2005 (9) TMI 328 - HC - Companies Law

Summary

Issues:
1. Appeal against refusal to grant ad-interim relief.
2. Alleged illegal preferential allotment of equity shares.
3. Violation of SEBI Regulations.
4. Delay in seeking relief.
5. Consideration of granting interim relief.
6. Rejection of the appeal.

Analysis:

1. The appeal was filed by the Plaintiffs challenging the order of the learned Single Judge who refused to grant ad-interim relief. The Plaintiffs contended that the allotment of equity shares to Defendant No. 7 was illegal and in violation of SEBI Regulations. They relied on past judgments to support their argument.

2. The main relief sought by the Plaintiffs was a declaration that the preferential allotment of CRCPS and subsequent conversion to equity shares was illegal and null and void. They also sought relief against the transferees. The Plaintiffs argued that the allotment was contrary to SEBI Regulations and, therefore, should be considered illegal.

3. The Plaintiffs highlighted that the allotment/acquisition of shares by Defendant Nos. 1 to 6 was against SEBI Regulations and that these Defendants had no authority to manage Defendant No. 7 or raise funds on its behalf. They sought injunctions to prevent further allotments or issuance of shares.

4. The Court noted a significant delay of nearly five years since the allotment of CRCPS and subsequent conversion into equity shares. Previous legal actions by associated companies of S.K. Modi challenging the allotment had been rejected. The Court emphasized that the delay in seeking relief was a crucial factor to consider.

5. The Court opined that the delay, coupled with the fact that Defendant No. 7 was seeking to raise funds, was not sufficient grounds for granting the interim relief sought by the Plaintiffs. The issue of whether the allotment was contrary to SEBI Regulations could be considered during the pending Motion before the Single Judge.

6. Ultimately, the Court rejected the appeal, stating that there was no merit in granting the relief sought by the Plaintiffs. The Court clarified that it had not expressed any opinion on the merits of the case, as the issue was still pending before the learned Single Judge for further consideration.