9911796707
TMI Blog1994 (5) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act, 1956 ('the Act') seeking certain reliefs and, in the alternative, have sought winding-up order under section 434 read with section 439 of the Act. 4. Vide (an) elaborate judgment dated 2-2-1993, it was held that the petition under sections 397 and 398 is not maintainable and the matter regarding prayer of winding up was directed to be dealt with separately. The petition for winding up has yet not been admitted and the same is at the show cause stage. 5. The learned counsel for the petitioner/applicant has contended that the respondent No. 1 company has sought to issue fresh right shares in violation of provisions of section 81 of the Act and, secondly, in fact, there is no genuine need for raising any capital for which n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of raw material has substantially increased because of decontrol policy introduced by the Government in respect of molasses. The price of the said raw material has shot up from Rs. 14 per quintal to Rs. 250 per quintal with consequential increase in excise duty and sales tax, which is again 20 per cent each. It is emphasised that now only 1/4th of the quantity required by the respondent company would be available at control rate which is also gone up from Rs. 14 per quintal to Rs. 70 per quintal. It is emphasised that this decontrol has become effective with effect from 1-4-1994, although policy of the decontrol was announced in November 1993, but the Government was liberal enough to allow the control process to remain in force for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abuse is held proved, but it equally settled that where directors have a discretion and are bona fide acting in the exercise of it, it is not the habit of the Court to interfere with them. It may be noticed that when the company is in no need of further capital, directors are not entitled to use their power of issuing shares merely for the purpose of maintaining themselves and their friends in management over the affairs of the company, or merely for the purpose of defeating the wishes of the existing majority of shareholders. 8. In this very judgment, it was also laid down by the Supreme Court, while giving interpretation to section 105C of the previous Companies Act, which is pari materia with section 81 of the present Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de to issue shares for purposes of raising the funds, the only question for decision is whether the issuance of the shares for the purposes of raising funds is in the interest of the company. 12. The learned counsel for the petitioners had drawn my attention to the annual return and accounts of the company for the year ending 31-3- 1993, copy of which is annexed as Annexure-C filed along with the application, which shows that the company had sales of about (Rs.) 22,28,42,956 in the current years, i.e. , up by 14 crores or so from the previous year and the company had about (Rs.) 1,52,70,603 as reserve funds. By merely raising of Rs. 50 lakhs by issuing right shares the company would not be having any material effect for carrying on its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces other than bank. 14. Could it be said that in view of this picture of the company when the company had in its discretion thought it proper to raise Rs. 50 lakhs by issuing right shares, the company had acted in any mala fide manner. It is not possible to accept the bald contention of the learned counsel for the petitioners that for raising the funds for the working capital, no company had any legal right to raise such funds by issuance of shares and funds for working capital must be raised only by raising loans from the banks. It is not disputed before me that raising of funds by issuance of the shares would not involve any payment if interest, while by raising bank loans, the company had to pay interest at quite a high rate of 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
