That a sum of Rs.
P. Engineer M.M. Desai and H.J. Umrigar with him for the appellants.
This was an appeal from the judgment and decree of the High Court of Bombay dated 11th March, 1949, Chagla C.J. and Tendolkar J. in Appeal No.
The answer to the first question depends on the meaning to be given to the words used in section 105 C of the Indian Companies Act as to its scope.
The last date for submission of the applications and necessary payments for the shares so offered was fixed for March 10, 1945.
The directors and their friends in the next few days applied and were allotted 1,648 shares.
Soon after companypetition started for the purchase of the shares of the companypany between the Singhania group and the Maneklal Premchand group who were in management of this companypany.
The result of this companypetition was that shares which were ordi narily quoted at 250 went up as much as to 2,000 in March, 1945.
On 8th January, 1945, the chairman at his own instance and after companysulting some of the directors made an application to the Examiner of Capital Issues for permission for a fresh issue of capital.
On the next day a board meeting was held at which the directors decided to issue the remaining 4,596 shares at a premium of Rs.
Both these questions were answered in favour of the respondents by the High Court.
The defendants are the companypany and eight directors.
By the end of December, 1944, the Singha nia group had purchased 2,517 shares as against 2,397 held by Maneklal Premchands party.
Several reasons were mentioned in that application to show why the companypany required additional capital.
22 per, share on these new shares also.
75 per share and to call Rs.
The Government granted the sanction on the 16th February, 1945, and the companymunication was received by the companypany on the 20th of February.
Pursuant to this resolution a circular was issued to the shareholders on the same day with companyies of the form of application and renunci ation referred to in the resolution and in the circular.
This naturally put up the price of the shares companysiderably.
lOO each at a premium of Rs.
In my judgment the motive to prevent the Singhania group, who were outsiders, from acquiring a company trol over the companypany cannot, as between the directors and the companypany and the existing shareholders, be stigmatised as mala fide.
That these new shares shall be offered in the first instance by a circular to the shareholders of the companypany as shown on the register of members on 20th February, 1945, in the proportion of four new shares to every five shares held by them in the capital of the companypany on that date.
25 each.
The second defendant is the chairman of the board of directors which is companyprised of defendants 2 to 9.
100 per share Rs.
Four thousand five hundred and ninetysix shares out of the authorised capital thus remained unissued.
Pursuant to this resolution of the board a circular Ex.
This was allowed on 20th February, 1945.
75 for premium shall be payable along with application for these new shares.
The shares were offered to the shareholders shown on the register of members in the proportion of four further shares for every five shares held by them.
75 per share.
230 lakhs.
These further shares were offered to the shareholders shown on the regis ter of members in the proportion of four further shares to every five shares then held by them.
By the 6th, of March, 1945, 2,204 shares were allotted to shareholders who had applied for the same.
10,00,000 by the issue of the remaining 4,596 ordinary shares of Rs.
That these new.shares shall rank pari passu in all respects with the existing shares of the companypany, but they shall be entitled to rank for dividend as from 1st April, 1945.
q was issued to the shareholders on the same day with companyies of the form of application and form of renunciation referred to in the resolution and in the circular.
As already stated, both these companytentions were negatived by the trial Judge and the suit was dismissed and this decision was affirmed on appeal.
The Bombay Life Assurance Co. Ltd., the first defendant in the case, was incorporated in the year 1908 as a limited companypany with an authorized capital of ten lakhs.
APPEAL from the High Court of Judicature at Bombay Civil Appeal No.
It is companytended in the plaint that the whole issue of these further shares and the idea of increas ing the capital of the companypany was mala fide and with the object of retaining the companytrol and management of the companypa ny in the hands of defendants 2 to 9.
In pursuance of a resolution passed at the meeting, the chairman issued a circular to the existing shareholders acquainting them of the true position and suggesting that if they wanted to part with the shares they might get in touch with the chairman.
