NATIONAL LAW SCHOOL OF STUDY AND RESEARCH IN LAW, RANCHI

COMPANY LAW

MOOT PROBLEM 6

Avalanche Pvt. Ltd. is a company of which 30% shares are held by Bellhouse Pvt. Ltd. B Pvt.
Ltd. by a special resolution held in its Annual General Meeting to convert itself into a Public
Limited Company.

Bellhouse was converted into a Public Ltd. Co., now being in the style and name Bellhouse
Ltd. However, Bellhouse Ltd. did not shred its shareholding of Avalanche Pvt. Ltd. Knowing
the fact of this conversion, the Board of Directors had not taken any measure and was not
discussed in any meeting. All the members were aware of this conversion but no measures
were taken.

Avalanche Pvt. Ltd. had prior to the conversion of Bellhouse Pvt. Ltd. into Bellhouse Ltd.
permitted transfer of 5% shares of Mr. Sandeep Vasmatkar to Mrs. Naveli Bhosale, Mr.
Sandeep Vasmatkar, still having other 2%; 3% shares of Late Mr. Swapnil Deshpande to his
legal heirs, Mr. Ashish Deshpande, Mr. Abhijeet Deshpande and Mr. Mangesh Deshpande
and; 1.3% of 6% shares held by Mrs. Bhagyashree Nagakar to Ms. Preeti Deshpande and six
months have elapsed from the date of this transfer.

The transfer of these shares has led to increase in the number of members, the number of
members now being 53.

Ms. Renu Lohade has proposed to transfer her half shares to her sister, Ms. Sayli Kasliwal.
The Board has now discovered that the limit of maximum number of members has exceeded.
The members have rejected her application on that basis. Also the members are now seeking
reversals of the transfers sought.

No intimation has been sent to the Registrar of Companies for cancelling the deemed
conversion within three months from conversion of Belhouse Ltd. and eight months from
increase in number of members. However, the Board of Directors have now sent an
intimation to the Registrar of Companies, as 50% of the members do not wish to convert the
company into a public company. Also, the Board of Directors, on behalf of the company has
sent a notice to Bellhouse Ltd. to shred its holding in Avalanche Pvt. Ltd.

Mrs. Naveli Bhosale, Mr. Sandeep Vasmatkar, Mr. Ashish Deshpande, Mr. Abhijeet
Deshpande, Mr. Mangesh Deshpande, Mrs. Bhagyashree Nagarkar, Ms. Preeti Deshpande
and Ms. Renu Lohade have approached the Company Law Tribunal, aggrieved from the
decision of reversal, where in the case of Late Mr. Swapnil Deshpande, the Board has
directed that only one legal heir shall be in the position to acquire the shares or all of them in
joint names.

ISSUES:

1. Whether Avalanche Pvt. Ltd. has become a deemed public company?

2. Whether the Avalanche Pvt. Ltd. is in a position to reconvert itself into a private
company? Can reversals of transfers be made?