law: Companies Act, 1956
  Sec 81    -     Further
  
  issue of capital 
  (1) Where at any time after the expiry of two
  
  years from the formation of a company or at any time after the expiry of one
  
  year from the allotment of shares in that company made for the first time after
  
  its formation, whichever is earlier, it is proposed to increase the subscribed
  
  capital of the company by allotment of further shares, then,
  (a) such further shares shall be offered to
  
  the persons who, at the date of the offer, are holders of the equity shares of
  
  the company, in proportion, as nearly as circumstances admit, to the capital
  
  paid-up on those shares at that date ;
  (b) the offer aforesaid shall be made by
  
  notice specifying the number of shares offered and limiting a time not being
  
  less than fifteen days from the date of the offer within which the offer, if
  
  not accepted, will be deemed to have been declined ;
  (c) unless the articles of the company
  
  otherwise provide, the offer aforesaid shall be deemed to include a right
  
  exercisable by the person concerned to renounce the shares offered to him or
  
  any of them in favor of any other person ; and the notice referred to in clause
  
  (b) shall contain a statement of this right ;
  (d) after the expiry of the time specified in
  
  the notice aforesaid, or on receipt of earlier intimation from the person to
  
  whom such notice is given that he declines to accept the shares offered, the
  
  Board of directors may dispose of them in such manner as they think most
  
  beneficial to the company.
  Explanation. : In this sub-section,
  
  " equity share capital " and " equity shares " have the
  
  same meaning as in section 85.
  (1A) Notwithstanding anything contained in
  
  sub-section (1), the further shares aforesaid may be offered to any persons
  
  whether or not those persons include the persons referred to in clause (a) of
  
  sub-section (1) in any manner whatsoever :
  (a) if a special resolution to that effect is
  
  passed by the company in general meeting, or
  (b) where no such special resolution is
  
  passed, if the votes cast (whether on a show of hands, or on a poll, as the
  
  case may be) in favor of the proposal contained in the resolution moved in that
  
  general meeting (including the casting vote, if any, of the Chairman) by
  
  members who, being entitled so to do, vote in person, or where proxies are
  
  allowed, by proxy, exceed the votes, if any, cast against the proposal by
  
  members so entitled and voting and the Central Government is satisfied, on an
  
  application made by the Board of directors in this behalf, that the proposal is
  
  most beneficial to the company.
  (2) Nothing in clause (c) of sub-section (1)
  
  shall be deemed :
  (a) to extend the time within which the offer
  
  should be accepted, or
  (b) to authorize any person to exercise the
  
  right of renunciation for a second time, on the ground that the person in whose
  
  favor the renunciation was first made has declined to take the shares comprised
  
  in the renunciation.
  (3) Nothing in this section shall apply :
  (a) to a private company ; or
  (b) to the increase of the subscribed capital
  
  of a public company caused by the exercise of an option attached to debentures
  
  issued or loans raised by the company :
  (i) to convert such debentures or loans into
  
  shares in the company, or
  (ii) to subscribe for shares in the company :
  Provided  that the terms of issue of such
  
  debentures or the terms of such loans include a term providing for such option
  
  and such term :
  (a) either has been approved by the Central
  
  Government before the issue of debentures or the raising of the loans, or is in
  
  conformity with the rules, if any, made by that Government in this behalf; and
  (b) in the case of debentures or loans other
  
  than debentures issued to, or loans obtained from, the Government or any
  
  institution specified by the Central Government in this behalf, has also been
  
  approved by a special resolution passed by the company in general meeting
  
  before the issue of the debentures or the raising of the loans.
  (4) Notwithstanding anything contained in the
  
  foregoing provisions of this section, where any debentures have been issued to,
  
  or loans have been obtained from, the Government by a company, whether such
  
  debentures have been issued or loans have been obtained before or after the
  
  commencement of the Companies (Amendment) Act, 1963 (53 of 1963), the Central
  
  Government may, if in its opinion it is necessary in the public interest so to
  
  do, by order, direct that such debentures or loans or any part thereof shall be
  
  converted into shares in the company on such terms and conditions as appear to
  
  that Government to be reasonable in the circumstances of the case, even if the
  
  terms of issue of such debentures or the terms of such loans do not include a
  
  term providing for an option for such conversion.
  (5) In determining the terms and conditions of
  
  such conversion, the Central Government shall have due regard to the following
  
  circumstances, that is to say, the financial position of the company, the terms
  
  of issue of the debentures or the terms of the loans, as the case may be, the
  
  rate of interest payable on the debentures or the loans, the capital of the
  
  company, its loan liabilities, its reserves, its profits during the preceding
  
  five years and the current market price of the shares in the company.
  (6) A copy of every order proposed to be
  
  issued by the Central Government under sub-section (4) shall be laid in draft
  
  before each House of Parliament while it is in session for a total period of
  
  thirty days which may be comprised in one session or in two or more successive
  
  sessions.
  (7) If the terms and conditions of such
  
  conversion are not acceptable to the company, the company may, within thirty
  
  days from the date of communication to it of such order or within such further
  
  time as may be granted by the Court, prefer an appeal to the Court in regard to
  
  such terms and conditions and the decision of the Court on such appeal and,
  
  subject only to such decision, the order of the Central Government under
  
  sub-section (4) shall be final and conclusive.