CP No. 53 (ND) of 2012 & CA Nos. 243 and 244 of 2012. Case: In Re: Himachal Fibers (P.) Ltd. Vs. Company Law Board

Case NumberCP No. 53 (ND) of 2012 & CA Nos. 243 and 244 of 2012
JudgesD.R. Deshmukh, Chairman
IssueCompanies Act, 1956 - Sections 397, 397(1), 398, 399, 399(1), 399(1)(a), 399(i), 86
Citation2012 (110) CLA 249
Judgement DateMay 09, 2012
CourtCompany Law Board

Order:

D.R. Deshmukh, Chairman, (New Delhi Bench)

1. Arguments were heard on CA No. 243/2012 filed by the company Himachal Fibres Ltd. (R-1) and CA No. 244/2012 filed by R-16 Garg Fincap Ltd. for dismissal of the petition on the ground that the petitioners do not satisfy the criteria under section 399 of the Companies Act, 1956 ('the Act') for filing a petition under sections 397 and 398 of the Act. Petitioner Nos. 1 to 4 filed CP No. 53(ND)/2012 giving details of their equity shareholding in R-1 as under:

(1) Petitioner No. 1 - 168, 675 equity shares of Rs. 10 each.

(2) Petitioner No. 2 - 157, 575 equity shares of Rs. 10 each.

(3) Petitioner No. 3 - 172,400 equity shares of Rs. 10 each.

(4) Petitioner No. 4 - 176,500 equity shares of Rs. 10 each.

Total = 6,75,150

According to the petitioners the legally issued, subscribed and paid-up capital of R-1 company is as under:

(1) 35,05,000 equity shares of Rs. 10 each

(2) 1,30,06,500 preferential shares of Rs. 100 each Petitioners do not hold any preference shares of R-1.

2. Counsel for the petitioners argued that the petitioners satisfy the criteria under section 399 of the Act as they hold 19.18 per cent of the issued equity share capital of R-1 company. It was contended that a preferential shareholder is not concerned with the affairs of the company as his voting rights are limited to only such resolutions placed before the company which directly. affect the rights attached to such preference shares. A preference shareholder not only has a preferential right to dividend but also to repayment of capital in case of winding up of the company. Therefore, under section 399 of the Act the legislative intent must be held to exclude the preferential share capital of the company from the purview of the words "issued share capital of the company.

3. On the other hand the learned counsel for respondent Nos. 1 and 16 argued that the words "holding not less than 1/10th of the issued share capital of the company" in section 399 of the Act includes the equity as also the preferential share capital and, therefore, since the petitioner's shareholding falls far below 1/10th of the issued share capital of the company, the petition is liable to outright dismissal as the same is not maintainable under section 399 of the Act. Reliance was placed on Northern Projects Ltd. v. Blue Coasts Hotel & Resorts Ltd. [2007] 81 CLA 7 (CLB)/[2007] 140 CC 300 which held that the meaning of the words "issued share capital" in...

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