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2016 (3) TMI 929 - DELHI HIGH COURT

2016 (3) TMI 929 - DELHI HIGH COURT - TMI - Non 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 Righ .....

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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 .....

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sh 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 direct .....

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ghout; 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 d .....

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ndent : Mr. M. Dutta, Advocate SUDERSHAN KUMAR MISRA, J. 1. This is a petitioners appeal under Section 10(f) of the Companies Act, 1956, impugning the dismissal of their petition by the Company Law Board on 24.06.2015 as well as the direction that the impasse between the two groups be ended by directing the appellants; who currently hold 15.87% shares; to exit the company by selling their shares to the respondents at a value to be determined by a valuer appointed by the Company Law Board. 2. To .....

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ion in the nature of a partnership, where the first appellant had also provided his own premises to the company to commence business. At the same time, in view of his experience, the second respondent was given a free hand in the belief that he would run the company honestly whilst keeping every shareholder in the loop. However, at the commencement of production, the appellants group was neglected by the respondents, who did not even bother to issue notice of Board Meetings or of the Annual Gene .....

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rely on UPC receipts. Ultimately, the appellants are stated to have inspected the records of the company on 20.12.2007 and 24.12.2007, and learnt that the appellants 1 and 3 have been removed from the directorship of the company, and that the share capital of the company have been increased from ₹ 30 lakhs to ₹ 63 lakhs without offering any additional shares to the appellants. It is also alleged by the appellants that they have not received notice of any Board Meeting held after the .....

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incipal grievance of the appellants is that in the year 2005, the respondents illegally increased the subscribed capital of the company from ₹ 30,00,000/- to ₹ 63,00,000/- by issuing Rights shares without providing the appellants an opportunity to subscribe to the same; and allotted the said shares to themselves, their close family friends and relatives in violation of Section 81 (1A) of the Companies Act, 1956, thereby reducing the shareholding of the appellants group from 33.33% to .....

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n the absence of a fair opportunity to participate, they could not exercise their legal right to subscribe the Rights issue. (b) Notice, claimed to be issued by the respondents through UPC, had actually never been issued by them; and the UPC produced by the respondents is forged. In support of their submission, the appellants contend that the Board Meeting approving the issue of right shares was convened on 5th February, 2005 at 5:00 pm at Faridabad, and the UPC receipt produced by the appellant .....

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he respondents have allotted themselves the rights shares on 2nd March, 2005 itself, i.e. prior to closing date of the issue, thus, foreclosing the rights of the appellants. (d) Even though the balance sheet for the year ended 31st March, 2006 shows ₹ 18,30,745/- as share application money pending for allotment, however, the respondents have proceeded to allot shares to their family members alone. 5. In response, the respondents contend that the share capital of the company was increased a .....

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, and posted to the shareholders by UPC from the nearby Lodhi Road Post Office. They further submitted that the shareholders of the company, other than the appellants, had already deployed the share application money aggregating to ₹ 17,50,000/- during the financial year 2003-04 for further increase of the equity share capital which was required to maintain debt equity ratio for seeking financial assistance from bank/financial institution. 6. The respondents also submitted that although in .....

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and that no further allotment has been made till date. The respondents have also submitted that the business of the company was being undertaken with the aim to benefit all the shareholders of the company; and that the company is regularly paying dividend to the appellants; and that in fact, a sum of ₹ 11.80 lacs has been distributed as dividend continuously without break till the financial year ended 31st March, 2007. 7. While dealing with these issues, the Company Law Board observed as u .....

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a total amount of ₹ 1,10,93,884/-. Towards meeting some of these expenses, the company raised fund by going for rights issue. The respondent company Board passed a resolution on 5-2-2005 to raise fund by issuing equity shares of 3,30,000 shares of ₹ 10 each in the share capital of the company as rights issue to the members who at the date of offer i.e. 5-2-2005 are holders of the company in proportion of 1:1 ratio. The Board further resolved that the share transfer book should remai .....

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luded that since it is a closely held company with four directors and about ten shareholders, it makes no difference from where they sent the paper of their resolution and notice to the shareholders. On the matter of closing of the issue on 2nd March, 2005 instead of 5th March, 2005, it held that even if it was assumed that the date of closure of the Rights issue communicated to the petitioner was wrong, had they intended to avail the opportunity, they could have informed the company that the of .....

