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Nekkala Usha Rani, Dr. Manjula Sridhar, ... vs Visakha Imagings And Medical Private ... on 31 December, 2007 cites

Dale And Carrington Invt. P. Ltd. And ... vs P.K. Prathapan And Others on 13 September, 2004

P. Ltd. and Ors. v. P.K. Prathapan and Ors. (supra) and the principles re-iterated in Goldmark Enterprise Ltd. v. Pondy Metal and Roiling Mills P. Ltd. and Ors. (supra) that the directors must exercise then power bonafide and with utmost good faith for the benefit and interest of the Company, ensuring fair play in the corporate management, by analysing the pros and cons of conversion of the unsecured loans given by the directors into share capital of the Company.
Supreme Court of India Cites 18 - Cited by 167 - A Kumar - Full Document

M.S. Madhusoodhanan & Anr vs Kerala Kaumudi Pvt. Ltd. & Ors on 1 August, 2003

The certificate of posting would only establish the entrustment of certain postal envelops/articles with the post office, which does not however, conclusively establish the service of the notice on the addressee concerned and therefore it is not safe to trust mere certificate of posting, without supported by any corroborative evidence in connection with serving of notice as repeatedly reiterated in (1) S. Narayanan and Ors. v. Century Flour Mills Limited and Ors.; (2) S. Madhusoodhanan and Anr. v. Kerala Kaumudi Private Limited and Ors.; (3) Goldmark Enterprise Limited v. Pondy Metal and Rolling Mills Private Limited and Ors.; and (4) V.S. Krishnan and Ors. v. Westfort Hi-tech Hospital Limited and Ors. (Supra).
Supreme Court of India Cites 81 - Cited by 89 - R Pal - Full Document

Nanalal Zaver And Another vs Bombay Life Assurance Co. Ltd.And ... on 4 May, 1950

12. The main dispute relates to the allotment of 24820 shares in favour of the first petitioner and the respondents 2 & 6 to 9 at a board meeting reportedly held on 30.03.2005. The board minutes dated 30.03.2005 which are seriously disputed would reveal that "The Chairman informed the board that Stale Bank of India made the pre-requisite to raise the paid up capital of the company to Rs. 50 lakhs in order to sanction the Term Loan of Rs. 180 lakhs to meet the cost of new units proposed to be established at Gajuwaka and Gopalapatnam. The Board discussed the matter in detail and decided to convert the existing unsecured loans given by the Directors of the company into share capital." After due deliberation the board of directors resolved to allot 24820 equity shares of Rs. 100/- each in favour of the first petitioner (2190 shares) second respondent (7270 shares), sixth respondent (14090 shares), seventh respondent (1250 shares), eighth respondent (10 shares) and ninth respondent (10 shares). The respondents 8 & 9 who reportedly brought in cash of Rs. 2000/- towards allotment of 10 shares each are neither shareholders nor directors of the Company. There is no explanation as to why shares have been allotted to the respondents 8 & 9 in spite of the decision of the board "to convert the existing unsecured loans given by the Directors of the company". The allotments made indiscriminately in favour of the remaining allottees namely the first petitioner and the respondents 2, 6 & 7, ignoring completely the other shareholder-unsecured creditors by mere conversion of the unsecured loans without generating any additional funds or accruing any material benefit in favour of the Company are liable to be set aside in view of the object of Section 397 being prevention of discrimination amongst shareholders which has been re-enforced in Nannalal Zaver and Anr. v. The Bombay Life Assurance Co. Ltd. and Ors. (supra). The details of the statement said to have been placed before the directors at the time of the impugned allotment are not even placed before the Bench. It is rather evident from the board minutes that there has been no application of mind on the part of the directors that the proposed conversion of the existing unsecured loans into share capital of the Company', would result in conversion of the petitioners from majority into minority shareholders. There has been absolutely no discussion whatsoever at the time of allotment of shares on this vital aspect which prejudicially affected the interests of the petitioners. There is neither any material to show whether the respondents have at any point of time brought to the knowledge of the petitioners, the consequences of any conversion of the existing unsecured loans given by the directors into share capital of the Company thereby the respondents failed to act bonafide for the general advantage of the Company. The petitioners would not have conceded to reduce themselves to the position of minority shareholders. The balance sheet for the year ended 31.03.2005, does not reflect the true and correct picture of the increase in capital and the reduction in unsecured loans consequent upon conversion of the unsecured loans into share capital of the Company, as reportedly approved at the board meeting of 30.03.2005. The auditors' report for the year ended 31.03.2005 indicates an amount of Rs. 37.42 lakhs towards capital raised during the year which does not fall in line with the claim of the respondents. The respondents 2, 6 & 7 in my considered view, failed in their fiduciary duties to make appropriate disclosures to the petitioners being directors and other shareholders either before or after allotting the major chunk of shares to themselves without generation of any additional funds more so when it is expected of the directors in a private limited company to make necessary disclosures to the shareholders of such a company when further shares are being issued which is absolutely lacking in the case before me. Non-payment of any interest by the Company on conversion of unsecured loans into share capital on which no complaint was reportedly ever made by the first petitioner is of little consequence when the resolution allotting the impugned shares is already found to be inoperative. The communication dated 05.12.2004 of SBI requesting the Company to "consider increasing the equity by subsequent modifications in paid up and authorized capital", does not even whisper about the conversion of "the existing unsecured loans given by the directors of the company into share capital". The acts of directors in a private limited company are required to be tested on a much finer scale in order to rule out any misuse of power for personal gains or ulterior motives. Even in the event of SBI communication implying the conversion of the existing unsecured loans into share capital the respondents 2, 6 & 7 ought to have acted with utmost care skill and due: diligence in view of a heavier burden cast on the directors in a private company, as cautioned by the Supreme Court in Dale and Carrington Invt.
Supreme Court of India Cites 8 - Cited by 61 - H J Kania - Full Document

