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Issues Involved:
1. Validity of the 1989 EGM resolution converting the company into a public limited company. 2. Validity and motive behind the 1995 EGM resolutions for issuing bonus or rights shares. Issue-wise Detailed Analysis: 1. Validity of the 1989 EGM Resolution: The petitioners challenged the validity of the 1989 EGM resolution which converted the company into a public limited company. They argued that the resolution was not passed with the requisite majority as required under section 31 of the Companies Act, 1956. The petitioners, holding 31.2% of the shareholding, contended that since the 2nd petitioner voted against the resolution, it could not have been validly passed. They further argued that the Chairman had a legal duty to demand a poll even though the 2nd petitioner did not request it. The court noted that the EGM held on 12-5-1989 was attended by four persons, and the resolution was passed by a show of hands with the requisite majority under section 177 of the Act. The 2nd petitioner did not demand a poll, and the Chairman was not legally obligated to demand a poll in the absence of such a request. The court referenced the case of Second Consolidated Trust Ltd. v. Ceylon Amalgamated Tea & Rubber Estates Ltd., which emphasized the Chairman's duty to reflect the real sense of the meeting. However, the court found that this case did not apply as the circumstances were different. The court concluded that the challenge to the 1989 resolution was not maintainable after a lapse of nearly six years. 2. Validity and Motive Behind the 1995 EGM Resolutions: The petitioners also challenged the resolutions passed in the 1995 EGM, which included the issuance of bonus or rights shares. They argued that these resolutions were based on the invalid 1989 resolution and were passed with the mala fide intent to force the minority shareholders to relinquish their shareholding. The respondents defended the resolutions, stating that they were in the company's best interest and necessary for its survival and growth in a competitive and globalized economy. They argued that the company needed substantial financial input to update its outdated machinery and technology. The respondents pointed out that the resolutions were passed to raise funds for the company's expansion and technical collaboration with a German company. The court emphasized that the primary consideration should be whether the resolutions were in the company's interest. The court found no oblique motive behind the resolutions and concluded that they were necessary for the company's growth and survival. The court referenced the Supreme Court's decision in Nanalal v. Bombay Life Assurance Co., which held that directors' actions aimed at the company's benefit, even if they had a subsidiary motive, were not grounds for interference unless the actions prejudiced the company or its shareholders. The court also considered the case of Re a Company, where an injunction was granted to restrain the majority shareholders from voting on a resolution to increase the company's capital. However, the court found that this case did not apply as there was no evidence of an ulterior motive in the present case. Conclusion: The court dismissed the company application, finding no merit in the petitioners' challenges to the 1989 and 1995 resolutions. The court held that the resolutions were validly passed and in the company's best interest. The ad interim relief was extended for four weeks, and the application was dismissed with no order as to costs.
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