AI Drafter 
TaxTMI 
TaxTMI 
2009 (8) TMI 710
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....d by a scheme of "arrangement of demerger" (sanctioned by the Central Government on 5-7-2002) between India Tourism Development Corporation ('ITDC') (of which Hotel Ashok Yatri Niwas was a unit) and HQRL. 3. The Central Government later invited bids for the purchase of 99.97 per cent of the total voting equity share capital of HQRL ; Moral Trading & Investment Ltd. ('Moral') met the parameters of the bid. The shares in HQRL were sold to it through two share purchase agreements dated 8-10-2002. Those agreements were entered into between the President of India, Moral, and HQRL. On the same date, an agreement was entered into between the President of India and HQRL, by which the plot of land where Hotel Ashok Yatri Niwas stood was leased to HQRL, for 99 years. In addition, a meeting of the Board of Directors of HQRL took place in which Mr. Ashwini Kumar Lohani and Mr. Samar Kumar Bandopadhya resigned as directors and Mr. Ram Parshotam Mittal, Mr. Ashok Mittal, Mrs. Sarla Mittal and Mr. C.S. Paintal were appointed as additional directors. 4. In December 2002 HQRL approved the transfer of one share from Moral Trading & Investment Ltd. to Mr. Ashok Mittal and two shares to Mr. Ram ....
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....fendants on 9-9-2008 and accepted in court. The case was then adjourned to 3-11-2008. An interim application being IA No. 12164 of 2008 was filed in that suit on 29-9-2008 which was listed on 30-9-2008. In the application, it was claimed that by Hill Crest Realty that it should be permitted to participate in the EGM of HQRL scheduled to be held on 16-10-2008. It was also prayed that an administrator be appointed to manage the affairs of HQRL. Alternatively, it was requested that the EGM scheduled for 16-10-2008 be stayed. 7. By an order dated 15-10-2008 the interim application (IA No. 12164 of 2008) filed in Suit No. 1832 of 2008 was disposed of by the learned Single Judge. It was held, inter alia, that HQRL had played a fraud on this court by suppressing a material fact in Suit No. 992 of 2005 that it had become a public limited company by virtue of the resolution dated 30-9-2002 and subsequent actions (which too were allegedly not disclosed by HQRL). An appeal, FAO (OS) No. 426/2008 was filed by HQRL, before the Division Bench. 8. Hill Crest Realty also filed an application (IA No. 12638 of 2008) in Suit No. 992 of 2005 praying, inter alia, that HQRL be declared a public li....
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....one in the order dated 15th October, 2008 will perhaps put Hotel Queen Road in the hands of a professionally unqualified person. Being an expert on hospitality arrangements and entertainment is the very antithesis of being "sobre as a judge". 86. The other solution, one that commends itself to us, is to let the democratic process of managing the affairs of Hotel Queen Road continue, subject to the decision, at the trial stage on whether Hotel Queen Road is a private limited company or a public company. Apart from this, we also feel that judicial interference in the internal affairs of a company should be eschewed and the shareholders should be allowed to manage their affairs as best as they can. We, therefore, direct that Hill Crest Realty may be permitted henceforth to exercise its voting rights in all meetings of Hotel Queen Road subject to the decision, at the trial stage on whether Hotel Queen Road is a private limited company or a public company. The decisions taken at the EGM held on 4th August, 2005 should be given effect to (subject to the above) and the meeting proposed for 16th October, 2008 should be held as soon as possible in accordance with our above order and in a....
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....wo years as far as Hill Crest is concerned, the Explanation to section 87(2)(b) would come into play thereby giving Hill Crest Realty, as a cumulative preference shareholder, the right to vote on every resolution placed before the company, at any meeting, in keeping with clause (i) of section 87(2)(b) of the aforesaid Act. 39. In keeping with the aforesaid principle, while dismissing the special leave petitions filed by Hotel Queen Road and Hill Crest Realty, we make it clear that the observations made in this judgment are of a prima facie nature only for disposal of the special leave petitions and should not influence the final decision in the suits, where the question relating to the status of Hotel Queen Road has been left open for decision. We, however, request the High Court, functioning as the trial court, to dispose of the suits at an early date so that the management and affairs of Hotel Queen Road are not left in a state of uncertainty." 11. The applicants contend that the impugned rights issue was decided upon by the plaintiff, in unseemly haste, on 30th July, 2009, by issuing a notice under section 8(1) of the Companies Act, 1956 ('the Act') barely 10 days after th....
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....irtually being ousted from the management of the affairs of the company ; yet the reality is that they are the largest equity shareholders. In the absence of a final decision that the company is a public limited company, the plaintiffs cannot take decisions that would fundamentally alter its character, or make lasting or irreversible changes, as would be the natural consequence, if the plaintiffs are left unrestrained, in their plan to go ahead with the rights issue. 14. The applicants contend that the plaintiff cannot, by virtue of section 78 of the Act, "dip into" the monies that are sought to be raised through the proposed issue. Counsel contends that the disclosure or justification, for the impugned issue, reveals that the plaintiffs intend to expend and fritter away the amounts likely to accrue, for inessential and frivolous purposes, and leave the company saddled with liabilities. 15. It is argued on behalf of the plaintiff, by Mr. Jayant Bhushan, learned senior counsel, that the application for temporary injunction, of the kind filed, is not maintainable at the behest of the defendant. It is urged, by placing reliance on the judgments in Liberty Sales Services v. Jakki....
