Company Law Board
Indglobal Investment And Finance Ltd. vs Rajasthan Breweries Ltd. on 3 May, 2001
Equivalent citations: [2001]107COMPCAS525(CLB)
ORDER
S. Balasubramanian, Vice-Chairman
1. In this petition filed under Section 111A of the Companies Act, 1956 (the Act), the petitioner has sought for the rectification of the register of members of the Rajasthan Breweries Limited (the company) in respect of 1,17,18,917 shares of Rs. 10 each allegedly allotted in favour of the petitioner and also to Mac Overseas Private Limited and Ganesh Exports Private Limited on the ground that the said allotments are invalid in law.
2. The facts of the case are that the petitioner company along with the other two companies had lent certain amount of money to the company which was to be repaid over a period of time along with the stipulated interest. In spite of various reminders, the company had not repaid the loans along with the interest According to the company, in view of unsatisfactory financial position of the company, there was an oral agreement between the parties that shares would be allotted against the loans out standing and accordingly, the impugned shares were allotted.
3. During the hearing, the learned counsel for the petitioner submitted that there was no such oral agreement for allotment of shares and the company had unilaterally allotted the shares and as a matter of fact, the company has not even issued the share scrips to the petitioner and the other two companies. He also pointed out that notwithstanding the unsatisfactory financial position of the company, the shares had been allotted with a premium of Rs. 8.50. Therefore, he prayed that the allotment of shares should be cancelled and the register of members accordingly rectified. The learned counsel for the respondent submitted that the company had written to the petitioner and the other two companies about the proposal of allotment of shares and since no objection was raised, shares were allotted as against the loans.
4. It is an admitted position that there is no written application or any written request or written agreement for allotment of shares to the petitioner and the other two companies. Section 41 of the Companies Act stipulates that a person, to become a member, should agree in writing, which, obvisouly is not the position in the present case. Non-compliance with the provisions of law is a sufficient cause to order rectification of register of members. Since, in the present case, the provisions of Section 41 of the Act have not been complied with, the register of members requires to be rectified. Accordingly, we direct the company to rectify the register of members by deleting the names of the petitioner and other two companies in respect of 1,17,18,917 shares within 30 days from the date of this order, and consequently, cancel these shares allotted to them and effect reduction in the share capital of the company to that extent.
5. With the above directions, the petition is disposed of with no order as to costs.