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appellants also challenged the removal of the first and third appellant from the Board, inter alia, on the following grounds: a. That although the Articles of Association of the company specifically provide that any resignation from the Board shall be in writing, in fact, the appellants never resigned, either orally or in writing because they never intended to resign. However, in the form filed with ROC, the respondent has mentioned the reason for their removal as, resignation letters received .....

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h was accepted; but inadvertently, in the form filed with the ROC, it was stated, resignation letters received . In this context, they submitted that the company wanted a loan from the Citi Bank for which personal guarantees of the Directors were required, with the additional pre-requisite that none of the directors of the company is a defaulter of the bank. However, since the appellant No.1 was being shown as a defaulter qua his credit card payments, therefore, appellant No.1 and appellant No.3 .....

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s 1 & 2 were shown removed as directors from April, 2004, there is material showing that loaning Bank could provide loan only when its directors are not defaulters to the Bank, the time of showing their removal as directors is coincidental to the timing Bank indicated loan be provided if no director of the company is defaulter to the Bank. For having the petitioners 1 & 2 themselves manage their own company i.e. P-4 company, it can be inferred that the petitioners are in know how Board m .....

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ersonal guarantees to the company; it is the respondents given their personal guarantees to have loans come to the company. Having the company wriggled out of trying time, if the petitioners now come and say the act of removal of them as directors is in violation of the provisions, it cannot become a ground of oppression and mismanagement.......... 17. These petitioners stopped participating in the management from 2003 onwards, let us assume for time being, they were removed from the board witho .....

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hem to continue in the management, the petitioners admittedly left the management to the respondents for the reasons they know best. The petitioners, after much water has flown, cannot ask rewinding all these happenings, which have given growth to the company. 12. At the outset, counsel for the respondents objected to the maintainability of this appeal on the ground that it raises only disputed questions of fact for which the Company Law Board is the final authority. And unless the order passed .....

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the appellants on the other hand submitted that the appeal does involve substantive questions of law, and it cannot be said that only disputed questions of fact are sought to be re-agitated in this appeal. He submitted that the respondents could not have removed the appellants as directors of the company without their resignation in writing in terms of Articles of Association of the company. Therefore, the so called oral resignations allegedly submitted by the appellants is a misrepresentation a .....

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ny at the relevant time. According to him, this amounted to preferential allotment in favour of the said Smt. Chand Rani; but even in such a case, the legal formalities for making allotment of preferential shares to Smt. Chand Rani were not complied with. 14. The appellants claim that the following questions of law arise in this appeal; I. 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 .....

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. Whether the meetings dated 5.1.2004 and 1.4.2004 allegedly held by the board of directors of the Respondent Company could be held to be valid in the absence of any notice in terms of section 286 of the Companies Act, having been served on the directors including the Appellant Nos. 1 & 3? IV. Whether illegal removal of Appellant Nos. 1 & 3 from the directorship of Respondent No. 1 Company could be brushed aside as a mere technicality not adversely affecting the interest of Appellant Nos .....

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orrect in view of totally different facts and circumstances of the present case? VII. Whether the findings in T. Muraru Vs. State (1970) 46 Company Case 613 Madras, as noted in para 24 of the impugned order, were applicable in the present case in view of the clearly distinguishable facts and circumstances including a provision in the Articles of Association of the Respondent Company providing for vacation of the office of a director by resignation in writing, admitted non-observance thereof by R .....

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unauthorized issue of right shares by the Respondents, in its right perspective thereby vitiating the impugned order? X. Whether the so called need/justification for issuance of right shares by Respondent Company, accepted as correct by the learned CLB in para 27 of the impugned order, was borne out of records and even if it was so, whether the findings of the learned CLB are based on complete non-application of mind and bad in law? XI. Whether the decision of issuance of right shares in the mee .....

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mmitted by the Respondents in relation to the issue of right shares, including closer of offer prior to the date mentioned in the board resolution allegedly passed in the meeting held on 5.2.2005, could be cured/ignored by the learned CLB on the ground of alleged error of inadvertence on the part of the Respondents? XIV. Whether the meeting of the board of directors of the Company allegedly held on 5.2.2005 at 5 pm at Faridabad and alleged dispatch of the notice to the shareholders on the same d .....

