In Brief
A private company's board of directors sought to increase authorised capital from Rs. 1 crore to Rs. 2 crores on bank advice and allotted additional shares to existing shareholders in a 1:1 ratio, with an option to apply for more. Two minority shareholder groups challenged this as oppression and mismanagement. The Supreme Court held that since the increase in capital was bona fide and driven by business necessity, and since all shareholders were given equal opportunity to apply (but chose not to), the allotment could not be oppressive. The directors' incidental gain did not vitiate their decision. The Court partly allowed the appeal, setting aside the direction to forcibly allot shares to non-applicants while upholding the audit order.
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