Sabyasachi Mukherjee, J. - (1.) This appeal has arisen out of an order passed and judgment delivered by the learned trial judge on 17th May, 1979. There is also a cross -objection filed by the respondent to the appeal. In the application which has resulted in the order appealed from the petitioner, the Bengal Dooars National Tea Co. Ltd., the respondent herein, had asked for certain orders, inter alia, that the resolution passed in the meeting held on 5th December, 1977, be declared illegal, invalid, null and void and of no effect. There was also a prayer for an injunction restraining respondents Nos. 2 to 7, who are the directors of the appellant, Jadabpore Tea Co. Ltd., from dealing with, disposing of or transferring or selling or alienating any of the assets of the company. There were mainly three factors involved in this application. The petitioner, viz., the Bengal Dooars National Tea Co, Ltd., claimed to be a shareholder of 10,002 ordinary shares of Rs. 20 each. The authorised share capital of the company was Rs. 4,50,000 divided into 22,500 shares of Rs. 20 each, and the subscribed capital was Rs. 49,689. The petitioner in the original application under Sec. 397 of the Companies Act, 1956, was holding about 49 percent, shares and was the largest single shareholder.
(2.) There were three grounds of challenge in the application. One was on the issue of further shares which was sanctioned by the company at the meeting held on 5th December, 1977. The other was about the shifting of the registered office from Jalpaiguri to Siliguri and the third was relating to certain alleged private sales and misapplication of the sale proceeds of tea. The application under Ss. 397 and 398 was presented to this court on the 3rd April, 1978. The petitioner also contended that the petitioner had not received the notice of the impugned meeting. The learned judge did not accept the grievance of the petitioner about the shifting of the registered office from Jalpaiguri to Siliguri. The learned judge was unable to accept the submissions of the petitioner that the petitioner did not receive the notice of the meeting, the proceedings of which were impugned. The learned judge, however, did not deal with, either way, about the alleged private sale and misapplication of the sale proceeds. It was contended on behalf of the appellant that the learned judge had refused to accept the grievance made by the applicant under Sec. 397 of the Companies Act. But the learned judge held that the resolution was invalid in law, in view of the provisions of Sec. 81(1A), for the issue of further share capital. As the learned judge held that the resolution was not in a proper form, in view of the notice given, that action of the learned trial judge has been challenged as contrary to the provisions of law. The short facts which are necessary for the present purpose are the following : The main business of the Jadavpur Tea Co. is to maintain tea garden at Ramshaighat in the district of Jalpaiguri, manufacture and sale of the tea grown in the said garden. The said company has its administrative office at the gate of Rai & Co., Siliguri. In or about November, 1977, the Bengal Dooars National Tea Co., being the petitioner under Sec. 397, came to know that the respondent, Jadavpore Tea Co. Ltd., was attempting to shift the registered office from Jalpaiguri to some other district. Therefore, according to them, they authorised one Manish Chandra Mitra to write letters on their behalf. On or about 19th November, 1977, the said Manish Chandra Mitra wrote certain letters to the respondent. It may be mentioned here that there was originally an agreement by the present applicant to sell their shares to the Chowdhuries who were willing to undertake the running of the company and it is their further case that in view of this they had lodged their share certificates with the company. When the sale transaction with the Chowdhuries had failed in 1974, they had repeatedly written to the respondent for the return of share certificates or for the issue of duplicate shares, if the shares were not available. But those were not heeded to. In this connection letters were also written to the Registrar of Joint Stock Companies as well as to the company. Thereafter several letters were written by the respondent to the appellant asking for copy of the annual balance sheets for several years as well as the particulars of the share registers. There were certain grievances as to whether Sri Manish Chandra Mitra was duly authorised or was competent to make those enquiries on behalf of the said respondent. On 9th November, 1977, it is stated that the notice for the impugned annual general meeting was alleged to have been sent under certificate of posting to the respondent. Between 21st November, 1977, and 20th December, 1977, it is the allegation of the appellant -company that there was the closure of the share register in compliance with Sec. 154 of the Companies Act, 1956. On 23rd November, 1977, the said Manish Chandra Mitra was written to by the appellant -company that due to the closure of the share register it was not possible to send the complete list of the shareholders. This letter, though dated 23rd November, 1977, appears to have been posted on 19th January, 1978, and was received by the respondent on the 21st January, 1978. This would be apparent from the records placed before the learned trial judge which were appearing in the paper book. In this connection a reference may be made to page 111 of the paper book. The importance of this fact is that the present respondent, relied on such conduct to indicate that the company, Jadavpore Tea Co. Ltd., was proceeding in a high -handed manner and was deliberately trying to shut out all information from the respondent so that the company could clandestinely increase the share capital and transform the respondent into a minority shareholder without any effective say in the running of the company. On 5th December, 1977, according to the appellant, the annual general meeting was held and the proceedings of the said meeting are under challenge in this appeal. On 13th December, 1977, the respondent wrote to the appellant company asking for copies of the balance -sheets of the years 1972 to 1976 as also copies of the memorandum and articles of the association. A sum of Rs. 10 was also remitted along with that