KALYAN JYOTI SENGUPTA, J. - (1.) THE above motion has been taken out by the plaintiffs for the following interlocutory reliefs: (a) The defendant Nos. 1 to 4 are restrained from acting upon or giving any effect or further effect to the said purported letter dated 7 -2 -2005 contained in Annexure 'D' hereto or from issuing or allotting any further share in the defendant company until disposal of t he suit; (b) Injunction restraining the defendant Nos. 1 to 4 either by themselves or through their servants, agents, assigns or howsoever otherwise from taking any step for diminishing or decreasing the shareholdings of the petitioners in the defendant company being 18.26 per cent of the total issued, subscribed and paid -up share capital of the defendant company in any manner whatsoever.
(2.) GOING by the petition being grounds of the notice of motion the grievance of the petitioners is against the decision of the board of directors to issue rights shares and further against any future attempt or action to increase or decrease the share capital aiming to disturb the pattern of shareholding of the existing shareholders. Though, in the plaint, various reliefs have been claimed, however, at the present moment. I am not concerned with the same. The sum and substance of the case of the petitioners is that going by the financial position and the activities of the company there was no need to increase share capital by issuance of rights shares. From the balance sheet it will appear that the defendant No. 1 has sufficient surplus fund, which can be utilized for expansion of the business. Whole idea to increase share capital is to decrease the percentage of the plaintiffs/petitioners so much so that the existing directors can retain their absolute control as long as possible. There are other allegations hinting at mismanagement and misappropriation of fund without any check and balance. The extravagant expenditure of the directors has led to deprivation of defendant and existing shareholders for a long time. In sum and substance, the decision to issue right shareholding is not bona fide and has abused the fiduciary power of the directors. Mr. S. Sarkar, Learned Senior Advocate, appearing in support of the motion, while inviting my attention to the balance sheet and the audit report, submits that the company has enough fund and in fact the fund has been diverted by granting loan to various third parties which could be recovered and be utilized to expand the business. He further submits that the real business activity of the defendant No. 1 has been stopped long time back. Now the business activity is confined to letting out of the godowns and premises of the company and the income therefrom are the main source. As such there is no need to increase further share capital. Moreover, there is no detailed project or scheme as to how the increased share capital will be utilized and despite having sufficient funds in the hands of the company why further fund is required. Therefore, the decision of the directors to issue rights shares to the existing shareholders without any right of renouncement of any share is nothing but to marginalize the petitioners who have a considerable extent of shareholding. In view of absence of right of renouncement the unsubscribed shares might be issued to the chosen persons of the directors so that in the office of the board they can perpetuate and mismanage as long as possible. According to him, the aforesaid fact demonstrates amply the lack of bona fide. In support of his contention he has relied on an old English decision in Piercy v. S. Mills and Co. Ltd. 1920 (1) CH 77.
(3.) MR . N.K. Podder, Ld. Senior Advocate, while resisting this application, submits first that unless there is proof that the decision of the board of the directors is a mala fide none of the shareholders can make any complaint against such decision as under the statute the Board of Directors has been given fiduciary power and ample discretion for the interest of lawful running of the company. He says that up to 1989 the manufacturing business of the company was carried on smoothly. However, due to change of Government policy and non -availability of raw materials the manufacturing activity was not found to be profitable as a result whereof the same had to be stopped. Thereafter the godowns, factory premises and other houses of the company were let out on a rental basis to the various intending parties. With this diversified business activity the company has somehow survived. The dividend of the company was not given for the benefit of the company and to tide over the accumulated loss. While carrying on business of setting out it was found that there is good prospect if this business is modernized.;