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TMI Blog2008 (1) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... seful objects of public interest and to disseminate news to the general public both about Indian and foreign affairs. In terms of Article 4 of the AOA, no shares shall be allotted or transferred to any person other than the owner or owners of newspapers published in the Union of India. The authorized capital of the company is ₹ 25 lacs consisting of 25000 equity shares of ₹ 100/- each. 20397 shares had been issued of which 10189 shares were subscribed and paid up leaving a balance of 10208 shares unsubscribed out of the right issue made in 2003. Before the allotment impugned in the petition on 2.9.2006, the company had 28 members holding shares in the company. Before the impugned allotment, the 1st petitioner held 22% shares and petitioners 2,3 and 4 collectively held 15.16% shares. The company has been in financial difficulties during the past few years. In a Board meeting held on 21.8.2006, the Board appointed a committee to suggest measures to revive the company. In a meeting on 2.9.2006, the committee considered 3 offers for acquiring the balance shares of 14,811 shares of the authorized capital, which remained unissued/unsubscribed and recommended to the Board to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any resolution that may come up for a decision in the Board meetings . Media West got a Road Map prepared for revival of the company for consideration of the Board which the Board declined to consider and the Committee of management was disbanded in a Board meeting on 12.5.2007, that is during the pendency of the present proceeding. Media West filed an application seeking for a direction to the Board to consider the Road Map while the 1st petitioner filed an application alleging that Media West has taken over the management inspite of the order of this Bench. Arguments were advanced on both the petition and the applications. 3. The 2nd respondent is the Chairman of UNI, 3rd respondent is the GM of UNI, the 4th is Media West to which shares were allotted, the 5th respondent is a nominee director of Media West and he control Essel group of which Media West is a part, Respondents 6 to 16 are directors of UNI, of which respondents 6 to 8 are the nominees of Media West and the 16 respondent is the nominee of the first petitioner. Media West has filed its reply and a common reply has been filed on behalf of respondents 1 to 3, by the 3rd respondent who is the general manager of UNI. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Article 89: Appointment of Additional Director: The company in general meeting may, and from time to time, to appoint any other qualified person as a Director, either to fill up a casual vacancy or as an addition to the Board, but so that the total number of Directors shall not at any time exceed the maximum number fixed. Any Director so appointed shall hold office only until the conclusion of the next following Annual General Meeting of the company but shall be eligible for re-election at such meeting . Article 90 Who can be appointed Director: (a) Except as mentioned in Sub-clauses (b) of this Article no person shall be a Director of the company unless he is himself a member of the company or is nominated by a member which is a body corporate and holding shares in the company. (b) Subject to the maximum number of Directors not exceeding fifteen as stated in Clause 85 hereinabove, the Directors may co-opt as Directors not more than two person who are men prominent in the public life of India, and such co-opted Directors need not be members of the company. Such co-opted Directors may hold office for such time as may be prescribed by the Board of Director at the time the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Essel group. 6. The allotment of impugned shares to the 4th respondent is illegal. The company is a public company governed by the provisions of Section 81 of the Act. Therefore, before any allotment of new shares to an outsider, the approval of the shareholders should have been obtained in terms of Section 81(1A). In the present case, right shares were issued in January, 2003 of 12538 shares of which only 2330 shares were subscribed leaving a balance of 10208 shares. No steps were subsequently taken to offer these shares to any of the members. Instead in September, 2006 i.e. after 4 years, these shares were allotted to Media West. This could not have been done without getting the approval of the general body and the board of directors had without any authority allotted these shares to the 4th respondent. On this ground alone, the allotment should be set aside. 