2000 (11) TMI 1125 - HC - Companies Law

Summary

Issues:
Challenge to order of Company Law Board dismissing petition under section 113(3) of Companies Act, 1956 for bonus shares entitlement.

Analysis:
1. The appellant challenged the Company Law Board's order dismissing the petition filed under section 113(3) of the Companies Act, 1956, regarding entitlement to bonus shares. The appellant was a shareholder in the respondent-company and held 5,000 equity shares. A resolution was passed at the annual general meeting (AGM) to issue bonus shares, but the appellant had sold all his shares before the cut-off date for entitlement to bonus shares.

2. The respondent-company contended that the appellant had no right to bonus shares as his name was not in the register of members on the cut-off date. The AGM resolution did not specify that shareholders as of the AGM date were entitled to bonus shares. The Company Law Board upheld the respondent's stand, citing non-joinder of necessary parties as the bonus shares had already been issued to the transferees.

3. The appellant argued that the explanatory statement indicated entitlement to bonus shares for existing shareholders as of the AGM date. However, the resolution specified entitlement for shareholders as per the register on a date determined by the board of directors, which was after the AGM. The appellant was not holding shares on the specified date and, therefore, was not entitled to bonus shares based on the AGM resolution.

4. The appellant's contention of inconsistency between the resolution and the explanatory statement was dismissed. The resolution clearly outlined the criteria for bonus shares entitlement, and the explanatory statement did not contradict this. The appellant did not challenge the AGM notice or resolution's validity but relied on it for bonus shares claim, which was not valid as he did not hold shares on the specified date.

5. The Court agreed with the Company Law Board's finding that the appellant was not entitled to bonus shares based on the AGM resolution. The appeal was dismissed.