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TMI Blog2010 (12) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... its rights issue in favour of Barings or its associates. There is no dispute that what is proposed is a rights issue under section 81(1)(a). We would think that in the facts of this case the appellants have not made out a case for interference with the exercise of discretion by the Company Law Board in vacating the interlocutory order - C.A. NO. 67 OF 2010 - - - Dated:- 1-12-2010 - K.M. JOSEPH AND MRS. M.C. HARI RANI, JJ. Karthik Seshadhri, Santhosh Mathew, Sathish Ninan, Arun Thomas and Jennis Stephen for the Appellant. M. Pathrose Matthai, Smt. Mariam Mathai, Saji Varghese and Rohit Choudhry for the Respondent. JUDGMENT K.M. Joseph, J. This company appeal is lodged against the order dated October 11, 2010 in C.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to proceed with the rights issue. The first respondent was permitted to proceed with the rights issue as resolved in the board meeting on May 25, 2010. It is also observed that the above order is subject to the final outcome of the company petition. The respondents were directed to file counter within four weeks. 3. The case of the appellants is essentially based on article 157A of the articles of association of the company. 4. Article 157A, inter alia, reads as follows : "157A(e). Decisions of the company and its present and future subsidiaries, regarding the following subject-matters shall require the affirmative vote of Regi Jacob or the nominee of Regi Jacob in an appropriately convened board meeting. (e) Further issue of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h does not alter the shareholding pattern in the respondent-company and as such there is no requirement of any affirmative vote of the petitioners/promoter group." 7. However, he would point out that the Company Law Board, by the impugned order has proceeded on the basis that the article itself is void being ultra vires section 81 of the Companies Act. He would point out that even the respondents did not have such a case before the Company Law Board. He would further submit that the Company Law Board has also found that no case of oppression is made out by the appellants and that the oppression which is sought to be built up by the appellants revolves around only the rights issue when on the contrary the appellants have other allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if it is so interpreted, he contends. Of course, he further contends that the appellants were the original promoters. They wanted further infusion of capital. It is accordingly that the agreement with the second respondent was entered into. They wanted the company to grow. It is pointed out that the proposed issue is attempted for a collateral purpose. He would contend that even though it is termed as rights issue actually the result will be that there will be several shareholders who may not subscribe to the rights issue and in respect of such shares the board can allot shares at their discretion and he would submit that though it is stated to be a rights issue at the end of it all shareholding pattern will be completely changed and it wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights issue there is no other allegation under sections 397 and 398. Sri Pathrose Mathai would emphasise that under sections 397 and 398 it is not open to the applicant to rely on an allegation of isolated nature to make good his case under sections 397 and 398. 9. We notice that the Company Law Board has proceeded to refer to a few decisions and came to the conclusion that article 157A is repugnant to section 81 of the Companies Act and therefore void. In the light of the same, it is tentatively held that article 157A is void as far as the company petition is concerned. It is also found that except the rights issue no prima facie case is made out regarding oppression on other grounds pleaded in the petition. The shares have been issued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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