2005 (3) TMI 794 - Board - Companies Law

Court allows petitioner to sell shares or receive property share; future development needs shareholder approval.

The court disposed of the petition without costs, granting the petitioner the option to sell shares to the respondents or receive a proportionate share in ... - Issues Involved:1. Allegation of oppression and mismanagement regarding the decision to develop the company's property.2. Whether the development of the property requires a special resolution by the shareholders.3. Request for division of the company's land among shareholders.4. Allegation of suppression of material facts by the petitioner.5. Offer by respondents to purchase the petitioner's shares or give a proportionate share in the developed property.Detailed Analysis:1. Allegation of Oppression and Mismanagement:The petitioner, holding 429 equity shares, alleged that the decision by the Board to develop the company's property with K. Raheja Universal Private Limited was made without proper consideration and was oppressive. The petitioner argued that the company's main business was film production and not real estate development, and such a decision should have been taken by a special resolution in a general meeting. The petitioner also claimed that the decision was made despite objections and without considering other proposals.2. Requirement of Special Resolution:The petitioner contended that any decision regarding the sale, disposal, or development of the company's property should require a special resolution passed by 75% of the shareholders. The respondents argued that an ordinary resolution was sufficient and claimed that the proposal was in the company's best interest to raise funds after a fire incident had damaged the studio. The Board initially decided not to proceed with the development without the petitioner's consent and later undertook not to develop the land without shareholder approval.3. Request for Division of Land:The petitioner requested the division of the company's land in proportion to her group's shareholding, arguing that the family company should respect the rights of all family members. The petitioner cited various cases to support the division of assets in family companies. The respondents opposed this, stating that division would fragment the valuable asset, reduce its economic value, and be against the company's interest. They also offered to purchase the petitioner's shares or give her a proportionate share in the developed property.4. Allegation of Suppression of Material Facts:The respondents alleged that the petitioner had previously entered into MOUs to sell her shares to an outsider, Mr. Karim Maradia, at a significantly higher price than the company's valuation. This was not disclosed in the petition, indicating that the petitioner had come to the court with unclean hands. The respondents argued that the petition was filed for an oblique motive and not in the company's interest.5. Offer by Respondents:The respondents expressed willingness to purchase the petitioner's shares at a fair value determined by an independent valuer or to provide her with a proportionate share in the developed property. The petitioner was given a month to choose between these alternatives. If neither option was chosen, any future development of the property would require approval by a special resolution in a general meeting, as initially decided by the company.Conclusion:The petition was disposed of with no order as to costs. The petitioner was given the liberty to choose between selling her shares to the respondents or receiving a proportionate share in the developed property. The court directed that any future proposal for the development of the company's property must be approved by a special resolution in a general meeting to ensure shareholder consent.