 3 and the second respondent. The appellants filed a company petition under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned senior counsel for respondents Nos. 1, 6, 8 and 9. We have also heard Sri Rohit Choudhry also who appeared with Sri Pathrose Mathai for respondent No. 9. 6. Sri Karthik Seshadhri, learned counsel for the appellants submits that the second appellant who is referred in the articles of association has a legal right to insist that further issue of capital can be done only if he agrees to the proposal. There should be an affirmative vote on the part of the second appellant. According to him, there is no such affirmative vote, and, therefore, the decision of the company approving the rights issue is in contravention of the provisions of the articles of association. He would point out that the stand of the first respondent as is disclosed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed capital. This result inevitably follows from the words used in section 81 namely that "where it is proposed". According to him, "where it is proposed" means where it is decided by the board. Therefore, according to him, when it is in dispute that he did raise his objection to the raising of further capital the fact that he was outvoted would not make any difference. At a stage when the board decides to take a decision as to whether there must be an increase in subscribed capital in the light of article 157A he poses the question as to how the Company Law Board could come to the conclusion that the said article is repugnant to provision of section 81. According to him, once it is decided by the board lawfully to increase the capital neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that what is involved is a plain case of rights issue. He would submit that there can be no case at all for the appellants to complain about as the shares will be distributed among the existing shareholders as mandated in section 81(1)(a). There is no preferential allotment at all to Barings and in this regard he draws our attention to article 157A(e) and he would submit that the article is directed to prevent any issue to M/s. Barings or its associates. (It is not in dispute that Barings is the company controlled by the second respondent). He would submit that there is no preferential allotment in this case. He would submit that the question of allotment of shares other than to the existing shareholders does not arise in this case and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We say this to allay the apprehension in the minds of the appellants that when the Company Law Board takes up the matter for final disposal the Company Law Board should not feel bound to follow the reasoning adopted in the interlocutory order. We are of the view that we need not interfere with the order vacating the injunction. We must notice in this regard that article 157A(e) which we have extracted actually prohibits rights issue in favour of Barings or its associates. There is no dispute that what is proposed is a rights issue under section 81(1)(a). We would think that in the facts of this case the appellants have not made out a case for interference with the exercise of discretion by the Company Law Board in vacating the interlocut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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