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of <h1>Court finds conspiracy for illegal control & share acquisition, deceptive practices, mala fide acts, mismanagement. Relief: refunds, investigation.</h1> <h3>Hemant D. Vakil and Ors. Versus RDI Print and Publishing Pvt. Ltd. and Ors.</h3> The court found respondents engaged in a conspiracy for illegal control and share acquisition through deceptive practices like misleading share issues and ... - Issues Involved:1. Conspiracy for illegal control and share acquisition.2. Mala fide and fraudulent acts by respondents.3. Mismanagement and personal benefits by respondents.4. Reliefs for established oppression and mismanagement.Detailed Analysis:1. Conspiracy for Illegal Control and Share Acquisition:The petitioners alleged that respondents Nos. 2 to 6 and 8 engaged in a conspiracy to gain control of RDIL by wrongful and illegal means. The conspiracy involved:- Non-Convertible Debentures (NCDs) Issue: The board decided on December 20, 1989, to issue NCDs instead of Fully Convertible Debentures (FCDs) approved by shareholders, citing false reasons.- Excess Subscription and Attractive Terms: Circular resolutions on February 1 and 2, 1990, extended the subscription date and offered incentives to debenture holders, despite poor initial response.- Allotment of Debentures: In March 1990, 23,000 out of 30,000 debentures were allotted to respondents Nos. 2 to 6 and 8 to 10, including non-shareholders, without board reference.- Rights Issue of Shares: On August 3, 1990, the board approved a rights issue of 1,80,000 shares citing financial constraints, which was misleading and aimed at gaining control.- Misleading Shareholders: The explanatory statement for the rights issue was tricky, implying shareholder approval was a formality without disclosing directors' interests.- Allotment of Shares: In October 1990, 1,36,770 out of 1,80,000 shares were allotted to respondents Nos. 2 to 6 and 8 to 10, violating the terms of the issue.- Misuse of Funds: RDIL funds were misused via Samrat and Crown to purchase RDIL debentures, enabling the respondents to subscribe to shares and gain control.2. Mala Fide and Fraudulent Acts by Respondents:The respondents acted fraudulently and with mala fide intent:- False Representations: Misleading the board about the impossibility of issuing FCDs and the need for funds.- Non-Disclosure: Failing to disclose details of debenture and share allotments to the board and shareholders, including directors' interests.- Violation of Shareholders' Mandate: Allotting shares to non-eligible persons and without a proper scheme for employees.- Pecuniary Benefits: Issuing shares at par without premium, resulting in financial gain for the respondents at the company's expense.- Misutilisation of Funds: Using RDIL funds through Samrat and Crown for personal gain, leading to financial loss for RDIL.3. Mismanagement and Personal Benefits by Respondents:The respondents mismanaged RDIL and Samrat for personal gain:- Investments in Aryagene and Crown: Investments made without disclosure, resulting in no returns and potential loss.- Fabrication of Documents: Inconsistencies in debenture certificates and investment records, indicating fabrication.- Illegal Appointments: Attempting to appoint an alternate director in violation of the Companies Act and manipulating board minutes.- Siphoning Funds: Paying Mrs. Dhabhar without work and granting loans to non-directors.- Conflict of Interest: The company secretary acting on behalf of conflicting interests.4. Reliefs for Established Oppression and Mismanagement:The petitioners are entitled to reliefs due to established oppression and mismanagement:- Setting Aside Allotments: The allotment of shares to debenture-holders and directors/employees is set aside, reducing the subscribed capital of RDIL and Samrat.- Refunds and Rectification: Refunds to be made to shareholders without interest, and the members' register to be rectified.- Appointment of Administrators: A committee of administrators is appointed to take charge of RDIL and its subsidiaries, with powers to operate bank accounts and appoint a special auditor.- Investigation and Action: The committee to investigate allegations against the company secretary and decide on further action.- Superseding Board: The current board of directors is superseded, and a special meeting of shareholders is to be called for electing new directors.- Legal Costs: Directors are not entitled to reimbursement of legal costs for defending the petition.The order emphasizes the need for transparency, fairness, and adherence to fiduciary duties by the directors, ensuring the protection of shareholders' interests and the company's financial health.
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