7. Not only being illegal, the allotment, done in a clandestine manner is also oppressive to the general body of shareholders as by this allotment, the 4th respondent came to hold more than 50% shares in the company and has thus become an absolute majority. Creation of a new majority has always been considered to be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued capital of 10208 shares could be allotted to the 4th respondent and balance 4603 shares would be offered to all shareholders at a premium and in case the other shareholders do not subscribe, then, the same would be offered to the 4th respondent. In the report of the committee, there is no mention as to how proposals were invited, what valuations were conducted, why merchant bankers were not appointed and whether the fund requirements of the company were determined. In the sub committee's report, there is no mention as to whether it had met earlier. If it had not met, there are no details as to how offers were invited, from whom they were invited and under whose authority, they were invited/received. Further, now it has been disclosed that Media West gave its offer on 9.6.2006, that is, even before the sub committee was formed and Gujarat Samachar gave its proposal immediately on 22.8.2006. In its offer, the 4th respondent had clearly indicated that it would offer 5% as control premium over the fair price to be determined. The offer of the 4th respondent was never placed in the meeting of the board on 21.8.2006. It is to be noted that M/S Earnest Young had been engaged to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting dated 26.8.2006, there was no agenda either for consideration of the committee's report nor for allotment of shares. Such an important item of allotment of shares which would create an absolute majority could not have been considered in a board meeting without being included in the agenda. Had it been included, other three directors would have attended the meeting. It is inconceivable that the committee meets at 10.30AM, prepares its report and submits the same to the board at 2.00PM and the board takes such a crucial decision without circulation to all the directors for their comments. The entire exercise is nothing but a fraud with the premeditated design to allot shares only and exclusively to the 4th respondent. 8. In the company, no investment company is a shareholder. No doubt that certain individuals are holding shares in the company but their shareholding is insignificant. Media West cannot equate itself with these individuals. The company itself has stated in its reply that it had a accumulated surplus of ₹ 22.94 crores as on 31st March, 2000 and profit for the year 1999-2000 was ₹ 4.27 crores and because of the Wage Board award which was notified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sub committee was incorrectly recorded, then, the basis of functioning of sub committee goes. It is to be noted that the draft minutes of the board meeting dated 21.8.2006 were approved only after the sub committee submitted its report. From the minutes of the board meeting on 2.9.2006, it can be seen that minutes of the board meeting held on 21.8.2006 were read and confirmed and there is nothing in the minutes to show that the draft minutes were amended to indicate that the words infuse funds was approved to be incorporated in place of the words funds plans for reduction of staff. Thus, it is evidently clear that the sub committee was never authorized to explore infusion of funds. 9. Even the appointment of 4 of the nominees of Media West as directors is against the long standing practice of the company. At no time, any of the shareholders had more than one nominee on the board. Even the 1st petitioner holding 22% shares had only one nominee. The manner in which these nominees were appointed is also questionable. Media West paid the money on 23.9.2006, share scripts were issued on 25.9.2006. Immediately thereafter Media West sent a letter for appointment of 4 directors an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clemens v. Clemens Bros. Ltd. 1976 2 AER 268: Reduction of the shareholding below 25% is an act of oppression. ii. Needle Industries case : Creation of a new majority is an act of oppression. iii. Pearson Education v. Prentice Hall of India : Bringing down shares below 25% by fresh allotment of shares is an act of oppression/mismanagement. In the present case, the 1st petitioner held 29% shares along with its nominee which has come down because of the allotment of shares to Media West. iv. Howard Smith v. Ampol Petroleum 1974 1 AER 1126: Directors cannot use their fiduciary powers to create a new majority. In the present case, even assuming that the company needed funds, the mode and manner adopted by the company in allotment of shares is questionable. At no time, the board had quantified the money needed and as a matter of fact, they have practically auctioned the shares that too not transparently. Therefore, the allotment cannot be sustained only on the ground that the company needed funds. v. Dale and Carrington : It is the fiduciary responsibility of directors to make full disclosure before making allotment of shares. vi. Martin Castelino v. Alpha Omega Ship Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nlike that of PTI. Thus it is very clear that the founding fathers of UNI never envisaged that a member cannot have majority shares or that the company cannot be under the control of any single shareholder. During the arguments, it was alleged that the motive of Media West to acquire the shares was to gain control over the properties of UNI. From the documents relating to the properties of UNI handed over during the hearing, it could be seen that none of the properties could be sold or transferred. Further, this allegation is not found either in the petition nor in the rejoinder but advanced only during the