Sunglory Apparels Ltd. and Ors. Vs. Bangladesh Commerce Bank Limited and Ors.
Source: LEX/BDHC/0430/2013
Case Reference/Source: Company Matter No. 15 of 2011
Decided on: May 13, 2013
Relevant Laws:
Companies Act, 1994 - Sections 43, 155, and 233
Key Takeaways: A perpetual injunction to restrain the allotment of shares, do not fall within the scope of Section 233 of the Companies Act, 1994.
Facts of the Case:
The petitioners, Sunglory Apparels Ltd. and others, are private limited companies and shareholders of Bangladesh Commerce Bank Limited (BCBL), which was holding not less than one-tenth of the issued shares. The case revolves around the issuance of right shares by BCBL to raise its paid-up capital.
BCBL offered right shares to all its shareholders, including the petitioners and the Government of Bangladesh (Respondent No. 4). The subscription period for the right shares was from December 14, 2010, to December 20, 2010. While the petitioners and other shareholders in the “Kha” (scheduled banks and financial institutions) and “G” (Amanatkari) classes subscribed to their shares and made payments within the stipulated time, the Government of Bangladesh, a shareholder in the “Ka” class (promoters), accepted the offer on December 20, 2010, but made the payment of Tk. 37.50 crore on December 28, 2010, after the deadline.
The petitioners contended that the late payment by the government should be considered a declination of the offer. They argued that the subsequent allotment of shares to the government on December 30, 2010, was illegal, discriminatory, and prejudicial to their interests. They filed an application under Section 233 of the Companies Act, 1994, and requested to cancel the allotment of right shares to the Government of Bangladesh. They wanted those shares to be given to the existing shareholders on a pro-rata basis. The petitioners argued that the Board of Directors decision was a case of mismanagement and oppression of minority shareholders.
The respondents, including BCBL and the Government of Bangladesh, argued that the government’s acceptance of the offer was unequivocal and made within the deadline. They asserted that the delay in payment was due to procedural formalities inherent in government transactions and that the government’s commitment to pay was a sovereign assurance equivalent to cash payment. They further contended that the petitioners had not suffered any prejudice as they had received their full entitlement of right shares. The respondents also argued that the matter was a dispute over share allotment, which should be addressed under Section 43 (rectification of the share register) rather than Section 233 of the Companies Act, and that the Board of Directors acted within its authority under Section 155 of the Act.
Judgment:
The High Court Division dismissed the petition, because it was misconceived and without merit. The court held that the petitioners failed to establish a case of discrimination, mismanagement, or oppression.
The court reasoned that the Government of Bangladesh had accepted the offer for right shares within the specified time and provided a clear assurance of payment. This assurance from a sovereign entity, the court viewed, was as good as a cash payment. The delay in the actual transfer of funds was due to governmental procedural requirements and did not invalidate the acceptance.
Furthermore, the court found no evidence of discrimination. The petitioners had received their full allotment of right shares and had not been negatively impacted by the allotment to the government. The court emphasized that the petitioners had no pre-emptive right or legitimate expectation to the shares allotted to the government.
The judgment also clarified that the relief sought by the petitioners, a perpetual injunction to restrain the allotment of shares, did not fall within the scope of Section 233 of the Companies Act, 1994, which is intended to protect minority shareholders from oppressive conduct and mismanagement. The court concluded that the Board of Director decision to allot the right shares to the Government of Bangladesh was competent and did not prejudice the interests of the petitioners or the bank. The parties were directed to bear their own costs.
