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TMI Blog1958 (6) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... per and Brothers, and has secured the services of foreign technicians, its career has not been a prosperous one. Since 1948 it sustained loss in its business and in 1956 the proportion of the loss assumed such a huge magnitude that the company has been forced to seek the assistance of the court for the purpose of putting it on a stable financial basis so that it may hope to meet brighter days in the future years. 2. On 14-2-1957 the company held 3 separate meetings of the different classes of shareholders and on the same day the company also held a general meeting of all the shareholders. At these meetings resolutions were passed sanctioning a proposal for reduction of capital by decreasing the nominal value of the different classes of shares and certain other resolutions for reorganisation of the share capital consequent on the reduction of the capital were also passed. The reduction was to the effect that the nominal value of each preference share of ₹ 100 each was reduced to ₹ 30, the nominal value of each ordinary share of ₹ 10 was reduced to ₹ 2 and the nominal value of each deferred share of ₹ 5 was reduced to Re. 1. 3. The resolution sanct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution whereas to constitute the requisite majority the holders of the preference shares of the value of ₹ 4,82,000 should have voted and so the resolution was not validly passed. Now, there is some controversy raised in the affidavit of Mr. Pai, the representative of the Hindusthan Commercial Bank as to what attitude he took up at the meeting held on December 11, 1957. Mr. Pai's suggestion is that he voted against the scheme for reduction resolution which was passed at the meeting of February 14, 1957 when this resolution was placed before the meeting of December 11, 1957. It is, however, clear from the report of the Chairman that those resolutions which were passed on February 14, 1957 were not put to vote at all in the meeting of December 11, 1957. It was only the modified scheme which was put to vote but Mr. Pai expressed his intention to remain neutral in respect of this matter. He did not vote either in favour or against the modified scheme. In other words, he did not take part in the voting at all All the other preference shareholders present voted in favour of the resolution. 5. Section 391(2) of the Indian Companies Act is as follows: If a majority i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re him came to the conclusion that the scheme was not a bona fide one but had for its object the restoration to power, of the old management whose misdeeds were responsible for bringing the company to grief. In this case before Das J., clear irregularities and fraud committed by the old management had come to light and had been so conclusively established that the learned Judge was of the opinion that it would be detrimental to the interest of the company if the scheme was sanctioned and the old management was restored to power. In the case before me it has not been shown that the managing agents are guilty of any fraud or irregularity which have made them unfit to carry on the management of the company. The company has no doubt met with adversity and has failed to make profit while the managing agents were in charge of the management of the company but there is nothing to show that this is due to any inefficiency or mis-conduct on their part. The present state of the company may be due to circumstances beyond their control. It has been repeatedly held that the onus of proving unreasonableness or unfairness about the scheme or of want of good faith is on those who object to the san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 20 lakhs worth of shares in the first instance as suggested by Mr. Mitra without reducing its capital, the insolvent condition of the company would have remained as before and the company might have become involved in further difficulties. Furthermore, if the managing agents had to be allotted ₹ 12 lakhs worth of shares out of the fresh issue there would remain only ₹ 8 lakhs worth of shares out of 20 lakhs which would be insufficient to raise liquid finance of ₹ 15 lakhs as was required by the company. So far writing off the loss and attaining solvency and also for raising further finance of ₹ 15 lakhs the resort to the scheme of reduction and reorganisation was a necessity. 8. The validity of the Scheme was also attacked by Mr. Mitra on the ground that it contravenes the provisions of Section 81(1)(a) of the Indian Companies Act, 1956. It was argued that the provision in the scheme under Clause (9), Sub-clauses (a) and (c) which authorise the allotment of 12 lakhs worth of the newly issued shares without offering such shares to the equity share-holders of the company in the first instance and the provision which enables the Directors to allot 96, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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