CP No. 66 of 2006. Case: Binay Prakash and Others Vs Domco (P.) Ltd. and Others. Company Law Board
|CP No. 66 of 2006
|B.S.V. Prakash Kumar, Member (Judicial)
|Arbitration and Conciliation Act, 1996 - Section 8; Companies Act, 1956 - Sections 397, 398, 402
|2012 (110) CLA 261
|June 01, 2012
|Company Law Board
B.S.V. Prakash Kumar, Member (Judicial), (Kolkata Bench)
1. This Bench hereby passes the following order in pursuance of orders passed by honourable High Court of Jharkhand on 19th August 2010 directing this Bench to decide as to whether the grievances pleaded in the company petition are attracting the ingredients of section 397 /398 of the Companies Act, 1956 ('the Act') or not.
Having the counsel on either side argued over the above point, it is hereby decided as follows:
Since the honourable High Court directed to decide the preliminary issue raised by the respondents on perusing the pleadings of the petitioners ignoring the factual defence of the respondent side, accordingly the respondents' counsel limited his submissions on the pleadings in the petition, nothing else.
2. The direction given by the honourable High Court to the Company Law Board ('CLB') is to:
Examine by a reasoned decision, question whether factual allegations made by the petitioners in their application under section 397 /398 of the Act, ignoring any factual defense, can be said to amount to either oppression or mismanagement or other mischief referred in section 397 /398 of the Act.
3. The case of the petitioners is that first respondent-company was incorporated on 29th March, 1988 to carry on the business of manufacturing various types of domestic coke and to manufacture pig iron and steel. The petitioner No. 1 is one of the subscribers of the memorandum of association ('MoA'). Prior to 27th March, 2004, the petitioners and their family members were the owners of 100 per cent issued and subscribed share capital of the company. The authorised share capital of the company is Rs. 2 crore divided into 2,00,000 equity shares of Rs. 100 each. The subscribed, issued and paid-up capital of the company is Rs. 1,00,00,000 divided into 1,00,000 equity shares of Rs. 100 each. The petitioner No. 1 is a member and director of the company holding 16,435 equity shares for self and 20,000 shares as Karta of Binay Prakash (HUF). The petitioner No. 2, wife of the petitioner No. 1, is also a member of the company holding 10,560 equity shares. The petitioner No. 3, father of the petitioner No. 1, holds 23,000 equity shares. The petitioners amongst themselves hold 70 per cent of the issued and subscribed share capital of the company. Since coal mine is required for the captive use for pig iron plant, on 12th January, 2004 R-1-company applied for iron ore mine for supply of raw material to the pig iron plant proposed to set up for the company in the State of Jharkhand. The company applied for allocation of coal mine at Lalgarh, North Sub-block in West Bokaro Coalfield, Hazaribag, Jharkhand. Responding to the same, the Ministry of Coal wrote letters dated 25th July, 2003 and 24th November, 2003 agreeing to grant permission to the company for a block of mining area for mining coal on terms and conditions contained in the said letters.
4. The petitioners counsel states second respondent-company has a pig iron plant at Kharda, Distt. North 24 Parganas, West Bengal, and an associate of 2nd respondent, Lanco Industries Ltd. also has a pig iron plant at Kalahasti, Chittur District, Andhra Pradesh. On coming to know the intention of the petitioners to set up a pig iron plant, respondents 3 and 4 approached petitioner No. 1 and expressed their intention to set up pig iron plant of the company along with the petitioners. They also expressed their interest in supply of coal to the plant of second respondent and its associated company from the coal mine to be allotted to the company after meeting the entire requirement of the plant of first respondent-company. Second respondent-company expressed an intention to invest in first respondent-company for the purpose of setting up pig iron plant and the development of coal mine to be allotted to the company. Respondents 3 and 4 on behalf of second respondent, entered into a joint agreement with the petitioners on 27th January, 2004 to set up a pig iron plant. The said agreement was again modified on 27th March, 2004 with the following terms and conditions:
(i) The issued and paid-up share capital of the company was to be raised to Rs. 60,00,000 initially consisting of 60,000 shares of Rs. 100 each which were to be subscribed by each party simultaneously, so that each of them owns 50 per cent of the issued and paid-up share capital of the company. The 50 per cent contribution required by the petitioners was to include the existing issued and paid-up share capital of Rs. 28,17,500 already subscribed by them, so that they will be required to subscribe Rs. 1,82,500.
(ii) On obtaining the allocation of the mining block for the coal mine from the Government of India the petitioners' group was to subscribe 40 per cent shares of Rs. 100 each for cash at par of DOMCO. The petitioners' group was then to sell and R-2 was to buy 20,000 shares of the company at Rs. 7,700 per share aggregating to an amount of Rs. 15,40,00,000. The respondent No. 2 along with the signing of the agreement paid to the petitioners' group Rs. 7,00,00,000 against the above price of shares. Balance Rs. 8,40,00,000 were to be paid by the respondent No. 2 to the petitioners' group as against transfer of 20,000 shares within nine months from the date of allocation or earlier.
(iii) Subsequently, the petitioners' group was to subscribe to 2,00,000 equity shares of and in the company of Rs. 100 each for cash at par aggregating to Rs. 2,00,00,000 and the respondent No. 2 was to subscribe to 2,00,000 equity shares of Rs. 100 each for cash at a premium of Rs. 2,265 aggregating to Rs. 47,30,00,000. The aforesaid subscription was to be made as and when required by the company.
(iV) R-2 shall be responsible for the financial closure for the project with the estimated project cost so that the company may take necessary steps for setting up the project as per the time frame (bar chart) submitted to the Ministry of Coal so that the directive of Ministry of Coal is adhered to. The bar chart submitted with the Ministry of Coal was marked as Annexure 'A'.
5. In terms of the said agreement, second respondent is to pay Rs. 7 crore to the petitioners for the price of shares, the equity shares of the company being 1,825...
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