2005 (2) TMI 533 - HC - Companies Law

Summary

Issues: Shareholders agreement breach, issuance of further share capital without consent, failure to offer new shares to shareholder, communication method for offering shares, interim relief

Shareholders Agreement Breach:
The judgment revolves around a shareholders agreement breach where the plaintiff alleges that a resolution for further issuance of share capital was passed without their consent, violating Article 50 of the Articles of Association. The plaintiff argues that certain decisions, including increasing share capital, require the consent of both parties, which was not obtained in this case. The plaintiff further contends that even if the resolution was valid, the shares were not offered to them as per the resolution's conditions.

Communication Method for Offering Shares:
A crucial aspect of the case involves the communication method for offering new shares to the plaintiff. The plaintiff, residing outside India, claims they were not informed of the further share issuance by the defendant company and were not offered the new shares. The defendants assert that the plaintiff was informed of the offer; however, the communication was sent via ordinary post, unlike previous correspondence that was sent electronically or via courier. The court raises concerns about the communication method, stating that the defendants have not proven that the offer was sent to the plaintiff, indicating a prima facie breach of the Articles of Association.

Interim Relief:
Considering the breach of the Articles of Association and the doubts raised regarding the communication of the offer of new shares to the plaintiff, the court grants an ad-interim relief. The defendants are restrained by an injunction from utilizing or exercising any rights in respect of the new shares issued to certain parties until the motion is disposed of. The court deems this interim measure necessary to address the prima facie breach and protect the plaintiff's interests pending further proceedings.

This detailed analysis of the judgment highlights the core issues of shareholders agreement breach, failure to offer new shares, concerns over communication methods, and the granting of interim relief by the court to address the alleged violations and protect the plaintiff's rights.