| Headnote |
Companies Act, 1956 – s. 2(32), 81, 81(1A), 81(3), 397, 398– Companies Act, 1913 – s. 105-C – First respondent is a privatelimited company having authorised capital of Rs.1 crore – Thereare three groups i.e. HMP, S and VPP – Appellant nos. 1 and 2described as the ‘HMP’ Group had 30.80% of the paid up sharecapital – ‘S’ Group represented by respondent nos. 4 & 5 had 45per cent share and ‘VPP’ Group represented by respondent nos. 2& 3 had 24.20 percentage in the paid-up capital – In response tothe proposal for a term-loan made by the appellants, Bank advisedthem to increase Share Capital for minimum level of Rs. 2 Crore –First respondent company send a Notice to its Directors, four innumber, viz., the appellants and Respondents 2 & 3 – Meeting wasconvened on 18.12.2009 – Directors of ‘S’ group resigned earlierand directors of ‘VPP’ Group were granted leave of absence – Inthe said meeting, the company proposed to issue further shares toits existing members in the ratio of 1:1 – S and VPP group sought totreat the first respondent company as disputed company – Thereafter,in minutes of Extraordinary General meeting of shareholders(27.01.2010), the authorised share capital of the company wasincreased to 2 crores – VPP Group and the S Group, purported toproject a case of mismanagement and oppression by the appellantsin the petitions u/s. 397 and 398 of the Companies Act, 1956 –NCLT found that the increase in the share capital and the allotmentof shares itself, was not an act of oppression of the rights – NCLATfound that the allotment in the ratio of 1:1 was not oppressive –However, the manner in which allotment is done, may be illegaland, thus, oppressive – The act of increase in the share capital wasupheld – The distribution of shares was ‘defective’ – On appeal,held: The authorised capital of a company, which is also known asnominal capital of the company, represents the maximum number ofshares that can be issued – It must be indicated in the Memorandum of Association – It can be increased only by the company by passinga resolution in a General Body Meeting – By the Resolution dated18.12.2009, the Board of Directors had not actually purported toincrease the Authorised Capital – The contents of the last paragraphof the Resolution, makes it abundantly clear that the Board ofDirectors was aware that the power lay with the General Body ofshareholders to bring about an increase in the authorised capital –It has, no doubt, undertaken to resolve to issue further capital,even though it could be said that as on 18.12.2009, there was ‘nofurther capital’ subsisting in terms of the limit of Rs. 1 crore, whichconstituted the Authorised Capital as on 18.12.2009 – What is moreshares have been offered on a ratio of 1:1 to the existingshareholders – They were given the choice of refusal or to applyfor more or lesser number of shares – This is not a case where theResolution was to allot the further shares to the Directors orMembers of their Group alone – There is a concurrent finding thatthe decision to go in for increase in capital, viz., Authorised Capital,was not vulnerable to attack – The decision was based on the advicegiven by the Bank – The purpose of the Board of Directors toincrease the capital has been admittedly found to be bona fide – Anincidental gain, namely the change in the shareholding pattern isentirely the inevitable result of the refusal of the respondent’s groupsto apply – On the whole, in the facts, the appellants cannot bedescribed as having acted in a defective or in an unfair manner, inthe matter of allotment of further shares particularly when thecontention of the respondents about the bona fides of the decisionto increase the authorised capital has been found in favour of theappellants. |