arguments. Another grievance regarding majority shares is that if the company is under the control of a single shareholder, unbiased collection of news would be vitiated. This allegation is without any basis and as a matter of fact there is no averment in any of the pleadings by the petitioners that association of Essel Group would be prejudicial to the interests of the company. The sole object of Essel group is to make the company to have a global presence. It is to be noted that 10% of income of Essel Group goes for charity. Even during the deliberations before the committee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment of its 4 nominees as directors. Having not expressed any reservation in this meeting on the allotment of shares as well as appointment of the committee of management, the 1st petitioner has filed this petition thereafter raising grievance on the allotment as well as appointment. The 16th respondent had written a letter on 24.4.2007 to all the directors of the company complaining that the nominee of Media West viz. Shri P.C. Lahiri had taken over the entire management by writing various letters to the employees. This allegation is factually incorrect. By writing the letters, Shri Lahiri had only sought for suggestions from employees to improve the working of the company. A reading of these letters would indicate that his effort is to make UNI as a global entity and towards betterment in every respect of the functioning of the company. Even otherwise, all the suggestions received would be subject to the approval of the board. In the affidavit filed on 4.7.2007, the 4th respondent has clearly brought out the need for additional funds for completion of construction of buildings at Bhopal, Jaipur, Indore etc. where Government had allotted land at concessional rate. In the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that some of the members, being individuals, are not owners of a newspaper and some of them were even original subscribers. Therefore, the petitioners cannot contend that Media West cannot be admitted as a member. Even one of the object of Media West as per its Memorandum is to make investment in print media. If need be, Media West is prepared to pay more also so that the allegation that Sandhya Prakash has quoted more would no longer survive. 17. Summing up his arguments, Shri Mookerjee submitted that this petition is a motivated petition filed by persons who were in full knowledge of the financial position of the company and who never came forward to assist the company and as a matter of fact they even deprived the company of its revenue by discontinuing their subscription. Therefore the petition should be dismissed. He relied on the following cases on the various propositions advance by him: a. Hindustan Lever v. State of Maharashtra : The properties belong to the company and the company belongs to the shareholders. It would mean that shareholders are owners of the company. In the present case, since Media West is the largest shareholding holding 49% shares in DNA, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay deem fit. Article 47 vests with the board the power to dispose of the unsubscribed shares in such manner as the board thinks most beneficial to the company. This is in line with Section 81(1)(d) of the Act. Article 47, which deals with the powers of the board to dispose of unsubscribed shares, does not refer to Article 4. Article 105 permits delegation of the powers of the board to a committee and the decisions taken by a committee signed by all the members of the committee shall be valid as if the same was decided in a board meeting. Likewise, in terms of Article 99, all the decisions in a board meeting have to be taken by majority directors. Thus in the present case, the allotment of shares recommended by the committee and approved by majority of the board, being beneficial to the interest of the company, cannot be questioned as the same is binding on the petitioners. Even though, the petitioners have questioned the eligibility of Media West to become a member in terms of Article 4, a careful reading of Article 4 would indicate that the owner referred to in that Article could be either an individual or a body corporate and that the decision of the board as to whether a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it clear that it had no objection to holding discussions with interested persons for inducting fresh funds in the company only with the condition that the same would not jeopardize the independence or autonomous character of the company. Equity would clearly non suit the 1st petitioner as it had acquiesced raising of funds from interested parties. Further, there is not even a single averment in the petition as to how as a shareholder, Media West would compromise the independence of the company. Mere unsupported apprehension or presumption cannot lead to grant of reliefs sought for. In a proceeding under Section 397, it is the interest of the company which is paramount and by the impugned allotment, the directors have acted in the best interest of the company. It is on record that the committee had accepted the highest offer made by Media West. Even the contention of the petitioners that there cannot be a single majority shareholder in the company is contrary to their own stand in paragraph (r) of the petition wherein they pointed out that M/S Sanjay Prakash Limited has made a better offer. It is further stated in paragraph (u) of the petition that if the unsubscribed shares had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement is not a justiciable issue unless malafide is established. In the present case, at no stretch of imagination, any malafide on the part of either the committee or the board could be claimed. 