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t to oppression of the Appellant and mismanagement of Company on the part of the Respondent Nos.2-5? XVII. Whether the finding of the learned CLB, qua issue no. 3, is legally tenable when the case of the Appellant was that the Appellant had financial expertise who had contributed not only to the paid up capital of the Respondent Company to the extent of 1/3rd but had also deposited a further sum of ₹ 18,30,745/- with Respondent Company toward share application money? XVIII. Whether the mer .....

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ends that it was mandatory for the Board of Directors to fulfill the formalities as required under Section 81 (1A) to formalize the allotment to outsiders, even though they may be relatives of some of the shareholders. He submits that absence of proper documentation, as prescribed in the Act, is fatal to such allotment of rights shares and hence such allotment is liable to be cancelled, being in violation of Section 81(1A); 15. Section 10F of the Act reads as under: Appeals against the orders of .....

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sixty days. Clearly, an appeal would lie only on a substantive question of law; and no disputed questions of fact can be reagitated under Section 10-F. While considering the scope of Section 10-F of the Act in V.S. Krishnan and Others Vs. Westfort Hi-Tech Hospital Ltd. (supra), the Supreme Court has held as under: 16. It is clear that Section 10-F permits an appeal to the High Court from an order of the Company Law Board only on a question of law i.e. the Company Law Board is the final authorit .....

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ellate court would interfere under Section 10-F was if such conclusion was (a) against law or (b) arose from consideration of irrelevant material or (c) omission to construe (sic consider) relevant materials. 16. Counsel for the appellants, however, is not able to point to any averment in the appeal where the issue with respect to the allotment of rights shares to outsiders is specifically raised. A mere mention of the Section, without the supporting averments in the appeal does not make such re .....

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required for issue of rights shares to members or outsiders, was not agitated before the Company Law Board. By changing the form of pleadings, the substance of plea does not change; and a mere change of form and terminology, will not confer jurisdiction under Section 10F which otherwise does not lie. 18. Resort to Section 10F of the Companies Act, 1956 to file an appeal against an order of the Company Law Board is statutorily circumscribed. It is only on a question of law that the invocation of .....

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ot be reopened once again in an appeal under Section 10F of the Companies Act. However, if the findings are found to be perverse, such perversity would itself become a question of law; and a perverse order is defined as one which is contrary to the facts and evidence on record; which no reasonable Adjudicating Authority could pass after examining the material placed before it. See Dale & Carrington Invt. (P) Ltd. and Anr. Vs. P.K. Prathapan and Ors., (2005) 1 SCC 212 (Para 36). In E. Shanmug .....

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Appellants not being informed of the meeting of the Board of Directors held on 05.02.2005; and the alleged notice sent under UPC informing the appellants of the decisions taken there, being a forgery. (ii) Unauthorized removal of the appellants as Directors of the Company. (iii) Allotment of Rights Shares in violation of Section 81(1A) of the Act. These three issues are necessarily questions of fact, and encompass the so-called 19 legal issues framed by the appellants. The Company Law Board has .....

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he notice allegedly issued to them under the Postal Certificate produced by the respondents before the Company Law Board is a highly suspect, forged and manipulated document. Further, that the meeting of the Board of Directors, approving the issue of Rights Shares was allegedly convened at Faridabad, Haryana, on 05.02.2005 at 5:00 p.m. But the UPC receipt, under which the purported notice of its decision was sent to the appellants, is also of the same date and time, viz. 05.02.2005 at 5:00 p.m. .....

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hough the meeting of the Board of Directors took place at Faridabad, the letter making the offer of Rights Shares was issued from the registered office of the Company situated at South Extension, New Delhi, which is very close to the Lodhi Road Post Office from where the notice was sent under Postal Certificate. He also submitted that same mode of service was adopted for all the directors and shareholders of the company; and except for the appellants, no other director or shareholder of the comp .....

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or by sending it by post to him to his registered address, of if he has not registered address in India, to the address, if any, within India supplied by him to the company for the giving of notices to him. 2. Where a document is sent by post- (a) service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document, provided that where a member has intimated to the company in advance that documents should be sent to him under a certificat .....

