ASHOK BHAN, J. - (1.) THIS is a petition under Section 155 of the Companies Act, 1956 (hereinafter referred to as "the Act"), read with rule 9 of the Companies (Court) Rules, 1959, for rectification of the register of members of the respondent-company.
(2.) THE Punjab Machinery Works Private Limited (hereinafter referred to as "the company") was incorporated under the Companies Act, 1913, in the month of September, 1939, as a public company. The company was converted into a private limited company in the month of May, 1978. The authorised capital of the company in the month of September, 1972, was Rs, 2,00,000 comprised of 20,000 shares of Rs. 10 each. The amount of paid up capital was Rs. 1,22,060 comprised of 12,206 shares which were fully paid up. It is alleged that on September 3, 1972, the remaining shares, i. e. , 7,794 shares were further allotted to respondents Nos. 2 to 10 and, thus, the paid-up capital of the company became Rs. 2,00,000. The capital of the company was further increased from Rs, 2,00,000 to Rs. 5,00,000 comprising of 50,000 shares of Rs. 10 each in the annual general meeting held on September 29, 1973. Thereafter, on January 30, 1974, further 4,247 shares were allotted to respondent No. 2 and his family members and to the family members and relations of respondent No. 9. That with the object of securing majority shareholding in the company 7,794 shares were allotted by the board of directors to themselves and their relations without offering those shares to the existing shareholders of the equity shares for allotment on proportionate basis of their holding of the paid-up capital as provided for under Section 81 of the Act; that no notice as contemplated under Section 81 (1) (b) of the Act was issued to any of the shareholders and that no special resolution as mentioned in Section 81 (1) (a) of the Act was issued before allotment of 7,794 shares or even thereafter. This illegality was pointed out even by the auditors in their audit report which finds mention in the balance-sheet for the financial year ending March 31, 1973. That the allotment of shares was kept a closely guarded secret from the other shareholders and that the board meeting lacked the quorum when the shares were allotted. The allotment of shares was got approved in the annual general meeting of the shareholders held on September 29, 1973, illegally because out of the nine shareholders four shareholders, namely, Shri Gautam Raj Mehra, Shri Hari Rattan Kapur, Smt. Kiran Kapur and Kumari Anita Kapur ; were the allottees of the new shares and they could not approve the allotment of shares to themselves; that till the company had approved the allotment of shares in their favour they could not in law participate in the annual general meeting and that the remaining five members did not constitute the quorum as provided under Article 81 of the articles of association. The increase of authorised capital on September 29, 1973, from Rs. 2,00,000 to Rs. 5,00,000 was illegal, being in breach of Article 13 of the articles of association. The share capital could be increased only by an extraordinary resolution, i. e. , special resolution but the same was passed as an ordinary resolution ; that after securing majority illegally, the respondents on January 30, 1974, issued 4,247 shares to the following persons : Sl Name No. of shares. N o. Shri Roshan Lal 100 (1 Mehra) Shri Ram Das 647 (2 ) Smt. Kiran Kapur 500 (3 ) Kumari Anita Kapur 1. 500 (4 ) Smt. Suhag Rani 500 (5 ) Shri Gautam Raj 250 (6 Mehra) Shri Shobir Mehra 750 (7 ) Total 4,247 Respondent No. 2 Shri Ram Das Kapur, managing director and respondent No. 9 Shri K. D. Mehra, director allotted the shares in their names or to their relations and in doing so, the provisions of Sections 81 and 299 of the Act read with Article 15 of the articles of association were violated as per the grounds in the case of earlier allotment. The present petition was filed in September, 1981, challenging the aforesaid two actions of the respondents allotting 7,794 and 4,247 shares and increasing the share capital from Rs. 2,00,000 to Rs. 5,00,000.
(3.) WRITTEN statement has been filed. In the written statement filed, apart from denying the allegations made in the petition on the merits, a preliminary objection has been taken that the petition suffers from delay and laches and the transactions of 1972 and 1974 cannot be challenged in September, 1981. On the merits, it was stated that the shares were allotted to the respondents in accordance with law ; that a notice, annexure R-l with the written statement, was issued to all the existing shareholders of the company for taking new shares on the basis of one share for every two shares held and that the petitioner did not indicate his willingness to purchase the shares within the time stipulated and, thus, the allotment was made in accordance with law.;