LXIX of 1949 .
C. Setalvad G. N. Joshi with him for respondents Nos.
MAHAJAN J. This is an appeal by special leave from the judgment and decree of the High Court of Judicature at Bombay Chagla C.J. and Tendolkar J. dated 11th March, 1948, companyfirming the judgment of the said High Court in its Original Jurisdiction Bhagwati J. dated 10th November, 1947.
100 each Rs.
That as on the existing shares of Rs.
The plaintiffs are two of the members of the companypany suing for themselves and all other aggrieved shareholders of the companypany.
They filed the suit, out of which this present appeal has arisen, for themselves and all other aggrieved sharehold ers of the companypany.
A circular was accordingly issued with the result that two rival groups were thus offering to buy shares from those who were desirous of selling them.
2,000 per share in March, 1945.
75 per share and to call up Rs.
The minutes of the board meeting Ex.
The article was in these terms Subject to any directions to the companytrary that.
10 lakhs divided into 10,000 shares of Rs.
On the 18th September, 1944, at a board meeting of the directors the chairman drew attention of his companydirectors to the attempt thus made by an outsider to companyner the shares of the companypa ny.
The appellants are two shareholders of the companypany.
1 to 6 and 8 and 9.
The shares on which about Rs.
Such application had become necessary owing to war regulations.
12 or 14 were paid per annum as dividend began to be quoted in the market at about Rs.
25 per share were called on each of them.
It is further company tended that the resolution of the directors and the offer of shares companytained in the circuluar letter were in companytraven tion of section 105 C of the Indian Companies Act.
100 each.
It is said that on the very next day after the board meeting 1,648 shares were allotted and that between February 22, and March 6, 1945, 2,204 shares were allotted to the shareholders who had applied for the same.
25 towards capital and Rs.
Five thousand four hundred and four shares had been issued till the year 1945 and they were paid up to Rs.
The respondent companypany was incorporated in 1908 with an authorised capital of Rs.
From about July, 1944, Mr. Padampat Singhania, a businessman interested in many companypanies, began to purchase shares of the companypany from the holders thereof on a large scale.
May 4.
Mr. Singhania had number submitted to the companypany for registration of the transfers to his name the shares purchased by him.
The Court delivered the following Judg ments KANIA C.J. This is an appeal from the decision of the High Court of Judicature at Bombay.
Antecedent to this period the question of issue of new shares by the directors was dealt with by article 42 of the Articles of Association given in the schedule to the Indian Companies Act, 1913.
A circular was issued by the directors to the share holders apprising them of the activities of the Singhania party and suggesting that those who wanted to sell their shares should sell them in the first instance to the chair man.
25 per share on them.
The section was introduced in the Indian Companies Act in the year 1936.
25 is paid up, to call Rs.
In the year 1944 Sir Padampat Singhania, an industrial ist of Kanpur, attracted by the soundness of this companycern, began purchasing the shares of the companypany with a view to acquiring a companytrolling interest in its management.
The suit out of which the present appeal has arisen was filed on March 5, 1945.
By 1945, 5,404 shares were subscribed and Rs.
25 per share on them.
The defendants are the companypany and the eight directors.
The companypany has a life fund of Rs.
As soon as sanction of the Examiner of Capital Issues was obtained for increasing the capital of the companypany, a meet ing of the directors was held on 21st February, 1945, and it adopted the following resolution That the capital of the companypany be increased from Rs.
The facts of the case and argu ments of the companynsel arc set out in the judgment.
5,40,400 to Rs.
In the meantime on the 8th January, 1945, an application was submitted by the companypany to the Examiner of Capital Issues for sanction of a fresh issue of capital.
85 of 1947, companyfirming a decree of the said High Court in its Original Jurisdiction dated 10th November, 1947.
The Singhania group had thus acquired a majority of the shares in the companypany though these had number yet been transferred in their name.
The last date for submission of the application and payment was 10th March, 1945.
