TMI Blog1998 (9) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... each in the share capital of the company of 2,500 equity shares of ₹ 1,000 each, and 200--4 per cent. preference shares of ₹ 1,000 each. Later, these equity shares were converted into 4 per cent. redeemable preference shares of ₹ 1,000 each at the extraordinary general meeting held on March 30, 1992. According to the petitioners, the business of the company was to be carried on on the principles of partnership between the first petitioner and his father, respondent No. 2 and that the former was appointed as the executive director of the company and was looking after the entire business, operation. Later he became the managing director, when the second respondent resigned from the office of managing director in December, 1991. According to the petitioners, there was a family settlement by which certain properties were divided among the family members sometime in 1993. Later, certain disputes arose between the petitioners and respondent No. 2 due to which respondent No. 2 decided to take control of the company by removing the first petitioner from the position of director at an extraordinary general meeting requisitioned by respondent No. 2. This notice of requisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship does not arise inasmuch as the company was incorporated in 1981, at which time the first petitioner was studying in the United States and only in 1987, the first petitioner was inducted into the board. It is further averred by the respondents that the first petitioner has obtained whatever he was entitled to out of the family properties by a family settlement and his only interest is to obtain the ownership of a building in Madras owned by the company and that the petition is a motivated one to put pressure on respondent No. 2 to settle the Madras building in favour of the petitioners. Further, according to the respondents, the business of the company has already been sold and after discharging all the liabilities, the funds available with the company have been profitably invested. As far as redemption of the preference shares and removal of the first petitioner as a director are concerned it is the stand of the respondents that the same has been done as per the provisions of law. 5. We heard the arguments of Shri Murali, counsel for the petitioners and Shri Muralidharan, advocate for respondent No. 2. Both of them elaborately dealt with the allegations. Shri Murali relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he referred to the various cases that have been initiated by the first petitioner against the company/respondent No. 2. 8. We have considered the pleadings and arguments of both the counsel. Before we proceed with the various allegations in the petition, it is necessary to adjudicate on the redemption of preference shares as the locus standi of the petitioners to move the petition under Section 397/ 398 in terms of Section 399 will depend on the decision on this issue. From the special resolution passed at the extraordinary general meeting held on March 30, 1992, when the equity shares were converted into preference shares, as per para. (d) of that resolution the preference shares shall be redeemed on or before March 31, 1993, in accordance with the provisions of Section 80 of the Act. In other words, the intention at the time of conversion was that the shares should be redeemed. There is nothing in the resolution to show that these shares would be converted into equity shares which prayer the petitioner has sought in the petition. May be the shares had not been redeemed by March 31, 1993, but there is nothing in the resolution to show that the shares would be converted into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in this case, as has been pointed out by respondent No. 2, the first petitioner has been in the habit of litigating with his own father who is supposed to be his partner in the company, not only in relation to the affairs of the company, but also in family matters. Therefore, we are not in a position to accept the contention of the petitioners that the redemption of preference share capital should be considered in the background of the partnership nature of the company. Since the redemption was done validly through a board resolution that too on the basis of a resolution in the extraordinary general meeting held on December 20, 1995, according to which these shares were to be redeemed, we do not find any justifiable reason to set aside the redemption. It is also on record that the redemption amount had been sent to the petitioners by way of cheques which the petitioners had not accepted. In other words, as far as the company is concerned the redemption had taken place which had been paid out of the proceeds of a fresh issue of equity shares. Once we confirm the redemption the petitioners do not continue as members of the company and as such they do not qualify to file the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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