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me at which the letter would be delivered in the ordinary course of post. The respondents have produced a Certificate of Posting. Such service under Postal Certificate is presumed to be valid under sub-Section 2(b) of Section 53 of the Act at the expiration of 48 hours after a letter containing the same is posted; and the conduct of the respondents cannot be doubted merely because the timing of its dispatch from the Post Office does not match with the time when the meeting of the Board was condu .....

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lace and the decision taken, the action on the decisions taken is immediate, without loss of any time. Thus, there is nothing outside the realm of the normal, which can be read into the almost simultaneous holding of the meeting of the Board of Directors, and the issuance of the consequent notice to the shareholders. Consequently, there is no force in the appellants case that the so called lack of intimation of the Board Meeting of 05.02.2005; or of the decisions taken there, amounts to oppressi .....

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l submits that there was no material whatsoever before the Company Law Board on the basis of which the CLB could have held that the appellants had resigned as directors of the company. There was no resignation letter to enable the CLB to hold that the appellants had resigned as directors. He also contends that if the resignation of the appellants was allegedly accepted in the meeting of the Board dated 05.01.2004; then what prompted the Board to record acceptance of their resignation in the late .....

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of the meetings dated 05.01.2004 and 01.04.2004 and, hence, they could not have orally resigned in the said meetings; and (iii) if the resignation had been orally conveyed to any other director who participated in the aforesaid meetings, then record thereof must contain the relevant details in the minutes as to whom the resignation was orally conveyed; and who then conveyed it to the Board. Learned counsel further submits that since the appellants were not present in person in both the meetings .....

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hing, the presumption can only be that a resignation conforming to the prescribed mode of resignation specified in the Articles of Association was received. Thus, the removal of the appellants as directors of the company was illegal and unauthorized; and would constitute as oppression and mismanagement within the meaning of Sections 397 & 398 of the Companies Act. 24. In response, the respondents contend that this plea of removal as a director without authorization, is an afterthought. The a .....

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ing business including, inter alia, the acquisition of new premises and bank loans etc. The appellants never complained about their removal as directors after the meeting of the Board on 01.04.2004; or even thereafter, once the information with respect to their resignation was put in the public domain by the Registrar of Companies. Further, even in their petition filed before the Company Law Board, the appellants did not raise this plea. It was only during the course of arguments before the CLB .....

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in those letters also, the appellants did not make any reference to their removal as Directors; or of the meetings of the Board of Directors not being held; or that they had not been invited for the meetings of the Board of Directors. The only grievance raised in the letter dated 20.06.2007 is that the Managing Director of the company has not cared to send the audited statement of accounts for the years 2003-04, 2004-05 and 2005-06, in-spite of an official letter and several reminders over the p .....

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f their removal as directors; and rightly so, since they had voluntarily resigned as directors of the company in 2004 itself, which fact was put in the public domain by the Registrar of Companies on 30.04.2004 itself. 25. Learned counsel for the respondents further submits that so far as the issue of the two Board Resolutions of 05.01.2004 and 01.04.2004 are concerned, there was no statement in either of these resolutions that there was any resignation letter. The statement in Form 32 submitted .....

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who had prescribed that none of the directors of the company should be a defaulter as a condition; and appellant No. 1, Mr. Raj Kumar Bhatia, was in default on certain credit card payments, therefore, in order to facilitate the loan for the company, he and his wife Mrs. Kavita Bhatia had volunteered to resign from the Board of Directors, so that their personal guarantees would not be required. Counsel also adverts to the resolution of the Board of 05.01.2004 where these facts are duly recorded t .....

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Mrs. Renu Sharma RESIGNATION AS DIRECTORS Pursuant to Citibank not accepting the personal guarantee of Mr. Raj Kumar Bhatia in view of certain dues being in default on the certain credited card owned by Mr. Raj Kumar Bhatia, it was suggested by Mr. Raj Kumar Bhatia that he and his wife, Mrs. Kavita Bhatia would resign from the board of directors so that Citibank will then not need the personal guarantee of Mr. Raj Kumar Bhatia and Mrs. Kavita Bhatia. Resolved that the resignation of Mr. Raj Kum .....

