BRITISH INDIA CORPORATION LTD Vs. STATE

JUDGEMENT

(1.) THIS is a petition by British India Corporation Ltd. under Section 80A of the Companies Act, 1956, seeking consent of the Company Law Board (i) to issue 8 per cent. (payable at 10.4 per cent.) cumulative redeemable preference shares in lieu of the existing 81,000 cumulative irredeemable preference shares ; and (ii) to allow the company for continuance of accumulation of arrears of dividend on the existing irredeemable cumulative preference shares as hitherto before.

(2.) It is stated that the petitioner-company was incorporated on February 24, 1920, as a Government company within the meaning of Section 617 of the Companies Act. The President of India holds shares to the extent of 97.47 per cent. of the equity share capital and the remaining 2.53 per cent. shares are held by the Life Insurance Corporation of India, the Unit Trust of India, nationalised banks and insurance companies. As it is a very old company, it is not possible to trace the papers relating to the issue. The terms and conditions of issue of these shares cannot be known. However, there is no provision in the memorandum of association of the company for redemption of preference shares and as such the aforesaid preference shares are irredeemable. By virtue of the provisions of Section 80A of the Companies Act, introduced with effect from June 15, 1988, 81,000--8 per cent. cumulative irredeemable preference shares of Rs. 100 each fully paid up have to be redeemed on or before June 14, 1993. The financial position of the petitioner-company is such that it is not possible for it to redeem the aforesaid cumulative preference shares and to pay the dividend remaining in arrear thereon on or before June 14, 1993. As per the balance-sheet as on March 31, 1992, the company suffered losses to the extent of Rs. 2,407.91 lakhs and the company has become a "sick industrial company" within the meaning of Section 3 read with Section 15 of the Sick Industrial Companies (Special Provisions) Act and its application to the Board for Industrial and Financial Reconstruction is under consideration. The shareholders of the company, therefore, at the extraordinary general meeting held on April 26, 1993, resolved that subject to the consent of the Company Law Board, new redeemable preference shares be issued to the holders of the existing 81,000-8 per cent. (payable at 10.4 per cent.) cumulative preference shares of Rs. 100 each or such other number as may be directed by the Company Law Board which the board of directors of the company is hereby authorised to issue, redeemable at par on June 14, 2003, or on such earlier date as may be decided later by the board in accordance with the provisions of the Companies Act, 1956, and as a consequence of which the said irredeemable preference shares shall be deemed to have been redeemed by the issue of fresh redeemable preference shares.

(3.) HE further stated that in the petitioner's balance-sheet in note 10 of the contingent liabilities, it is stated as under :