22. The learned Counsel relied on the following cases: a. Nurcomb v. Nurcomb 1985 3 CLJ 163 CA: Proceedings should be for the benefit of the company and not for any other purpose. The court has to satisfy that the persons coming forward is a proper person. In the present case, the petitioners never supported the company in time of its needs. They discontinued their subscription, thus, depriving the company of substantial revenue. b. Kalinga Tube case : The court has to decide whether there is oppression by taking into consideration the facts of each case. There must be continuous acts on the part of the majority shareholders continuing up to the date of the petition showing that the affairs of the company were being conducted in a manner oppressive to some part of the members. The oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his proprietary right as a shareholder. In the present case, the acts complained of are isola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner had acquiesced to the said allotment. Even otherwise, there can be no such claim of knowledge in so far as the other petitioners are concerned and they can independently prosecute this petition. The 2nd respondent had written a letter to the Chairman of the 1st petitioner on 21.9.2006 wherein he had stated that in the last year, the board had discussed the possibility of inducting fresh capital with appropriate share premium to help the company. There is no record to show that such a discussion for inducting fresh capital was at any time discussed in any board meeting. It is further stated in the said letter that the Chairman of the 1st petitioner was informed of Essel's interests in picking up unsubscribed capital in the last year. What was the response of the Chairman of the 1st petitioner has not been indicated. It is to be noted that in the same letter, the 2nd respondent had indicated that the process of allotment of shares would be stopped if the Chairman of the 1st petitioner could indicate other better options. However, even without waiting for a reply, share scripts were delivered to Media West on 25.9.2006. It is on record that on 25.9.2006, the Chairman o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PM. There is nothing on record to show as to how the three parties came to know of the meeting of the committee and by whom and how they were invited for the meeting etc. has not been disclosed. Only during the hearing of the petition, the offers of the three parties were disclosed. When the 1st petitioner had objected to the allotment of shares by a letter dated 18.9.2006 and by which time Media West had not deposited the entire consideration, the company should not have accepted the balance money on 23.9.2006 and delivered the share certificates on 25.9.2006. When the respondents assert that the allotment is in the interests of the company, when Sandhya Prakash had offered ₹ 40 crores on 4.9.2008, by which time Media West had not deposited the entire amount, the Board should have considered the better offer. Further, the directors' report was approved on 2.9.2006 on which date allotment of shares had been made to Media West but die directors' report did not mention the same especially when according to the respondents, the main consideration for allotment of shares was for revival of the company. The shareholders are entitled to know the steps taken by the company f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not have any proprietary right and since UNI is a Section 25 company, the petitioners cannot claim that any of their proprietary rights has been infringed to invoke the provisions of Section 397. On this contention, he relied on the judgment in Swarajya Sangha case. In the said judgment, Madras High Court had considered two petitions CP 12 of 1982 filed under Sections 397/398 and CP 13 of 1982 filed under Section 155 of the Act. In the first petition, there were six allegations. The court dismissed the petition observing Six items of complaint leveled against the respondents have been well met and answered. The right of the petitioners under Section 25 of the Act is only to ensure the performance of a charitable trust and certainly the personal benefits of the petitioners do not come into the picture. Hence I am of the view in the case of a Section 25 company, the scope of Section 397 of the Act is curtailed'. The court further observed The right of the petitioners under Section 25 of the Act is only to ensure that the charitable objects of the company are carried out and certainly the personal benefits of the petitioners do not at all come into the picture. The scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e super imposed over the rights under the Articles if the exercise of the right would result in disastrous consequences. In the present case, the allegation is that the result of the impugned actions taken by the board of directors have resulted in change in the character of the company itself. If so, then, the allegations can be entertained in this petition. 