2015 (4) TMI 768 - Board - Companies Law

Tribunal validates share allotment, orders return of money, director cessation, and exit option

Sajal Dutta & Others Versus Ruby General Hospital Ltd. & Others

Sajal Dutta & Others Versus Ruby General Hospital Ltd. & Others - TMI Issues Involved:1. Issue and allotment of 30,55,329 equity shares to Dr. Kamal Kumar Dutta.2. Decision to reflect the money brought in by Sajal's group as 'disputed liability.'3. Non-cancellation of the allotment of 25,000 shares to Dr. Kamal.4. Efforts to remove Sajal as Director.5. Appointment of Arindam Samanta, Sudip Basu, and Dr. A.K. Sanyal as directors.Issue-wise Detailed Analysis:1. Issue and Allotment of 30,55,329 Equity Shares to Dr. Kamal Kumar Dutta:The petitioner, Sajal, argued that the allotment of shares to Kamal was in violation of Section 81 of the Companies Act, 1956, as no offer was made to the existing shareholders in proportion to their shareholding. The respondents countered that Section 81 is a pre-emptive provision applicable only to issues of equity for cash and does not apply to shares issued for consideration other than cash. The tribunal held that the allotment of shares to Kamal was valid and not in violation of Sections 81, 299, or 300 of the Companies Act, 1956. The tribunal emphasized that the arrangement for the allotment of shares for the medical equipment was made at the inception of the company and was not a new contract requiring disclosure of interest by Kamal.2. Decision to Reflect the Money Brought in by Sajal's Group as 'Disputed Liability':The tribunal directed that the money of Sajal remaining with the company should be returned along with any accrued interest. It was noted that the Board had decided that the monies of Sajal did not fall under any categories such as share application money, loan, or debentures.3. Non-cancellation of the Allotment of 25,000 Shares to Dr. Kamal:The tribunal observed that the Honorable Supreme Court had not given a direction to set aside the allotment made to Kamal and that such allotment had not affected the 11.12% shareholding earmarked for Resident Indian Shareholders. Therefore, it was concluded that the allotment did not cause any prejudice to the rights of Sajal.4. Efforts to Remove Sajal as Director:The tribunal held that the attempts by Kamal to remove Sajal as a director could not be considered an oppressive act under Sections 397 and 398 of the Companies Act, 1956. It was noted that the company was in continuous litigation and that it was in the domain of the company to decide who should remain on the Board. The tribunal invoked Section 402 of the Act and ordered that Sajal should cease to continue as a director for the survival of the company.5. Appointment of Arindam Samanta, Sudip Basu, and Dr. A.K. Sanyal as Directors:The tribunal found that the appointments were made at the wish of the majority and that there was no proof that their continuation on the Board was prejudicial to the interests of the petitioners or the company. Therefore, the tribunal concluded that the appointments did not amount to oppression or mismanagement.Conclusion:The tribunal validated the allotment of 30,55,329 shares to Kamal, subject to the outcome of WP 1157/2004 pending before the Honorable High Court of Calcutta. It directed the company to return the money brought in by Sajal along with accrued interest and ordered that Sajal should cease to continue as a director. The company was also instructed to release all guarantees given by Sajal to financial institutions and provide an exit option for Sajal as a shareholder on fair valuation of the shares. The company petition was disposed of accordingly.