1999 (4) TMI 637

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..... ollectively hold 19,565 shares of the value of ₹ 1,95,650 constituting roughly about 8.72 per cent. of the subscribed and paid up capital of ₹ 22,50,000 consisting of 2,25,000 equity shares of ₹ 10 each. Section 399 stipulates that for filing a petition under Section 397/398, the petitioners should hold not less than 10 per cent. of the subscribed capital or in the alternative they should constitute one-tenth of the total members of the company. In this case, obviously the petitioners do not satisfy either of these two conditions and as such in the normal course, the petition should be dismissed as not maintainable in terms of Section 399. However, in the instant case, the petitioners have questioned the validity of issue/ .....

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..... this issue is in violation of the provisions of Section 81 of the Companies Act. 4. According to the company, the impugned shares were allotted to the managing director of the company on a preferential basis on an approval given by the shareholders in the annual general meeting in terms of Section 81(1A) of the Act. In other words, according to the company, the issue was made after following the statutory provisions. As far as the need for preferential allotment, it is the stand of the company that the company was in need of funds and as the then prevailing market price of the share was only ₹ 2.50, the company felt that there would be no response from the shareholders/public for taking the shares at par value. Since the managing .....

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..... t/motive for the allotment on a preferential basis, we perused the minutes of the board meeting held on August 18, 1994, in which the decision was taken to get the shareholders approval for this additional issue. As per the minutes of this meeting, the managing director placed before the board details regarding the requirement of funds for diversification of the company's activities in digital clinical thermometers and further informed the board that the Indian Overseas Bank had shown their unwillingness for enhancing the limit for this purpose. We directed the company to produce the necessary details in this regard. We find that, some time in late 1994, the company prepared a project for digital thermometers for which the company proje .....

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