S. Muralidhar,J.

1. This is an application under Order VII Rule 11 read with Section 151 of the Code of Civil Procedure 1908 („CPC) seeking rejection of the plaint. The case of the Plaintiff

2. The Plaintiff H.B. Stockholdings Limited („HBSL) claims to hold 24.8% of expanded issued and paid-up capital of DCM Shriram Industries Limited („DSIL), Defendant No.1 and thereby being its single largest shareholder. On 22nd September 2008, the Plaintiff received the Annual Report and audited accounts of DSIL for the year ending 31st March 2008, which had been approved by the Board of Directors of DSIL on 25th June 2008. According to the Plaintiff, the Annual Report and audited accounts revealed that they were “grossly inaccurate and/or lacking in several material particulars” and “do not reflect a true and fair view of the Companys affairs, apart from being in violation of the provisions of the Companies Act, 1956 („Act), the provisions of the Listing Agreement with the Bombay Stock Exchange (BSE) and the Companys own Code of Business Conduct and Ethics.” It is claimed that these constituted “unjust and unlawful acts of the Defendants” which were likely to “cause irreparable harm and injury not only to the Plaintiff but also to over one lakh other shareholders of the Defendant No.1 company.”

3. Tracing the background to the present suit, it is stated in the plaint that Versa Trading Limited („VTL?) was a wholly owned subsidiary of DSIL. In September 2002, DSIL sold 50.02% of its shareholding in VTL at 10 paise per share against its acquisition price of Rs.10/- per share to three entities viz., AKS International Limited (AIL), RPG Securities Limited (RSL) and Indus Netlink Limited (INL). However, a perusal of the Annual Reports of these three companies for the year ending 31st March 2006 did not reflect any investment in VTL. It had, therefore, to be inferred that the three companies were benami holders of the said shares. The balance 49.98% shares held by DSIL in VTL were claimed to have been sold in 2007-08 but the price at which they were sold was not known. According to the Plaintiff, it was strange that DSIL would sell its shareholding in VTL when it knew that more than Rs.18 crores would be raised by VTL itself for investment in DSIL. Moreover, VTL owed DSIL about Rs.7.8 crores as on 31st March 2007. Out of this debt, a sum of Rs.7 crores was converted into redeemable non-cumulative preference shares. However, the Directors Report dated 30th July 2007 of DSIL as well as of VTL did not reflect any increase in the authorized capital of VTL. They also made no mention of the issuance of any preference shares in lieu of the debt owed by VTL to DSIL. It is stated that VTL could not have possibly invested Rs.18.63 crores in DSIL instead of repaying the debt. DSILs balance sheet showed that DSIL had made a 100% provision for the Rs.7 crores invested in VTL.

4. According to the Plaintiff, the Annual Return of VTL dated 30th August 2007 filed with the Registrar of Companies („ROC) did not reflect the increase in the share capital or the issuance of preference shares to DSIL. The shareholding pattern in terms of the Annual Return showed that DSIL held 49.98% shares, and the three companies AIL, RSL and INL 16.67%, 16.67% and 16.68% shares respectively. The six individuals shown as the remaining shareholders of VTL were either DSILs or VTLs employees. As already mentioned in the Annual Returns of the three companies i.e AIL, RSL and INL for the years ending 31st March 2006 and 31st March 2007, their investment in VTL was not shown. The Auditors Report of VTL for the year ending 31st March 2007 showed that VTL had accumulated losses exceeding the companys share capital, and yet it was investing Rs.18.63 crores in DSIL.

5. According to the Plaintiff, although DSIL itself had not indicated how and to whom it had sold the remaining 49.98% shares held by it in VTL, enquiries revealed