ABP PRIVATE LIMITED Vs. UNITED NEWS OF INDIA

JUDGEMENT

(1.) THERE are two main allegations in the petition. One relates to allotment of shares to one Media West, the 4th respondent, alleging that this issue and allotment of shares has not only changed the character of the company but also has resulted in creation of a new and absolute majority. The second allegation is that immediately after Media West became a shareholder, by coopting 4 of the nominees of Media West, the control and management of the company has been handed over to Media West. With these allegations, the petitioners have sought for canceling the allotment and for declaring the Board meeting wherein the 4 nominees were coopted as null and void.

(2.) THE facts of the case are that United News of India (UNI) was incorporated under Section 25 of the Companies Act, 1956 (the Act) in the year, 1961 with the main object to promote the spread of knowledge, Political, Cultural, Art, History, Sports and other useful objects of public interest and to disseminate news to the general public both about Indian and foreign affairs. In terms of Article 4 of the AOA, no shares shall be allotted or transferred to any person other than the owner or owners of newspapers published in the Union of India. The authorized capital of the company is Rs. 25 lacs consisting of 25000 equity shares of Rs. 100/ - each. 20397 shares had been issued of which 10189 shares were subscribed and paid up leaving a balance of 10208 shares unsubscribed out of the right issue made in 2003. Before the allotment impugned in the petition on 2.9.2006, the company had 28 members holding shares in the company. Before the impugned allotment, the 1st petitioner held 22% shares and petitioners 2,3 and 4 collectively held 15.16% shares. The company has been in financial difficulties during the past few years. In a Board meeting held on 21.8.2006, the Board appointed a committee to suggest measures to revive the company. In a meeting on 2.9.2006, the committee considered 3 offers for acquiring the balance shares of 14,811 shares of the authorized capital, which remained unissued/unsubscribed and recommended to the Board to accept the offer of Media West for Rs 32.05 crores. On 2.9.2006, Media West remitted a sum of Rs 5 crores. In a Board meeting held on the same day, the Board accepted the offer of Media West and allotted 10189 shares which remained unsubscribed out of the right issue made in 2003 with the decision that the balance 4603 unissued shares would be offered as right issue and unsubscribed shares out of the same would also be allotted to Media West. Media West paid the balance on 23.9.2006 by way of a cheque which was encashed by the company on 25.9.2006. Share scripts were handed over to Media West on the same day and one of its nominees attended the AGM on 26.9.2008 which was held in the morning. In a Board meeting on the same day in the afternoon, 4 nominees of Media West were appointed as Additional Directors pursuant to a request made by Media West by a letter dated 25.9.2006. Both the allotment of shares and appointment of 4 directors have been impugned in the petition. In a Board meeting held on 9.9.2006, a committee of management was constituted with 5 members of which Media West had 3 of its nominees. Initially, when the petition was mentioned on 5.12.2006, I passed the following interim order: "Petition mentioned and arguments on interim reliefs heard. Prima facie it appears the allotment of shares to Media West is in violation of Article 4 and that cooption of 4 directors, immediately after the general meeting on the same day does not appear to be bonafide. In view of this, I direct that the status quo with regard to shareholding should be maintained and that no board meeting should be held without the leave of this Board. I also direct maintenance of status quo with regard to fixed assets of the company." Thereafter, the 1st respondent filed an application CA 462/2006 seeking for modification of the said order and after hearing the parties I passed the following order on 14.12.2006. Subject to final order on the allotment of shares to the 4th respondent and on cooption of 4 directors on 26.9.2006, I direct the company to maintain the status quo as of date in regard to the shareholding in the company as also its fixed assets. The company is permitted to hold Board meetings with 10 days notice to all the directors along with agenda and the 4 directors co -opted on 26.9.2006 may attend and participate in the Board meetings but they shall not vote on any resolution that may come up for a decision in the Board meetings". Media West got a Road Map prepared for revival of the company for consideration of the Board which the Board declined to consider and the Committee of management was disbanded in a Board meeting on 12.5.2007, that is during the pendency of the present proceeding. Media West filed an application seeking for a direction to the Board to consider the Road Map while the 1st petitioner filed an application alleging that Media West has taken over the management inspite of the order of this Bench. Arguments were advanced on both the petition and the applications.

(3.) BEFORE I elaborate the arguments of the counsel, I consider it appropriate to extract the relevant Articles of the AOA of the company which have a bearing on the issues raised in the petition.