28. The next objection raised by the company on the maintainability is that since the petitioners have never taken interest in the affairs of the company that two of the petitioners did not take the right shares, that three of them have discontinued their subscription, that the nominee of the 1st petitioner Viz. the 16th respondent had attended only 2 out of the 18 Board meetings etc, they are not proper persons to find fault in the measures taken by the company for revival of the company and prosecute the petition. Shri Dave relied on the decision in Nurcombe case in this regard. It is further pointed out that the 1st petitioner was fully aware that Zee group had evinced interest in taking up the shares and that the 1st petitioner never raised any objection and therefore it has acquiesced to the allotment. It is further co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gathered only with reference to the terms of the Articles. I agree with his stand. In a recent case of interpretation of the amended Civil Procedure Code, it was urged before the Supreme Court that while interpreting the amended provisions, the statement of the Law Minister in the Parliament while introducing the Bill should be taken into account. The Supreme Court held that the interpretation should be restricted to what the Legislature had enacted. Similarly, it is the Articles which have to be taken into account to decide the allegations not no those of the recommendations of the committees. 30. Initially, Shri Sarkar argued, relying on the cases of Clemens v. Clemens and Prentice Hall that reduction of the shareholding of the petitioners from 29% to below 29% by the allotment of the impugned shares is an act of oppression. This grievance would no longer survive after he made a statement at the bar that the petitioners' case is not of oppression but it is by way of a derivative action. 31. Having dealt with the maintainability of the petition, I shall deal with allegations against Media West. The allegations are two fold- that its motive for investment and for gainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, the allegation that the motive of Media West is to grab the properties of UNI does not stand to scrutiny, more so, when no such allegation has been made either in the petition or in the rejoinder. It is a settled law that without a pleading a new case cannot be sought to be made in the arguments. In so far as the other allegation that the Essel group would use the company for its own group interest is concerned, the same is mostly based on certain press interviews given by the Esssl group Chairman wherein he had outlined the steps that he would take to revive/develop UNI. From these statements, I cannot draw any inference that UNI would be used to promote the affairs of Essel group. Thus, I do not find any substance in this allegation also. 32. The primary allegation in the petition relates to allotment of shares to Media West. In most of the cases of complaints of further issue of shares, the main ground would be that shares had been issued/allotted with an ulterior motive even though the company is not in need of funds. In the present case, the petitioners themselves have repeatedly stated in the petition about the poor financial condition of the company. The, auditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be final and binding and since the Board had admitted Media West as a member, its decision is final and binding. Neither in the minutes of the meeting of the Committee nor in that of the Board on 2.9.2006, I could see that the Board had examined whether Media West fulfilled the requirement as per Article 4. While the Committee had noted that Media West was the promoter and publisher of DNA, in the Board minutes there is no reference at all about Media West owning a newspaper. Therefore, its decision to admit Media West cannot be binding as the Board had not specifically taken note of the provisions of Article 4 and decided that Media West was eligible to become a member. Media West, on the other hand, has contended that the term owner as used in Article 4 should be construed broadly and since Media West holds 47% shares in Diligent Media Corporation Limited which owns DNA Newspaper, Media West should be construed to be an owner of a newspaper. When a qualification has been prescribed, such a qualification has to construed strictly especially in view of the mandatory nature of Article 4 and not liberally as suggested by Shri Mookherjee. He also pointed out that in terms of the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... West owns a visual media and the second is, even it does, since the Article restricts the eligibility only to owners of newspaper, until the Articles are amended, no one else can be admitted as a member. Shri Mookherjee pointed that even at present, there are members in UNI who are not owners of news papers and therefore Media West cannot be singled out to deny the right to become a member. I notice that at the time of incorporation, 4 of the subscribers were individuals- two of them shareholders of two family companies owning news papers- the Hindu and the Telegraph and two were merchants. At present, as per the list of members of UNI, there are 6 individuals of which 4 are members of the families owning news papers. 