Ashok Kumar Mishra, Member - (1.) The petitioner is a shareholder of the respondent No. 1 company holding 630 shares out of issued, subscribed and paid up capital of 40,000 equity shares of Rs. 10/- each excluding preference share capital.
(2.) Respondent No. 2 to 11 are the Directors of the Respondent No. 1 Company. The petitioner has sought the relief of ordering and investigation by an inspector appointed by the Central Government into the affairs of the company with regard to the fraudulent nature of preferential issue of 40,000 equity shares of Rs. 10/- each and to the misconduct of the directors in this connection towards the company and the shareholders.
(3.) The petitioner has made averments as follows: (i) The petitioner is a shareholder of the Respondent No. 1 Company holding 630 shares vide Folio No. 610. The petitioner has received a copy of the Notice of the Extra-ordinary General Meeting of the Respondent No. 1 Company dated 6th June 2011, to be held on 6th July 2011 and came to know that the Respondent No. 1 Company is proposing a preferential issue of 40,000 shares at a price of Rs. 10/- each. (ii) The petitioner submits that the proposed preferential allotment of 40,000 equity shares at a price of Rs. 10/- per share to any person or persons or in such a manner and at such time as the Board of Directors may deem fit, as mentioned in the Extra-ordinary General Meeting Notice amounts to illegal enrichment at the cost of non-promoter public shareholders of the Company. (iii) It is seen from the Explanatory statement of the Notice of the Extra-ordinary General Meeting that the proposed issue of shares is for augmenting the share capital of the company, in view of the increased activities of the company. However no details are provided in the notice or in the explanatory statement. The proposed resolution says that any person or persons or in such a manner and at such time as the Board of Directors may deem fit, is to be given shares at a fixed price of Rs. 10/- per share, which is patently illegal and intended as undue enrichment to the chosen persons. The book value of the shares of the company is very much higher - @ Rs. 350/- per share and hence the proposed issue at a price of Rs. 10/- is prejudicial to the interest of the Company. The Directors of the company are attempting to enrich themselves by manipulating the brute majority of their shareholding and taking advantage of the non-attendance of shareholder at the shareholders meeting. The fiduciary position of directors for the interest of the company and its shareholders has taken a back stage. (iv) The notice of the Extraordinary General meeting nor the explanatory statement is silent on the justification of the price proposed for the preferential allotments. (v) It is patently clear from the notice and Explanatory statement that the proposed issue of 40,000 shares to any person or persons or in such a manner and at such time as the Board of Directors may deem fit, is a deliberate attempt to illegal enrich the beneficiaries of the proposed allottees. No details of the allottees are given in the Explanatory Statement. (vi) The preferential issue of shares are oppressive to the petitioner and also prejudicial to the interest of the company and to all its non-promoters public shareholders. The directors are guilty of misconduct towards the company and to all its shareholders on account of the under-pricing of the shares and also on account of the preferential issue of selected persons chosen by them. The explanatory statement attached to the notice of the Extraordinary General meeting have suppressed the beneficiaries of the proposed share issue. (vii) Further it may be noted that the company has not followed any of the provisions of unlisted public companies (Preferential allotment) Rules 2003. (viii) The petitioner also take this opportunity to point out that the industry average sales realization of Rubber for the year 2009-2010 amounts to more than Rs. 120/- per Kg. whereas the company has reported only Rs. 98.48 per Kg. It appears there is under reporting of the average price realization for the year 2009-10 in the books of the company and hence it is clear there are irregularities in the way the business and transactions are managed by the Board. Last year (2008-2009) also the company had reported only Rs. 84.94 against an industry average of Rs. 101/-.;