ORDER
K.K. Balu, Vice-Chairman
1. This is an application filed by the applicants under Section 634A of the Companies Act, 1956 (“the Act”) for enforcement of the order dated 05.04.2006 of the Bench, wherein M/s. Vidya Pracharanam Private Limited (“the Company”) has been directed to issue further shares in favour of the applicants from and out of the unissued enhanced share capital of the Company in the manner specified therein. However, the Company failed to comply with the order dated 05-04.2006. Hence the applicants have come forward with the present application for enforcement of the subject order.
2. According to Sri T.K. Bhaskar, learned Counsel, the Company allotted in compliance with the order dated 05.04.2006, 85 shares as against the entitlement of 70 shares in favour of the first petitioner and 25 shares to the second petitioner. The Company remitting the consideration for these shares, issued the share certificates on 26.04.2006 in favour of the petitioners 1 & 2. However, the applicants, who are the petitioners 3 & 4 have not been allotted any shares in the A Company. The Company is bound to issue further shares in favour of the applicants from and out of the unissued enhanced share capital in proportionate to the existing shareholding in tune with the policy approved by the board of directors at the meeting held on 1 8.04.2003. After issuance of 110 shares in favour of the first petitioner (85 shares) and the second petitioner (25 shares) the total paid up share capital of the Company would account for 1162 equity shares as against 1200 equity shares of the Company. Thus 38 shares remain unissued. The first applicant holding two shares will be entitled to a minimum of 20 shares, while the second applicant having one share will be entitled to ten shares in the Company in accordance with the policy approved by the Board. Whereas the Company failed to allot any further shares as directed by the Bench, in spite of repeated requests made in writing by the applicants. The Company has not preferred any appeal against the order dated 05.04.2006 and therefore, the Company is bound to act as per the directions of the Bench.
3. According to Sri D. Sudhakaran, learned Counsel appearing for the Company, though the authorized capital of the Company was originally 200 equity shares of Rs. 100/- each, the paid up capital from the very inception itself was only 162 shares of Rs. 100/- each. The remaining 38 shares were not so far issued. Thereafter, the share capital was enhanced by 1000 shares of Rs. 100/- each out of which 110 shares of Rs. 100/- each alone remained unissued. The Company by oversight allotted 85 shares instead of 70 shares to the first petitioner and 25 shares to the second petitioner. In view of the issuance of the entire 110 unissued shares in favour of the petitioners 1 & 2, the Company could not allot any further shares to the applicants, who are the children of the petitioners. The original unissued 38 shares cannot be spared for issue of further shares in favour of the applicants. However, in the event of the first petitioner returning the excess allotted 15 share, the Company will be in a position to issue those shares to the applicants namely. 10 shares to the first applicant and 5 shares to the second applicant as per the principles adopted by the board of directors on the issue of further shares to the shareholders.
4. I have considered the submissions of learned Counsel. This Bench by an order dated 05.04.2006 directed as under:
(i) The Company shall issue further shares within twenty one days from receipt of this order in favour of the petitioners from and out of the unissued enhanced share capital in proportionate to their existing shareholding in accordance with the principles approved by the board of directors at the meeting held on 18.04.2003 subject to the following conditions:
(a) Any further issue of shares in favour of the petitioners in terms of the order of the Bench shall be subject to the final outcome of the civil suit in O.S. No. 233/2002 on the file of the Munsiff Court, Kayamkulam;
(b) The petitioners shall not sell or transfer any such additional shares, till the final termination of the proceedings in O.S. No. 233/2002.
(c) Any benefit or accrual to the additional shares will be dealt with by the petitioners as per the final verdict, which may be made in O.S. No. 233/2002.
The enhanced share capital of the Company accounts for 1200 shares of Rs. 100/- each as borne out by the share certificate dated 26.04.2006 issued in favour of the petitioners 1 & 2, in which ease after issuance of 110 shares in favour of the petitioners 1 & 2. there would remain 38 shares unissued. In view of this, the plea of the Company that there are no unissued shares for issuance in favour of the applicant must fail. It may be observed that the original authorized capital of the Company consisted of 200 equity shares of Rs. 100/- each, which got subsequently enhanced to 1200 equity shares. The paid up capital before the enhancement of the capital accounted for 162 shares of Rs. 100/- each and the remaining 38 shares were not admittedly issued. The Company should take into account these 38 shares which remained unissued for the purpose of complying with the order of this Bench, in which case there would be 38 shares available for issuance in favour of the applicants. It could be seen from the policy adopted by the board of directors that any member holding two shares has been allotted either 20 or 22 shares and any member holding one share allotted 10 shares out of the enhanced share capital. Applying this principle adopted by the board of directors, the first applicant, in my view, would atleast be entitled to 20 shares and the second applicant would be entitled to 10 shares. The applicants cannot be deprived of their right to the enhanced shares in the ratio and at the price approved on 18,04.2003 by the board of directors. There are, as already pointed out by me, 38 unissued shares from and out of the enhanced share capital of 1200 shares of Rs. 100/- each. In the circumstances, the Company is hereby directed to allot 20 shares in favour of the first applicant and 10 shares to the second applicant within 30 days from the date of receipt of this order. The applicants shall pay the consideration for the shares within the next 30 days, thereafter upon which the Company will within fifteen days issue the share certificates to the petitioners. The Company is at liberty to take steps for securing return of 15 shares allotted in excess in favour of the first petitioner. With these directions the application stands disposed off.