4 of these members hold only 1 share each. Therefore, it would have been very relevant for the Board to decide whether majority shares could have been issued to a single entity even without examining whether it is entitled to be admitted as a member. 35. The second argument by Media West is that both Section 81(1)(d) and Article 47 vest with the Board, uncontrolled discretion to allot the unsubscribed shares in a manner which is most beneficial to UNI. The relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allot the unsubscribed shares in any other manner. Under these circumstances, even granting that in terms of Article 47 the shares could be allotted to any one as contended by the company, the Board should have first clothed itself with full powers before the allotment in a duly convened meeting with proper agenda. Therefore if Media West is not an owner of a news paper, it could not have been admitted as a member by allotment of shares. 36. Creation of a single majority: A reading of the Articles would indicate that there is no restriction in the number of shares that a shareholder can hold unlike PTI where the maximum number of shares that a shareholder can hold is restricted to 1000 shares. While the Articles regulate the manner in which the affairs of the company are to be conducted, yet, many a times, the practice followed by a company for a long time would become relevant. For instance, recently this Board dealt with a case wherein, in respect of a public company, issue/allotment of shares without following the provisions of Section 81 was challenged. This Board found that over a period of 20 years, the company had issued shares on 6 earlier occasions without following th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the changed circumstances, some of them, including the petitioners would have accepted the shares. However, the counter argument is that two of the petitioners did not even subscribe to the right shares and other two had not applied for additional shares even when the shares were offered at par, and therefore the question of their taking up the shares at premium does not arise. It is further argued that neither in the Article nor in the Act, there is any stipulation regarding the time limit within which the Board should exercise its discretion in allotting the unsubscribed shares. It was also pointed out that in 2006, that is after three years, 100 unsubscribed shares were allotted without any protest. Relying on the judgment of Supreme Court in Geakwad case wherein it has been held that in case of preemptive rights, there is no need to make repeat offers, Shri Dave submitted that in case of right offers also, there is no need to make repeat offers in respect of the unsubscribed shares. When no upper time limit is fixed either by the Act or the Article stipulating the time within which the power to allot unsubscribed shares should be exercised, I am of the view that the powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agenda. The purpose of including an item in the agenda is to make directors aware of the businesses to be transacted in the meeting so that they could come prepared to take informed decisions relating to the issues placed. Further, it would also enable the directors, who are unable to attend the Board meeting to convey their views in writing on the issues in the agenda for consideration of those attending the Board meeting. In so far as the contention of Shri Mookherjee that even businesses which are not indicated in the agenda could be transacted under other businesses is concerned, the normal practice is that businesses which are urgent and which were not anticipated at the time of sending the notice for the board meeting are transacted under other businesses . In the present case, the offer of Media West was dated 9.8.2006 and in his letter to Media West on 25.8.2006, the 2nd respondent had indicated that Media West's offer was discussed in the board meeting on 21.8.2006 and that a committee would like to discuss the offer on 2.9.2006. In fact, the minutes of the meeting doest not reflect such a discussion. The notice for the board meeting on 21.8.2006 was issued on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We would like to state that we are one of the promoters and publishers of DNA Newspaper in Mumbai. We have interest in reviving the company's premier news gallery agency UNI with the help of existing shareholders. As per discussion, we are willing to subscribe the unsubscribed part of authorized capital of the company which is approximately of 55 to 60% . The letter further states that Media West would carry out a due diligence and valuation of shares and would pay an additional 5% as control premium. The offer letter of Sanjay Prakash Limited dated 31.8.2006 reads We understand that UNI is exploring an investor to invest the sizeable amount in the company in the shape of equity/loans. We as Dainik Sanjay Prakash are keen to invest in your company UNI. Please let us know the details with regard to the price of equity share of the company. We would appreciate if you kindly