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of <h1>Supreme Court Validates Share Capital Increase & Allotment Decision, Orders Financial Audit</h1> <h3>HASMUKHLAL MADHAVLAL PATEL AND ANR. Versus AMBIKA FOOD PRODUCTS PVT. LTD. AND ORS.</h3> HASMUKHLAL MADHAVLAL PATEL AND ANR. Versus AMBIKA FOOD PRODUCTS PVT. LTD. AND ORS. - TMI Issues Involved:1. Validity of the Increase in Authorised Share Capital.2. Validity of the Allotment of Shares.3. Allegations of Mismanagement and Oppression.4. Financial Irregularities and Audit.Summary:1. Validity of the Increase in Authorised Share Capital:The Supreme Court upheld the decision of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) that the increase in the authorised share capital from Rs. 1 crore to Rs. 2 crores was valid. The decision was based on the advice from the Bank of Baroda, and it was found to be bona fide and in the best interest of the company. The Court noted that the increase in authorised capital is a decision that must be taken by the shareholders in a General Body Meeting, which was duly done on 27.01.2010.2. Validity of the Allotment of Shares:The Supreme Court found that the allotment of shares was not done in an oppressive manner. The appellants had offered shares to all existing shareholders in a ratio of 1:1 and allowed them to apply for more shares if desired. The respondents (V.P. Patel Group and Sheth Group) did not apply for any shares, leading to an increased shareholding for the appellants' group. The Court held that the appellants' actions were not defective, illegal, or oppressive, as the terms were applied equally to all shareholders. The Court also noted that the Board of Directors' decision on 18.12.2009 to issue further shares was contingent upon the increase in authorised capital, which was later approved by the shareholders.3. Allegations of Mismanagement and Oppression:The NCLT and NCLAT had found no merit in the allegations of mismanagement and oppression by the appellants. The Supreme Court concurred, noting that the decision to increase the authorised share capital and the subsequent allotment of shares were not acts of oppression or mismanagement. The Court emphasized that the appellants acted in the best interest of the company and that the change in shareholding was a result of the respondents' refusal to participate in the share allotment.4. Financial Irregularities and Audit:The NCLT had directed an audit of the company's accounts from the financial year 2009-2010 to determine any amounts siphoned by the petitioners and respondents. The Supreme Court upheld this direction, ensuring that any financial irregularities would be scrutinized and addressed. The audit was to be conducted by M/s. A.R. Sulakhe & Co., and the report was to be placed before the General Body of the company.Conclusion:The Supreme Court allowed the appeals partly, setting aside the direction to allot shares to the respondents. The order for conducting an audit remained undisturbed. The Court found that the appellants' actions were in compliance with the law and were not oppressive or unfair to the respondents. There was no order as to costs.
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