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Issues: Interpretation of clause (d) regarding bonus issue and reduction in conversion price.
The judgment concerns the interpretation of a clause in a prospectus regarding a bonus issue and reduction in conversion price. The plaintiff held convertible bonds issued by the defendant company and argued that a bonus issue should result in a reduction of Rs. 90 in the conversion price per equity share. The defendant contended that the plaintiff's interpretation was illogical and incorrect. The central issue was the construction of clause (d) in the prospectus following a bonus issue in the ratio of 2:5. The plaintiff's argument was based on the word "proportionate," which they claimed should result in a specific reduction amount. The defendant, however, maintained that their approach was correct and the plaintiff was not entitled to any relief. The judgment analyzed the mechanics of issuing bonus shares and the practical advantages of such issues. It highlighted that bonus issues increase the number of shares and reduce the value of each share, making them more saleable. The judgment emphasized that the reduction in conversion price following a bonus issue should be proportionate to maintain equality among shareholders and bond holders. The court rejected the plaintiff's argument that proportionate reduction meant a reduction of the same percentage, stating that the reduction must be in proportion to the increased number of shares after the bonus issue. The defendant's method was deemed appropriate, ensuring equality between shareholders and bond holders. Ultimately, the court ruled in favor of the defendant, dismissing the summons and deciding that the plaintiff was not entitled to any relief. The judgment concluded that the defendant's method of calculation following the bonus issue was correct, placing shareholders and bond holders on an equal footing. No costs were awarded in this matter.
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