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; 150 lacs, which includes Term Loan facilities up to ₹ 85 Lacs and working capital facilities upto ₹ 65 Lacs and non-fund based facilities up to Rs.Nil. The company being a Partner of AvLight Automotive works is also required to authorize a representative to sign the documents on behalf of the company. -:SD:- Chairman CERTIFIFED TRUE EXTRACT OF THE MINUTES OF RESOLUTION PASSED AT BOARD MEETING OF AVLIGHT AUTOMOTIVES LIMITED HELD ON THURSDAY 1ST APRIL 2004 AT 23/7, MATHURA ROAD, FARI .....

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nd 25.10.2007, by the appellant to the company, read as follows: The Managing Director Date 20/06/2007 M/s. AvLIGHT Automotives Ltd. C-14, 2nd Floor, South Extn. Part-II, New Delhi - 110049 Attention: Mr. Anil Anand Sub: Copy of Audited Statement of Accounts for the years 2003-04, 2004-05, 05-06. Please refer to my letter dt. 05.04/07 on the above subject I am sorry to state that you have not cared to send me the Audited Statement of Accounts for the years mentioned above in spite of my official .....

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rs with letter dt.15/08/07 on the above subject: I am surprised that you have not courtesy even to acknowledge my letter under reference. You should clearly understand that it is my legal right to have the notice of AGM and audited statement of accounts from the company and right to attend AGM either personally or through proxy. I am not aware what is happening in company for all these years. I therefore call upon you to send the latest Audited Statement of Accounts for the year ending 31-03-07 .....

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tes that if a Director absents himself from three consecutive meetings; or from all meetings of the Board for a continuous period of three months without obtaining leave of absence from the Board, he ceases to be a Director of the company. Section 283(1)(g) reads as under : 283. Vacation of office by Directors (1) The office of a director shall become vacant if- __________________ (g) he absents himself from three consecutive meetings of the Board of Directors, or from all meetings of the Board .....

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not even bother to seek any information with regard to the meetings with the Board of Directors. Nor did they raise any issue in that context; which warrants the conclusion that they never considered themselves to be a part of the Board. 29. An examination of the minutes of the Board Meetings clearly indicates that there was a reason for the appellants resignation from the Board of Directors, and their resignations were also accepted by the Board for the same reason. It cannot be said that the a .....

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y; is that it is only on an afterthought that this plea was sought to be raised during the course of arguments before the CLB. There is thus substance in the stand of the respondents that the appellants knew and had accepted the fact that they had ceased to be directors; and were always aware that their status was now limited to that of shareholders of the company. Add to this the fact of the appellants remaining silent for almost 03 years; and not making enquiries or calling upon the company to .....

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explained by the respondents as an inadvertent error, which even though not found plausible by the Company Law Board was accepted in view of the accompanying circumstances. The Company Law Board has believed the resignation of the appellants as valid and not oppressive against them. To my mind also, it is obvious that the appellants had communicated a clear animus to resign and to disassociate, to the other members of the small handful that owned and controlled the company; which was then recor .....

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e meetings of the Board. The claim for restoration of directorship is a clear afterthought to somehow regain a foothold in the company. Under the circumstances, and for all the aforesaid reasons, the appellants have not been able to persuade me to conclude that there is any error or perversity in the order of the Company Law Board on this issue. 31. The appellants next contend that the issue of rights shares by the company in the meeting of the Board of Directors of the company dated 02.03.2005 .....

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way of rights to the existing shareholders of the company; but in the process, in violation of Section 81(1A) of the Act, they allotted 30,000 shares to one Mrs. Chand Rani, who was not a shareholder of the company at the relevant time. It was submitted that once a company undertakes an exercise to increase its capital; and intends to issue shares to persons other than existing shareholders; it is required to pass a special resolution to this effect under Section 81(1A) of the Act. Further, sin .....

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no communication from any shareholder of his desire to renunciate his/her entitlement under the rights issue. Counsel submits that in case a shareholder exercises his/her right to renounce any shares, he must write to the Board of Directors saying that he has renounced so many shares and also to note in whose favour the renunciation is being made. There is no correspondence placed on record by the respondents which would support their claim of having acted under Section 81(1)(c) of the Act. It .....

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ssue, he/she must serve a notice of 15 days to the company. It is submitted that the entire exercise of allotment of shares by way of a rights issue was a camouflage to bring down the holding of the appellants from 33.33% to 15.87%, to render them ineffective in monitoring the affairs of the company. 33. Counsel for the appellants referred to the decision of this Court in Pearson Education Inc. Vs. Prentice Hall India (P) Ltd. & Ors., 134 (2006) DLT 450 to submit that the motive of allotment .....

