IN RE: FIREBRICKS AND POTTERIES PRIVATE LIMITED Vs. STATE

JUDGEMENT

(1.) IN the company petition filed under Sections 397 and 398 of the Companies Act, 1956 ("the Act") on account of certain acts of oppression and mismanagement in the affairs of M/s. Firebricks and Potteries Private Limited ("the Company"), the applicant -respondents have preferred the present application, challenging the maintainability of the company petition, for not meeting the requirements of Section 399, in support of which Shri R. Venkatavaradan, learned Counsel submitted:

(2.) SHRI R. Murari, learned Counsel, while opposing the maintainability application submitted:

(3.) IN view of the above settled proposition of law, enunciated in various decisions, the right of the petitioner herein to apply under Section 397/398 cannot be denied at the threshold, especially when his shareholding came to be reduced below ten percent, on account of the issue and conversion of RCPS into equity shares of the Company, which are being challenged in the present proceedings. The validity or otherwise of issue and conversion of RCPS into equity shares of the Company shall be considered in the light of the rival claims of the parties, to determine the maintainability of the company petition. The notice dated 06.02.2006 convening the extra ordinary general meeting of the members of the Company on 04.03.2006 contains inter -alia the special business for the increase of authorised share capital of Rs. 4 lakhs to Rs. 80 lakhs by creation of 36000 equity shares of Rs. 100/ - each amounting to Rs. 36 lakhs and 40,000 cumulative preference shares of Rs. 100/ - each amounting to Rs. 40 lakhs. The notice contemplates that the cumulative preference shares may be either redeemable or convertible or partly redeemable and partly convertible as the board of directors may determine at the time of issue of such shares. The special business further envisages the consequent amendment of the capital clause of the memorandum of association of the Company. The explanatory statement under Section 173(2) appended to the notice, containing among other matters, reads thus: "At present the Company does not have any income other than lease rentals. The Board of Directors proposes to develop the existing property jointly with other interested parties to augment some regular source of income which enables the Company to strengthen it's financial position. In the first instance, it is proposed to build residential apartments with an initial investment of about Rs. 300 to Rs. 350 lakhs. To part finance the said project your directors propose to raise funds to the extent of about Rs. 165 lakhs by issue of Preference Share Capital.