let us know the time for meeting you in person to discuss the issue in length and get some more detailed information . The offer letter of Gujarat Samachar dated 22.8.2006 reads We have come to know through confirmed reliable sources that UNI require funds for its revival. We are interested in reviving the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.9.2006, that is on the same day, offering to pay ₹ 32.04 crores for 14811 shares constituting 59.24% of the authorized capital and it enclosed a cheque for ₹ 5 Crores. Sanjay Prakash expressed that it might consider going up to ₹ 30 crores but did not commit. On the basis of five criteria that the committee had decided to apply on the offers, the committee recommended acceptance of the offer of Media West at ₹ 32.04 crores. It is to be noted that originally in its offer dated 9.8.2006, Media West desired to have the valuation done and was prepared to pay 5% extra as Control premium However, when the committee sought for a fixed price, offer, Media West not only immediately agreed by a letter on the same day but also enclosed a cheque for ₹ 5 crores. The written offer has also been mentioned in the committee's report. Whether the representatives of Media West had the authority, without the approval of the board of Media West to make substantial changes in its original offer, is not clear. 42. The report of the committee was placed before the board on the same day i.e. 2.9.2006 at 2.30PM. Out of 9 directors, six were present of which four were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard on 26.9.2006. In other words, both the committee and the Board had been kept in dark about the revised offer of Sandhya Praksh. Only in the Board meeting on 9.11.2006, after Sandhya Prakash moved the High Court, the 2nd respondent informed the Board of the proceeding initiated by Sandhya Praksh. The share scripts were delivered to Media West on 25.9.2006, by which time by a letter dated 19.9.2006, the 16th respondent had raised objections on the allotment of shares to Media West. 44. The speed with which Media West revised its proposal enclosing a cheque for ₹ 5 cores, the speed with which the board also approved the allotment of shares to Media West, all within a few hours on the same day of the meeting of the committee, that inspite of the letter of the 1st petitioner dated 19.9.2006, share scripts were delivered to Media West on 25.92006, do support the stand of the petitioners that the entire exercise of the constitution of the committee, its discussions with 3 parties, of which 2 had come on their own without any invitation to quote, laying down the criteria for evaluation at the time of the committee meeting and finally recommending Media West and the Board acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agenda to enable the directors to take an informed decision. Further, deviation from the long practice of one member-one director- and to appoint 4 nominees of Media West, that too within a day of receiving its request and without a detailed discussions in the Board without inclusion in the agenda, that too when a request had been received from 2 directors for deferment, is not in order. Petitioners have also expressed their apprehensions that by handing over the management to a single member, the Board had compromised the independence of UNI, in the sense, the collection and dissemination of unbiased news would be affected. I do not wish to dwell on this issue as one cannot adjudicate on assumptions and presumptions. 46. From the various findings I have given, it is evident that the board had acted in haste without taking into account all aspects, that too, not in a transparent manner- both in the allotment of shares as well as on the acts have, considering the fact of the long existing practice in the company that there was never a single majority shareholder and that at no time any member had more than one nominee on the board, definitely brought about a change in the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso refund the consideration paid by Media West. I notice that a part of the consideration of about ₹ 5 crores paid by Media West has been utilized by the company and the balance of about ₹ 27 crores is kept in a fixed deposit. While the fixed deposit along with the accrued interest shall be paid to Media West immediately, the amount already spent by the company should be paid at the earliest. It shall be the responsibility of the 1st petitioner which has actively prosecuted this petition to assist the Board of the company to raise funds to make good the said amount. I make it abundantly clear that I have not given any conclusive finding on the eligibility of Media West to become a member of UNI, as in terms of Article 4, it is for the Board of directors of UNI to decide the eligibility. 49. The admitted position is that UNI is in financial distress and but for my adverse findings summarized in the earlier paragraph, I would not have declared the allotment as null and void, as, while considering a petition under Section 397, this Board has to give utmost importance to the interests of the company. Now that the allotment has been declared as null and void, consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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