9911796707
TMI Blog2015 (9) TMI 1692X X X X Extracts X X X X X X X X Extracts X X X X ..... . The case in brief is that P1 and R2 set up R1 Company in the year 1992 with above 80% shareholding to P1 group and around 20% shareholding to R2 Company to produce milk products. When this Company became sick and went to BIFR, R2, at the request of P1, bailed out the company from the financial crisis by investing around Rs. 34 crores as equity in the company, the result is the shareholding of R2 has gone up to 51% and the petitioners' has come down to 49%, ever since R2, through its nominee directors, R3-6, has been running the company without any kind of allegation against R2, until this CP has been filed against the Respondents. I must say one fact that the petitioners have their own company called SADL to supply milk to R1 Company, R1 Company, in turn, process milk and make complete range of milk products. By this, it is evident SADL making business on R1 Company. Perhaps for that reason, R1 Company has not been giving any dividend to the shareholders, therefore whatever profits the company making keep rolling over into the company. Now for the last two years, there has been a proposal to buy a specialised Dryer from Nestle to bring a product called Baby food, in fact P1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India and State Bank of Patiala. By this, the company has outstanding dues, as on 31.3.2015, to a tune of Rs. 48/- Crores. 4. Thereafter, one of the major customers of R1 company i.e. Nestle India, agreed to set up manufacturing plant in R1 premises for manufacture of baby food ingredients by R1 company with the support of another company called Sahyadri Agro & Dairy Farm Pvt. Ltd. (hereinafter referred as SADL), which produces and supplies quality milk to R1. In furtherance of it, R1 and Nestle India Ltd. entered into an agreement called project agreement' on 12.2.2012 for setting up of a new manufacturing unit at R1 premises. They have also entered into another agreement on the same day for supply of certain quantities of ingredients by R1 to Nestle India for manufacture of finished foods and to sell the same under Nestle India trademark. Apart from these two agreements. R1, Nestle India and SADL entered into another agreement stating that SADL shall supply fresh milk of the requisite quality and quantity at a fair and competitive market price. 5. When a minority shareholder Mr. Pramod Goenka, son of P1, wrote a letter of alleging mismanagement against R2, R3-R6, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents, P1 raised his grievances in the meeting, thereafter wrote a letter 05.08.2015 stating that the notice brought out for the meeting was inconsistent to the stand taken by the directors as recorded in the minutes of the board meeting 21.05.2015 and the draft minutes of the board meeting 16.07.2015. In the same meeting R2 to R6 sought to pass a resolution for increase of authorised share capital of R1 Company and proceeded to hold AGM on 23.09.2015. 6. The petitioners submit that in the event the right issue is permitted the shareholding of the petitioners group will stand reduced making the respondents group have unfettered control over the affairs of R1 Company. The petitioners further submit that R1 company has sufficient resources to fund the project by raising funds from banks/financial resources thereby the decision to raise funds by infusing capital is not a bonafide decision, moreover, there is no immediate need or requirement to procure the said dryer, in the present market scenario. The petitioners further submit that when Rabobank is ready and willing to provide loan of above Rs. 100 crores, where is the need for the company to raise equity financing? Therefore, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany engaged in the diary business holding 51% of the total share capital of R1 Company. Since R2 is entitled to nominate majority of directors, R3-R6 have been continuing on the Board of R1 Company nominated by R2. 8. The counsel further submits that R2 in the year 1996 and the year 2002 subscribed to 19% shares of the company, that time this company was in the control of P1 and his family. In the times, when they controlled the company, it had become sick with its entire network eroded. Then a reference was made to BIFR, it was not possible for the company to make its net worth exceed the accumulated losses on its own within a reasonable time. In that distress situation, when the petitioners made a request to R2 to invest funds to turn around the company, R2 invested all most Rs. 35 crores towards equity, in the result, R2 shareholding has gone up to 51%. As a result of such infusion of funds, R1 Company was able to turn around and came out of BIFR. Evidencing the same, P1, R1 & R2 entered into an agreement on 14.01.2014 and also a supplemental agreement on 23.08.2005, pursuant to which, R2 agreed to purchase milk products from R1 Company to ensure maximum utilisation of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancing for fund raising, so to suit to their gain, they don't want to allow the company to purchase the dryer by putting spoke in the wheel of the company. The respondents being majority, it is the company to take a decision whether to go for equity financing or debt financing depending on the history the company already has. The company went into BIFR owing to the losses the company entered when it is managed by the petitioner. That time it became a debt ridden company. Now the company wants to be prudent to raise fund by subscribing to equity. The counsel further submits that the petitioners needn't be under the apprehension that if the petitioner do not subscribe to the issue that come to them on pro rata, the respondents would allot B Class shares to themselves. They have given a chart in the reply stating that if the petitioners subscribed to the rights issue their shareholding percentage would remain the same, if the shares are allotted to R2 only, then petitioners shareholding would only come down to 43%, if the respondents subscribed their shareholding and also to the petitioners shareholding, then R2 shareholding will only go up to 60.80% and the petitioners shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 397 & 398 of the Act 1956 to stall the functioning of the company, when the act of the management is in the interest of the company. Since there is a decision to purchase dryer costing around ' 100 crores, it can't be said that there is no need to raise fund. Therefore, the argument of the petitioners counsel saying that there is no need for raising fund has no merit. 14. However since the respondents categorically mentioned that they will not invoke allotment of shares under B Class, the shareholding of the petitioners will not come down to 20% as stated by them, when the respondents have come forward saying that they will not allot any shares as B Class shares, there cannot be any more equity than this. 15. The petitioners counsel relied upon Mrs. Farhat Sheikh v. Esemen Metalo Chemicals Pvt. Limited & Ors. & Detinners Pvt. Ltd. & Ors. (1996) 87 Comp. Cas. 290, to say that on issuing additional shares in private companies set up on partnership lines, the directors shall be more onerous in discharging their fiduciary duties. 16. Here, in the case supra, the directors in the management indulged in all sorts of malafide acts and irregularities to dilute the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
