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TMI Blog2018 (7) TMI 2105X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1956 - the Company may refund the amount on account of the additional issue of shares to the 2nd, 4th, 5th, 6th, and 7th Respondents made on 07.04.2007 and 27.09.2010 and accordingly rectify the register of members after making the refund to the concerned Respondents. Petition disposed off. - TCP NO. 96/2016, OLD CP NO. 42/2012 - - - Dated:- 10-7-2018 - K. ANANTHA PADMANABHA SWAMY, JUDICIAL MEMBER AND S. VIJAYARAGHAVAN, TECHNICAL MEMBER For the Petitioner : A.G. Sathyanarayana, Adv. For the Respondent : Dr. K.S. Ravichandran, PCS and S. Manjula Devi, Adv. ORDER S. Vijayaraghavan, Technical Member:- The Petitioners have stated that the 1st Respondent ( the Company ) was incorporated on 07.08.1970 as a private company and later converted as a public company. Late Mr.A.P.Madhavan was managing the affairs of the Company. Subsequent to the demise of Mr.A.P.Madhavan in 1985, his son Mr. Mahesh Madhavan took over the management of Company affairs. The Petitioners are residents of Singapore and Malaysia. The Petitioners had invested ₹ 1,40,00,000/- (Rupees one crore and forty lakhs only) in the Company in a single tranche. The Petitioners were in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the first illegal and fraudulent allotment of shares was made on 09.04.2007 for 20,00,000 equity shares at ₹ 10 each, at par: (Ref Petitioner's C.P typed set, Pg.nos. 208-11) Sl.No. Name of the allottee Shares allotted Rank in C.P 1 M.C.Mythili 1,05,900 Respondent 5 2 Manjula Sunil 1,08,500 Respondent 4 3 Mridula Sugandhan 1,75,600 Respondent 6 4 Mis. Deccan Radiators and Pressing Pvt. Ltd. 16,10,000 Respondent 7 Total 2,000,000 5. The Petitioners have stated that Company's Articles of Association (AoA) in s.46(l)(a) states as follows: (1) Where at any time it is proposed to increase the subscribed share capital of the company by allotment of further shares then, (a) Such further shares will be offered to the person who on the date of the offer, are holder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aith is mala fide and oppressive. 9. The Petitioners have stated that the said alleged resolution passed at the EGM did not adhere to the mandatory requirements of the Unlisted Public Companies (Preferential Allotment) Rules, 2003. The Preferential Allotment Rules mandate that a Company passing a special resolution to preferential allotment of shares to comply with the following criteria: 5. Pricing.- Where warrants are issued on a preferential basis with an option to apply for and get the shares allotted, the issuing company shall determine before hand the price of the resultant shares. 6. Disclosures. - The explanatory statement to the notice for the general meeting as required by section 173 of the Companies Act, 1956 shall contain the following particulars: (a) the price or price band at which the allotment is proposed; (b) the relevant date on the basis of which price has been arrived at; (c) the object/s of the issue through preferential offer; (d) the class or classes of persons to whom the allotment is proposed to be made; (e) intention of promoters/directors/key management persons to subscribe to the offer; (f) (shareholding pattern of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nail the fact that they had full knowledge of the financial status and business of the Company, allotment of shares and further the Petitioners were directly interacting with the top management executives and statutory auditors of the Company. (Annexure P2) 13. The Respondents have submitted that the Petitioners by letter dated 23.08.2007 requested the Company to split their stocks in lots of 500 equity shares. Reply has been sent by the Company to the Petitioners on 28.09.2007 and the Company requested them to clarify some of the queries (Annexures- P3 P4 series). To the said reply letter the Petitioners sent reply e-mail on 05.12.2007. The same was responded by Mr.S.N.Hariharan, Group Vice-President (Finance Accounts). Copy of the mail and the reply mail are available in Annexures P5 P6 respectively. Subsequently on 05.08.2008 the Petitioners sent letter to the Company and requested the Company to cancel the splitting of Stock Certificates (Annexure - P7). 14. It is submitted by the Respondents that the notice for the EGM dated 20.02.2006 was duly sent to all the Petitioners on 20.01.2006. The special resolution passed in the EGM dated 20.02.2006 was duly filed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In terms of the reliefs sought by the Petitioners the rights issues ought to have been made by the Company to all the existing shareholders at the relevant points of time. In this case the Company has not intimated or gave any chance to the Petitioners to acquire the shares at the value for which it was offered to the Respondents. In this case the Respondents have not denied this fact but have stated that since the Petitioners were interested in exiting the Company it was considered that they will not be interested in subscribing to the rights issue of the Company. The mere fact that the Petitioners had intent to exit the Company is not a ground for denying their right to subscribe to additional shares in proportion to their shareholdings vis-a-vis that of the total paid-up capital of the Company. In view of the above facts and circumstances, the Tribunal hereby cancels the allotment of shares made on 09.04.2007 and 27.09.2010 as being in violation of provisions of section 81 of the Companies Act, 1956. In view of the above directions the Company may refund the amount on account of the additional issue of shares to the 2nd, 4th, 5th, 6th, and 7th Respondents made on 07.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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