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Interlocutory reliefs sought by plaintiffs against the decision of the board of directors to issue rights shares and potential disturbance in shareholding pattern. Analysis: The plaintiffs sought interlocutory reliefs to restrain the defendant company from acting on a purported letter to issue rights shares, alleging mismanagement and abuse of fiduciary power by directors. The plaintiffs argued that the company had surplus funds and did not require further capital. The plaintiffs contended that the decision to issue rights shares aimed to decrease their shareholding and maintain control for existing directors. The plaintiffs claimed lack of bona fide intentions behind the decision, citing mismanagement and fund misappropriation. The senior advocate for the plaintiffs argued that the company had sufficient funds from various sources and did not need to increase share capital. He emphasized the lack of detailed plans for utilizing the increased capital and raised concerns about unsubscribed shares being allotted to chosen persons of the directors. The advocate referenced a previous English decision to support the argument against the issuance of rights shares without the right of renouncement. In response, the senior advocate for the defendants defended the decision to issue rights shares for business modernization, citing the need for additional funds. The advocate highlighted the company's diversified business activities and the necessity for modernization to ensure profitability. The defendants argued that the decision was in the best interest of the company and not for personal gain, countering the plaintiffs' allegations of mismanagement. The court considered the arguments and legal principles regarding the fiduciary power of directors in making decisions for the company's benefit. Referring to a Supreme Court decision, the court emphasized that the issuance of shares should primarily benefit the company and not solely the directors. The court noted that mere surplus funds did not necessarily indicate mala fide intentions, as directors have discretion in managing the company. After thorough analysis, the court concluded that the decision to issue rights shares was for the company's interest and business expansion. The court found no basis for the plaintiffs' apprehension regarding shareholding reduction, as the rights shares were to be issued in proportion to existing shares. The court distinguished a previous case where preferential shares were issued for personal gain, emphasizing that the current rights issue was for existing shareholders' benefit. The court dismissed the plaintiffs' application, allowing the issuance of rights shares and directing the allocation of unsubscribed shares to existing shareholders to prevent concentration of shareholdings. In conclusion, the court disposed of the application with specific directions regarding the issuance of preferential shares and vacated the interim order, emphasizing that the decision to issue rights shares was in the company's interest and not for personal gain.
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