letter for the aforesaid purpose. On 23rd December, 1977, the respondent reminded the appellant -company to send a complete list, as aforesaid. On 3rd January, 1978, the appellant -company wrote to the respondent enclosing balance -sheets for the years 1972 -73, 1973 -74, 1974 -75 and 1975 -76 as also memorandum and articles of association on 4th January, 1978, there was a publication in the news paper, " Basumati ", about the shifting of the registered office. On 12th January, 1978, there was a publication about the shifting of the registered office in " Amrita Bazar Patrika ". From the post mark on the envelope it appears that the letter dated 23rd November, 1977, which we have referred to hereinbefore, was posted on the 19th January 1978. On 20th January, 1978, a letter was written by the appellant -company to Manish Chandra Mitra to send the registration number of the shareholder. On 21st January, 1978, there was a letter received by Manish Chandra Mitra intimating to him that the registers of shareholders were closed from 21st November, 1977, to 20th December, 1977. On 21st January, 1978, a letter was written by the said Manish Chandra Mitra to the appellant -company stating that the envelope containing the letter dated 23rd November, 1977, showed that the letter was posted on the 19th November, 1978, and was received by him on 21st January, 1978, on the same date there was a letter written to the same effect by the said Manish Chandra Mitra to the Registrar of Companies, West Bengal. On 25th January, 1978, the respondent -company wrote to the Registrar of Companies, West Bengal, complaining about the illegal shifting of the registered office and non -receipt of notice convening the impugned annual general meeting. Again on 31st January, 1978, a letter was written by the respondent -company to the Registrar of Companies, inter alia, complaining about the illegal shifting of the registered office, failure to supply copies of the balance -sheets for the years ending 1972 and 1976 and non -service of the notice of impugned annual general meeting. On 4th March, 1978, the Registrar of Companies wrote to the appellant company directing them to furnish copies of the balance -sheets for 1972 and 1976 and memorandum and articles of association. It was, inter alia, stated in the letter as to whether any special resolution had been passed for shifting the registered office of the company incompliance with Sec. 146 of the Companies Act, 1956. On 20th March, 1978, the appellant -company forwarded a memorandum and articles of association as also balance -sheets for the years 1972 and 1976. On the same day, the appellant -company wrote to the Registrar of Companies in answer to the letter dated 4th March, 1978, of the Registrar of Companies. That letter, according to the respondent, was regarding the failure to give notice of such change to the Registrar as required under Sec. 146 of the Companies Act, 1956. Thereafter, further searches were caused to be made on 21st March, 1978, in the office of the Registrar of Companies and the respondent came to know about the resolution increasing the share capital of the company, which was impugned in the application under ss. 397 & 398, and the order in respect of which is under appeal. The application tinder Sec. 397 and Sec. 398 was, as we have mentioned hereinbefore, made ready on 31st March, 1978, and was filed on 3rd April, 1978. In order to decide the main and first legal question on which the appellant has challenged the findings of the learned judge, it is necessary to set out the resolution which has been impugned in this case. The resolution increasing the share capital reads as follows : " 7. Resolved the 15,000 equity shares of Rs. 20 each be arid are hereby issued, in terms of Sec. 81(1A)(a) of the Companies Act, 1956, and the directors be and are hereby authorised to decide the time and the manner of issue including the calls to be made on the shares and any other matter incidental thereto. Explanatory notes on agenda No. 7. The company is in need of immediate funds for the development works of its garden and as such quick realisation of the share capital is vitally important. The impecunious losses for the same period has eroded public confidence to a great extent. And it will be futile to expect the general public and the existing members who have shown no interest in the matter of the company for this long time, to invest in these shares. The matter is, therefore, left entirely to the discretion of board of directors of the company who are authorised to allot and issue the shares and make calls in such a manner as would be most beneficial to the company and conducive to the purpose for which these new shares are being issued."
(3.) The notice dated 19th January, 1977, was also given to that effect. It has been alleged that the said notice was bad being violative of Sec. 81(1A). Sec. 81 provides, along with (1A), which was substituted by the Companies (Amend.) Act, 1960, as follows: "81. Further issue oj 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 alter its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares, then (a) such further shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid -up on those shares, at that date : (b) the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than 15 days from the date of the offer within which the offer, if not accepted, will be deemed to 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 he declines to accept the shares offered, the Board of Directors may dispose of them in such manner as they think most beneficial to the company. Explanation : In this sub -section, ' equity share capital' and ' equity shares ' have the same meaning as in Sec. 85. (1A) Notwithstanding anything contained in Sub -section (1), the further shares aforesaid may be offered to any persons whether or not those persons include the persons referred to in Clause (a) of Sub -section (1) in any manner whatsoever - (a) if a special resolution to that effect is passed by the company in general meeting, or (b) where no such special resolution is passed if the votes cast (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 members so entitled and voting and the Central Government is satisfied on an application made by the board of directors in this behalf that the proposal is most beneficial to the company. ";