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Ltd. & Another v. P. K. Prathapan and Ors., V (2004) SLT 784= IV (2004) CLT 25 (SC)=(2005) 1 SCC 212, The Supreme Court had the occasion to dwell on this aspect in detail by taking note of most of the available judgments on the subject. It may be noted that the facts of that case bear close proximately with that of the present case inasmuch as in that case also the company was having two groups of shareholders, one Indian ground and one foreign group. The Managing Directors and his wife rep .....

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e of further share capital nor has it been shown that proper procedure was followed in allotting the additional share capital. Conclusion is inevitable that neither was the allotment of additional shares in favour of Ramanujam bona fide nor was it in the interest of the company or was a proper and legal procedure followed to make the allotment. The motive for the allotment was mala fide, the only motive being to gain control of the company. Therefore, in our view, the entire allotment of shares .....

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s began for expanding the company and the consequent need to generate funding, they approached the Citi Bank for loan. The bank agreed to advance a loan of ₹ 1.5 crores on the condition, inter alia, that the company must purchase its own land and move in to its own premises within 12 months, from the rented premises; and the directors of the company furnish personal guarantees for funding the proposed expansion of the factory to increase the capacity and turnover. When the finance was comm .....

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. Learned counsel further submits that reliance on the judgment in Pearson Education Inc. Vs. Prentice Hall India (P) Ltd. & Ors., (supra) by the appellants is misplaced since the facts of the two cases are entirely different. It is submitted that in the case in hand, the appellants themselves had turned away from the company, resigned as directors and had, by their conduct, allowed the respondents to increase their stake in the company since they themselves did not intend to either extend t .....

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of the rights issue; and it was left to the respondents to undertake this risk. In this context, it must also be reiterated that the bonafides of the decision to infuse funds in the company or to go in for the expansion, have not been impeached anywhere by the appellants. 36. So far as the contention with regard to the violation of Section 81(1A) of the Act is concerned, learned counsel for the respondents referred to sub-clause (c) of clause 1 of Section 81 to say that this permits the shareho .....

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that there is no violation of any provision of law. 37. It would be appropriate at this stage to notice Section 81 of the Companies Act, 1956, which reads as follows; 81. Further issue of capital 1) Where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company .....

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o have been declined; c) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause (b) shall contain a statement of this right; d) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that h e decline .....

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cial resolution to that effect is passed by the company in general meeting, or (b) Where no such special resolution is passed, if the votes case (whether on a show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any, of the Chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by me .....

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enactment must be given a plain meaning within its ambit and context; and the separate provisions of a statute must normally be read to complement each other; and if it is not possible to do so, each of the provisions must be construed to make it effective and operative (Ref. CIT Vs. S. Teja Singh, AIR 1959 SC 666). No rules of construction can require that when the words of one part of a statute convey a clear meaning, it shall be necessary to introduce another part of the statute for the purp .....

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s is in favour of, any other person , which, in this case was her mother-in-law Mrs. Chand Rani. This is in consonance with sub-clause (c) of Section 81(1). There is no need to bring in Section 81(1A) which envisages further issue of capital by offering further shares of the company to any person, whether or not that person includes the person referred to in clause (a) of sub-section (1). There is a clear difference between an offer of allotment by a company pursuant to a decision taken by its B .....

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line of reasoning while stating that; The requirement of passing a special resolution under sub Section (1A) is necessary only when the shares are issued to the public or are placed privately in terms of Section 67 (3) or proposed to be offered to any segment of the shareholders ….. to the exclusion of the rest. The shareholders approval is accordingly not required for a rights issue, including the allotment of shares to the renounces, who are not members of the company. It follows, ther .....

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-condition that none of the directors of the company should be a defaulter of the bank whereas the appellant was admittedly in default in making payment against his credit cards. Also, no malafides can be attributed to the decision of the respondents to enhance the capital structure of the company to raise resources, which eventually resulted in the appellants shareholding being reduced from 33.3% to 15%. 40. Looking to the overall circumstances, particularly the fact that the appellants did not .....

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ver, 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. 41. To enable the appellants to now reprise their role as directors, whilst also giving them the opportunity to avail the Rights issue at this s .....

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