- (1.) THIS is a petition made under Section 397 of the Companies Act of 1956 by three petitioners who are share-holders of Moga Transport Company, Private Limited, respondent No. 2.
(2.) THE facts giving rise to this petition are that on 16th of June, 1958, the Board of Directors of the respondent -- Company passed a resolution to the effect that the capital or the Company would he increased by Rs. 35,000/ -. The resolution which is annexure A runs as under: "after detailed discussion it was unanimously resolved that in order to improve the financial position of the Co. , and to meet the liabilities of the Co. , 350 shares of Rs. 100/- each be allotted. The shares may, in the first instance, be offered to the present share-holders in the ratio of one share for every four shares held by each shareholder, fraction up to 1/2 share to be ignored and more than 1/2 share to be counted as one share. The existing share-holders may be asked to send their applications within 15 days of the date of the notice and to pay Rs. 10/- per share with application. They should be informed that the balance amount of Rs. 90/- per share will have to be paid by them within one week of the receipt of the letter of allotment, and that in case the application for purchase of shares of any shareholder is not received by the Co. , within the period of 15 days aforesaid, it will be deemed that the share-holder has declined to purchase the shares offered and the board of directors will be at liberty to dispose of these shares to any person or persons they approve of. The Managing Director of the Co. , is authorised to issue necessary notices and receive the applications along with the application money and he is further directed that the said money if and when received be "deposited in the United Commercial Bank limited, Moga. "
(3.) IT was then alleged that notices offering shares were issued to those share-holders who were the party-men of Chanan Singh, Managing Director of the Company, respondent No. 1, and this was done with a view to get new share-holders of his own choice. The object of doing so was to increase Chanan Singh's own strength as shares were sought to be sold to persons belonging to his own group. The petitioners complain that the resolution reproduced above was never communicated to all the share-holders and those share-holders who did not belong to the group of respondent No. 1 were kept in the dark. It was stated that the memorandum and articles of association of this company do not authorise the issue of shares to strangers and the additional capital could be distributed among the existing share-holders only. It was prayed that the resolution and the notices issued to some of the share-holders of the company be quashed and the respondents be directed not to act upon the said resolution, and an interim stay order be also passed staying the operation of the resolution till the final disposal of this petition.;