JUDGMENT :

N.J. PANDYA, J.

1. This is a petition filed by some of the shareholders of respondent No. 6 company seeking reliefs under sections 397 and 398 read with section 402 of the Indian Companies Act, 1956 (hereinafter referred to as 'the said Act').

2. Respondents No. 6 company came to be incorporated as a public limited company having name 'Gaekwad Investment Corporation Limited' (GIC for short). In the same year, and probably at about the same time, Baroda Rayon Corporation Limited was also incorporated and was managed by Gaekwad Chinoi and Company (P) Ltd., as managing agents.

3. The GIC right from the beginning had 425 shares of which late Shri Fatesinhrao Gaekwad (FRG for short) held 301 shares and, out of that, 300 were made over to or were owned by J.K. Gorpade Trust. However, FRG was shown in the company register to be the holder of the entire lot of 301 shares. Rest of the shares were held by different family members and so far as the contesting respondents are concerned, respondents No. I and 2, at the relevant time, between them, had only six shares. The details of the shareholding are to be found at pages 412 and 413 of the paper book.

4. More or less, this continued to be the position right upto the year 1987 and to be precise till 10.11.1987 when the Board of directors of GIC mooted a proposal for increasing the share capital of GIC. This was possible as most of the authorised capital remained unissued.

5. Accordingly, in the said meeting of 10.11.1987, the Board of directors recommended holding of extraordinary general meeting of GIC on 17.12.1987 to consider the issue of capital and also to consider other incidental resolutions pertaining to the same.

6. The meeting came to be held on 17.12.1987 chaired by Shri P.U. Rana. The recommendation of the Board was considered and accepted. The Board had recommended increase in the capital mainly in the light of the financial position of GIC. Accordingly, a meeting authorised by the Board of directors was convened, which in turn left the matter to its managing committee. That committee decided to issue a letter of offer. It came to be issued on 12.12.1988. The members were informed to convey their acceptance for the number of shares which they would wish to subscribe to and they were to convey their wish within 3 weeks from the date of receipt of the letter. The last date for receipt of the reply was fixed to be 10.3.1988. No reply by that date would result into proceeding on that basis that the non-replying member or non-responding member does not want to subscribe.

7. The said letter dated 12.2.1988 was produced at the Board meeting of 13 February 1988 where said FRG, respondent No. 1, and Mr. P.H. Chinoi were present.

8. By 10th of March, 1988, nothing was heard of from any of the members. This led to a peculiar situation. There were shares offered, but none was ready to subscribe to. This continued to be the position upto 21.3.1988 when, a decision was taken by the managing committee. According to this decision, 8,000 shares were kept apart for FRG, 6,475 shares were kept apart for the first respondent and others, 500 shares were kept apart for respondent No. 12, who supports the petitioners and 25 shares were kept apart for respondent No. 13 who also supports the petitioners. Allotments were to be made as and when the amounts were received.

9. In a Board meeting held on 16.4.1988, respondent No. I and one of the directors, Shri H.A. Shinde, were authorised to sign the share certificates and the company secretary, Mr. M.N. Khade, was authorised to countersign the same.

10. Between March and May, 1988, FRG failed to subscribe to any shares, while respondent No. I and his family members subscribed for 6,475 shares and that is why between April and June, 1988, share certificates signed by respondent No. I and Shri H.A. Shinde and countersigned by company secretary, Mr. Khade, came to be issued to them. Respondent No. 13 also likewise came to be allotted 25 shares.

11. So far