V L S FINANCE LTD Vs. SUNAIR HOTELS LTD

JUDGEMENT

(1.) THE main allegation in this petition filed under section 397/398 of the Companies Act, 1956 ('the Act') by the petitioner holding 24.17 per cent shares in Sunair Hotels Limited (the company) is that the respondents 3 to 5 have fraudulently allotted shares worth about Rs. 21 crores to respondents 3 to 27 and therefore the petitioner has prayed for cancellation of the allotment of these shares as null and void and for consequential rectification of the Register of Members by deleting the names of respondents 3 to 27 in respect of these shares. Another allegation is that when further shares were issued by the company, no offer was made to the petitioner and as such the allotment of further shares should also be declared as null and void.

(2.) The undisputed facts in this case are: The company was incorporated in February 1977, the third respondent being the main promoter along with his family members. The main object of the company is to carry on hotel and allied businesses. The NDMC allotted a plot of land to this company on license basis in Gole Market area New Delhi by a License Deed dated 5-12-1982 with a supplemental deed in 1988. A part of the land was handed over in 1982 and another part possession was given in 1988. The NDMC cancelled the license in 1990 due to some dispute on the license fees, the cancellation of which was challenged in the Delhi High Court. As the proceedings were on, the balance land was given possession in 1992. In June 1993, Aeroflot and the company entered into an agreement for a joint venture hotel project by which a company in the name of Sunaero Ltd. (second respondent) was to be incorporated. Accordingly Sunaero was incorporated as a wholly owned subsidiary of the company in October 1993. In the beginning of 1994, Aeroflot withdrew its proposal and thereafter the second respondent entered into a management contract with one ACCOR for the hotel project and necessary approval from the government was also obtained. In October 1994, the Delhi High Court decided the matter in favour of the company and the NDMC restored the land license to the company. In March, 1995, the petitioner, the company and the promoters entered into an MOU, according to which the petitioner was to invest Rs. 7 crores as share capital in the company and also to provide a sum of Rs. 10 crores as security deposit and the respondent promoters were to invest a sum of Rs. 22 crores by way of share capital. The petitioner was also to arrange for public issue of shares for Rs. 10 crores and mobilize a sum of Rs. 85 crores by way of loans. In 1995, the petitioner invested Rs. 7 crores as share capital and also gave a security deposit of Rs. 8 crores. The respondents also got allotted shares worth Rs. 20.99 crores. The main complaint of the petitioner is that the respondents got the shares allotted in a fraudulent manner without actually remitting any consideration for the shares by rotation of the funds of the company through the second respondent. Further, in October 1997 the company had issued 15.3 lakh further shares to the respondents group without offering any shares to the petitioner. The petitioner has challenged the allotment of these shares also.

(3.) SHRI Sarkar, Sr. Advocate appearing for the petitioner submitted as follows: The petitioner entered into an MOU with the company and the promoter respondents 3 to 5 on 11-3-1995 by which the petitioner was to invest a sum of Rs. 7 crores towards share capital and was to provide a sum of Rs. 10 crores as interest bearing security deposit, The petitioner had also undertaken the responsibility of arranging for public issue of 10 lakh shares of Rs. 10 each at a premium of not less than Rs. 90 so as to mobilize Rs. 10 crores. It also undertook to mobilize Rs. 85 crores for the project by way of term loans and working capital facilities. The promoter respondents were to invest a sum of Rs. 22 crores by cash towards the shares. ACCOR were to invest in 10 lakh shares at Rs. 100 per share. Both the petitioner and the promoter respondents were to contribute cash at par for the shares by 30-4-1995. In terms of this MOU, the petitioner paid Rs. 7 crores between 11-3-1995 and 18-4-1995 and 70 lakh shares were allotted to the petitioners. On allotment of these shares, the petitioner constituted the majority with 87.41 per cent shares in the company. In addition, the petitioner also paid a sum of Rs. 8 crores between the period 21-11-1995 to 23-4-1996 towards security deposit. Even though, the respondents assured the petitioner that they had also contributed Rs. 22 crores in terms of the MOU towards the share capital in cash, yet, later it was found out that the respondents had fraudulently allotted shares to themselves without actually paying any consideration for Rs, 20.99 lakhs.