MEGA RESOURCES Vs. BOMBAY DYEING AND MANUFACTURING COMPANY LTD

JUDGEMENT

(1.) IN this order, we are considering the application CA No. 151 of 2001 filed by the respondent company in CP No. 12 of 2001 filed by the petitioners under Sections 235/397/398 of the Companies Act, 1956 (the Act). IN this application, the respondent company has challenged the maintainability of the petition in terms of Section 399 of the Act.

(2.) Shri Aspi Chinoy, senior counsel for the respondent company, submitted: This petition has been filed on the strength of the petitioners' holding 104% shares in the company. Since, these shares were acquired in contravention of the provisions of regulation 7 of SEBI (Substantial Acquisition of Shares and Take-overs) Regulation, 1997, the applicant company had filed a petition before the Company Law Board seeking rectification of the register of its members in terms of Section 111A of the Act. The Company Law Board, in its order dated 4.7.2001, has given a finding that the shares acquired by the petitioners beyond 5% shares in the company were in violation of [the Take-over Code] and as such, the acquisition was null and void. This being the case, the petitioners cannot claim to hold shares beyond 5% and since this petition has been filed on the basis of their holding more than 10% shares, this petition is not maintainable. Further, this petition was filed on 7.2.2001 and was mentioned on 8.2.2001. Even though this petition has been filed on the strength of the petitioners' holding 41 lakhs shares in the company constituting 10.4% shares as on 19.1.2001, as per the records of the company, the petitioners held only 34.52 lakh shares, constituting 8.42% shares only. Therefore, it is doubtful whether on the day of filing of the petition, the petitioners held 10% or more of the shares in the company. A reference to the various paragraphs in the order dated 4.7.2001 [see Bombay Dyeing and Manufacturing Co. Ltd. v. Arun Kumar Bajoria (2001) 4 Comp LJ 115 (CLB)] would indicate that this Board had categorically come to the conclusion that the acquisition being in contravention of the Take-over Code, the same was null and void and the register of members of the company deserves to be rectified in respect of the shares held beyond 5%. However, having come to the conclusion that the acquisition was null and void, yet, in view of the petitioners having transferred the shares beyond 5%, this Board has also held that no order of rectification could be ordered. A reading of the order would clearly indicate that the petitioners had no title to the shares since the acquisition was ab initio invalid and, if it is so, then, on the strength of holding 10% shares, the petitioners cannot file this petition and, therefore, they are not qualified in terms of Section 399 of the Act. Accordingly, he prayed for dismissal of the petition.

(3.) ON the basis of the above decisions, he contended that the petitioners were de facto shareholders with more than 10% shares on the day of filing of the petition and, therefore, the same was sufficient to maintain the petition. Even de jure, the shareholding was valid in law. Further, since on the day of presentation, there was no declaration by any court of law, that the shareholding was null and void, subsequent declaration to this effect, cannot affect the maintainability of the petition.