TaxTMI 
TaxTMI 
2009 (1) TMI 480
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....would be subject to equitable considerations. 2. The suit is on rebound, as any student of company law would know. The appellants' petition of the late 1980s under sections 397 and 398 of the Companies Act was stultified on a reading of the petition that it carried only a directorial complaint that did not meet the exalted test of just and equitable winding up that an oppressed shareholder has to establish before progressing to seek any relief. In the judgment in Hanuman Prasad Bagri v. Bagrees Cereals (P.) Ltd. [2001] 4 SCC 420^1 , the Supreme Court upheld the Division Bench view of this Court but left room for a suit to be based on the substance of the original complaint. 3. The plaint seeks a declaration that the first appellant herein continues as a director of the first defendant company, challenges several resolutions of Board and general meetings of the company and implores that a scheme be framed for the management of the company upon ousting the defendant Nos. 2 to 8 wrongdoers. The first appellant is the youngest of five brothers and the plaint says the other brothers had conspired to deprive the first appellant and his branch from the family business and wealth by ....
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....he issue. The appellants allege that the company's accounts for the year ended March 31, 2004 did not justify the issue and there was no commercial basis for increasing the paid-up capital of the company. They claim that the persons who had usurped control of the company had masterminded the issue for their personal aggrandisement without even intending to deploy the additional funds for the reasons given in obtaining the same. 7. Such conduct, the appellants assert, was illegal and the issue was liable to be cancelled. The appellants refer to the judgment in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 3 SCC 333 to say that the principal purpose for issuance of further shares in a company has to be for the benefit of the company and if it is assessed that the company was in need of funds then the incidental benefit of the issue to the directors would be disregarded. Paragraph 111 of the report is placed for such purpose: "111. Whether one looks at the matter from the point of view expressed by this Court in Nanalal Zaver AIR 1950 SC 172 or from the point of view expressed by the Privy Council in Howard Smith 1974 AC 821, the test is t....
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....raised when it is required for the purposes of the company but that power is not conditioned by such need. That power can be used for other reasons as, for example, to create a sufficient number of shareholders to enable the company to exercise statutory powers (see Punt v. Symons & Co.1903 2 Ch. D. 506), or to enable it to comply with legal requirements as in the instant case. In Hogg v. Cramphorn, Buckley J., (1966) 3 All ER 420 Ch. D. (p. 267) agreed with the statement of law of Byrne, J., in Punt. And so did Lord Wilberforce (pp. 835-36) in Howard Smith (1974) AC 821 where he said: 'It is, in their Lordship's opinion, too narrow an approach to say that the only valid purpose for which shares may be issued is to raise capital for the company. The discretion is not in terms limited in this way: the law should not impose such a limitation on directors' powers. To define in advance exact limits beyond which directors must not pass is, in their Lordships' view, impossible. This clearly cannot be done by enumeration, since the variety of situations facing directors of different types of company in different situations cannot be anticipated.' The Australian decision in Harlowe N....
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....eave of the court. The petitioner shall deposit a sum equivalent to the price of 18 per cent shares in cash with the Registrar, Original Side of this High Court within two weeks from date. The Registrar shall keep the said amount in an interest bearing fixed deposit account with any nationalised bank. In default of payment of such amount the stay will stand vacated. Upon depositing the amount with the Registrar, Original Side such stay will continue until further order of this Court." 13. In the Privy Council case the conflict was between two groups of shareholders with Howard Smith Limited on one side and Ampol Petroleum Limited and Bulkships Limited on the other. Ampol made an announcement to purchase shares from the existing shareholders in the company to which Howard Smith made a counter offer. Ampol thereafter joined hands with Bulkships; the two together having 55 per cent of the paid up capital in company R.W. Miller (Holdings) Limited. Ampol and Bulkships then issued a statement that they would act jointly as to the future operation of the company and that they had decided to reject any offer for their shares from any other. Despite such being the shareholding compositio....