Raja Ram Kumar Bhargava (Decd., By His ... vs Union Of India (Uoi) on 28 July, 1972

13. Having found that the conversion of the petitioners group into a minority status would definitely constitute an act of oppression in the facts of the present case, the various irregularities and illegalities alleged by the petitioners in the conduct of the board meeting of 30.03.2005, allotting the impugned shares are being examined. Section 186 of the Act stipulates that notice of every meeting of the board of directors of a company shall be given in writing to every director, in the manner prescribed therein, failing which any resolution passed at the meeting of the board of directors shall become invalid. This mandatory requirement has been reenforced by the courts from time to time including in the decisions cited by Shri A.K. Mylsamy, learned Counsel, namely. (1) Mrs. Senthamarai Munusamy v. Microparticle Engineers Private Limited and Ors. and S. Munusamy v. Micromeritics Engineers Private Limited; (2) Parmeshwari Prasad Gupta (deed., through legal representatives) v. Union of India; (3) Ansar Khan and Ors. v. Finecore Cables Private Limited and Ors.; and (4) Rashmi Seth v. Tillsoil Farms Private Limited and Ors. (supra). The respondents are merely planking on the certificates of posting to discharge the onerous obligation of issuance of the notice of the board meeting held on 30.03.2005 in favour of the petitioners.
Delhi High Court Cites 50 - Cited by 4 - Full Document

Anugraha Jewellers Ltd. And Anr. vs K.R.S. Mani And Ors. on 17 December, 1999

The cumulative effect of these events would evidently show that the conduct of the respondents by indiscriminately converting the unsecured loans into share capital is not only harsh; and oppressive but also shrouded with a series of irregularities, warranting intervention of this Bench, which, cannot be denied by virtue of the decisions in London School of Electronics Limited and Anugraha Jewellers Limited and Ors. v. K.R.S. Mani and Ors. (supra).
Madras High Court Cites 15 - Cited by 8 - Full Document
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