S.Balasubramanian, - (1.) THE petitioner claiming to be entitled to hold 49% shares in M/S Dr. Bais Surgical & Medical Institute Private Ltd. (the company) has filed this petition under Sections 397/398 of the companies Act, 1956 (the Act) alleging that by allotment of further shares to themselves the respondents 2 and 5 have reduced the shareholding of the petitioner and that the company is in the process of handing over complete control of the company to the 9th respondent which would be against the interest of the petitioner and the company. With these allegations, the petitioner has sought for cancellation of the allotment made and also for restraining the company from entering into any MOU with the 9th respondent.
(2.) The facts of the case are that the petitioner had earlier filed a petition under Sections 397/398 of the Act (CP 9 of 2001) which was disposed by an order dated 2nd December, 2004. In terms of the said order, the company was directed to allot 1475998 shares of Rs. 10 each to the petitioner or in the alternative refund the entire amount of Rs. 1.475 crores invest by him along with an interest of 6% from the date of investment till the date of payment. In a board meeting held on 15.12.2004, reserving its right to file an appeal against the order of this Board, the company decided to allot 1475998 shares to the petitioner and by a letter dated 16.12.2004, the petitioner was informed of the said decision. On the same day, i.e. on 15.12.2004, the company also held an EOGM to increase the authorized capital of the company from Rs. 3 crores to Rs. 10 crores. On 25.12.2004, while allotting shares to the petitioner as per the decision on 15.12.2004, the board of the company also allotted shares to the 2nd and 3rd respondents against their earlier investment. With these allotments against the investment already made, the shareholding of the petitioner and the 2nd and 3rd respondents came to be 49% and 51% respectively. However, on the same day the 2nd respondent was allotted further 60 lakh shares as consideration for sale of the land and building in which the hospital is functioning, to the company. The petitioner has challenged the allotment of 60 lakh shares to the 2nd respondent on the ground that the same was made solely with a view to dilute the percentage shareholding of the petitioner from 49% to around 15% and also to enable the 2nd respondent group to take complete control of the company in view of his holding going up from 51% to about 85% shares. Shri Choudhary, Senior Advocate, appearing for the petitioner submitted: In the earlier proceeding, when the respondents contested the claim of the petitioner of being a 49% shareholder on the ground that no shares had been allotted to the petitioner, this Board upholding the claim of the petitioner, directed the company to allot 1475998 shares so that the shareholding of the petitioner would be 49%. However, with a view to over reach the directions of this Board that the petitioner should hold 49% shares, on the same day of allotment of shares to him, 6 lakh shares were allotted to the 2nd respondent by increasing the authorized capital. By this allotment, the petitioner's shareholding has come down to 15%. It is to be noted that the company had issued a notice for convening an EOGM on 15.12.2004 at 10.00AM by a notice dated 15.11.2004. On the same day, the time is not known, the board allotted 1475998 shares to the petitioner in terms of the order of the Board dated 2nd December, 2004. This allotment was communicated to the petitioner vide letter dated 16.12.2004. When the appeal filed by the company came up for hearing before the High Court on 17.12.2004, the company sought for a stay of the order of this Board which was denied in view of the communication dated 16.12.2004 from the company. At the request of the petitioner therein, a copy of the resolution dated 15.12.2004 allotting shares to the petitioner was given to the petitioner on 23.12.2004. In this, there was no disclosure of alteration in the authorized share capital. Thereafter by a letter dated 1.1.2005, the company informed him that on 24.12.2004, 1475998 shares had been allotted to the petitioner and 6 lakh shares had been additionally allotted to the 2nd respondent consequent to increase in the authorized capital. Since in the High Court proceeding on 17.12.2004 the company had not disclosed the holding of the EOGM, it is doubtful whether the alleged notice dated 15.11.2004 was issued at all and whether the alleged EOGM was held at all. The respondents have not shown any board meeting wherein the board had considered the proposal to alter the share capital and to convene an EOGM. Even otherwise, the holding of the EOGM on 15.12.2004 without notice to the petitioner was illegal as on that day even according to the company, he had been declared as a shareholder. In the Explanatory Statement it is stated that the company had to allot 6 lakh shares to the 2nd respondent as consideration for purchase of the building in which the hospital is functioning and therefore it was necessary to increase the authorized capital. The very facts that no funds came to the coffers of the company and that the building was already in the possession of the company by way of lease, would reveal that the motive for allotment of shares to the respondents was only to reduce the shareholding of the petitioner. Since with the allotment of the shares to the petitioner, he had become a 49% shareholder, he could have blocked the special resolution if notice for the EOGM had been given to him. Further, the petitioner being one of the substantial shareholders, he should have been offered proportionate shares which with a view to marginalizing the petitioner, the company did not offer. By this singular act, notwithstanding the direction of this Board that the petitioner should be a 49% shareholder, his shareholding has come down to around 15%. Further, the allotment of 6 lakh shares is abinitio void as the property has not yet been registered in the name of the company meaning thereby that shares have been allotted without any consideration which is not permissible. Thus, taking into consideration all these aspects that the allotment is highly oppressive to the petitioner and that even legally the allotment is not sustainable, the allotment should be cancelled.
(3.) THE learned Counsel further submitted: At the time when the petition was mentioned, this Board had directed that no management agreement should be entered into by the company with M/S Wockhardt. When the petitioner apprehended that the company/respondents might enter into management agreement, filed CA 54/2005 which was heard by this Board and by an order dated 14.3.2005 directed that the management agreement would be subject to final order on the petition. THErefore, a finding on this aspect should also be given.;