2010 (9) TMI 913 - Board - Companies Law

Summary

Issues:
Challenge to maintainability of the company petition under sections 397 and 398 of the Companies Act, 1956 based on grounds related to consent, shareholding, and timing of share acquisition.

Analysis:
The application challenged the maintainability of the company petition under sections 397 and 398 of the Companies Act, 1956, based on various grounds. The main contention was regarding the pricing of shares at Rs. 30 compared to the book value of Rs. 65, leading to a challenge against a special resolution passed for preferential issue of shares. The applicant sought dismissal of the petition on grounds including undisclosed details of consenting persons, lack of proof of shareholding, and alleged manipulation of consent letters. The respondent argued that the petition was filed by a group of 105 shareholders against illegality and oppression, with genuine consent letters authorizing the petition. The critical issue revolved around the timing of share acquisition by 24 out of 104 shareholders after the alleged cause of action, with reference to the Supreme Court decision emphasizing the importance of qualifying share percentage to prevent frivolous litigation. The respondent's conduct in acquiring shares after the cause of action was deemed irrelevant in determining the petition's maintainability under section 399 of the Act.

The criteria for determining the applicability of section 399 of the Act centered on the existence of consent by requisite shareholders before filing the company petition. Despite the acquisition of shares by some shareholders post the alleged cause of action, the presence of consent prior to the petition filing was crucial. The judgment highlighted that the conduct of the respondent in acquiring shares after the cause of action should not impact the petition's maintainability. The court emphasized that the key factor for consideration under section 399 was whether the petitioner held the required percentage at the time of filing the petition. As consent existed before the petition filing, the court concluded that the company petition was maintainable under section 399 of the Act.

In conclusion, the court dismissed the application challenging the maintainability of the company petition. The respondent was directed to file a counter to the petition within four weeks, followed by the petitioner filing a rejoinder within three weeks. The company petition was scheduled for hearing on a specified date, affirming its maintainability under section 399 of the Companies Act, 1956.