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.... Application of premiums received on issue of securities.-(1) Where a company issues securities at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those securities shall be transferred to an account, to be called "the securities premium account", and the provisions of this Act relating to the reduction of the securities capital of a company shall, except as provided in this section, apply as if the securities premium account were paid-up securities capital of the company. (2) The securities premium account may, notwithstanding anything in sub-section (1), be applied by the company- (a)in paying up unissued securities of the company to be issued to members of the company as fully paid bonus securities ; (b)in writing off the preliminary expenses of the company ; (c)in writing off the expenses of, or the commission paid or discount allowed on, any issue of securities or debentures of the company ; or (d)in providing for the premium payable on the redemption of any redeemable preference securities or of any debentures of the company. (3) Where a company has, before the commencement of this Act, issued any secu....
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.... settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to reduction ; (c)where a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of that creditor, on the company securing payment of his debt or claim by appropriating, as the court may direct, the following amount : (i)if the company admits the full amount of the debt or claim, or, thought not admitting it, is willing to provide for it, then, the full amount of the debt or claim ; (ii)if the company does not admit and is not willing to provide for the full amount ol the debt or claim, or if the amount is contingent or not ascertained, then, an amount fixed by the court after the like enquiry and adjudication as if the company were being wou....
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.... possession of the suit land, sought for specific performance of an alleged agreement, to lease it to him; the defendant denied existence of a concluded contract. During pendency of the suit, the defendant applied for injunction, claiming that the plaintiff had altered the nature and character of possession, by putting up bamboo structures, and seeking to collect parking fees. The court held that the plaintiff had claimed relief, in equity ; after noticing Suganda Bai's case (supra), the Calcutta High Court concluded that the defendant's claim was incidental to the plaintiff's relief, and granted the temporary injunction sought for. In an interesting decision, Vincent v. Aisummia AIR 1989 Ker. 81, the Kerala High Court, without noticing the previous decisions in Suganda Bai's case (supra) and Dr. Ashish Ranjan Dass' case (supra) arrived at the same conclusion, on a textual interpretation of order 39, rules 1 to 3, Code of Civil Procedure, 1908 ('CPC'). The court noted that the structure of rule 2 enables only the plaintiff to seek relief whereas the other provisions, such as rules 1 and 3 are wider, and can be availed by parties other than the plaintiff. The court also, pertinently....
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....2 Ch.D 541, while holding plaintiff has no right to continue in occupation or retain possession held : "What is the defendant's cause of action? It is identically the same thing from the opposite point of view. He negatives the plaintiff's claim to be employed and claims to prevent him from interfering with the management. In the state of things, I think he is entitled to move in the plaintiff's action. It is a novelty to me that an order can be obtained to restrain a person from remaining in a house, which is, of course equivalent to a mandatory order upon him to go out."' After referring to Spurgin v. White [1960] 2 Giff 473 where such an injunction of a mandatory nature was held could be issued, Buckley, J., held : "That appears to me to be a precedent for an order I am prepared to make, which will have the effect of restraining the plaintiff from remaining in possession of the premises. The said order was affirmed by the Court of Appeal, in the same report, by Rigby, Vaughan Williams and Stirling, L, JJ." 22. This court cannot be unmindful of the circumstance that the plaintiff has sought relief equity, i.e., various declarations. As noted in Dr. Ashish Ranjan Da....
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...., and with a view to modernise and upgrade the hotel, the plaintiff proposes to go ahead with the issue, at the premium, indicated, without which the company and its shareholders would be prejudiced. 25. The applicant's position, during the hearing was that interim arrangements, which have altered the management of the company, should not result in decisions that have far reaching and irreversible consequences. It was contended that the company could well have raised the amounts, without indicating any premium, in which event, if the defendants had chosen to pick up any shares, they would not be prejudiced irreparably, and the rights equity, after allotment, would be reflective of their existing shareholding. The first irreversible position pointed out, therefore, is that the defendants' extent of shareholding, in terms of percentage and proportion, would dwindle or get diluted, which cannot be restituted at all. It is contended, additionally, that the proposed expenditure of the amounts received from the rights issue, are impermissible, having regard to section 78 of the Act. It is also argued that the defendants too have spent substantial amounts, which equals if not surpasses....
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.... be transferred to an account, to be called "the securities premium account", and "the provisions of this Act relating to the reduction of the securities capital of a company shall, except as provided in this section, apply as if the securities premium account were paid-up securities capital of the company". Section 78(2), which begins with a non obstante clause, enacts the exceptions from the general rule mandated by section 78(1) and enables a company to apply the securities premium account in paying up its unissued securities, to be issued to its members as fully paid bonus shares ; in writing off its (the company's) preliminary expenses ; in writing off the expenses of or the commission paid or discount allowed on any issue of securities or debentures of the company or in providing for the premium payable on the redemption of any redeemable preference securities or any debentures of the company. The provisions of, and procedure prescribed for under sections 100-102 of the Act, for reduction of share capital would apply, wherever a company proposes to utilise amounts from the securities premium account, for any purpose, other than what is provided for under section 78. 28. Se....
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...., either with or without extinguishing or reducing liability on any of its shares, or (iii) pay off any paid-up share capital which is in excess of the wants of the company, with or without extinguishing or reducing liability on any of its shares and may also, if and so far as is necessary, alter its memorandum by reducing the amount of its share capital and of its shares. The purposes listed above are only illustrative and not exhaustive. 12. Where a company has adopted a special resolution for reducing the securities capital, it may by petition to the court apply for confirming the reduction. Where, however, the proposed reduction involves diminution of liability in respect of unpaid share capital or involves the payment to any shareholder of any paid-up share capital or, in any other case, if the court so directs, every creditor of the company would be entitled to object to the reduction and the court would settle the list of creditors so entitled to object and for that purpose ascertain the names of creditors and the nature and amount of their debts or claims. 13. Where a creditor, entered in the settled list of creditors, does not consent to the reduction, the court may,....