(i) According to section 81 of the companies Act, 1956 where any debentures or loan have been obtained from the Govt. by a company whether before or after the commencement of the companies Act, the Central Government is in opinion directs to convert those debentures or loans into the shares in the company on such terms and conditions as it thinks reasonable even when there is no provision for such conversion.
(ii) Following are the circumstances on which Central Government pays due regard in determining the terms and conditions of such conversion:-
(i) Company’s financial position.
(ii) The terms of issue of debenture loans.
(iii) The capital of the company, its loan liability, its reserves, its profit during the preceding 5 years.
(iv) Interest rates payable on debenture and loans.
(v) The current market price of the shares in the company.
A copy of every order passed by the Central Government must be drafted before each house of parliament.
(iii) Remedies open to the company :-
If the terms and conditions of such conversion are not acceptable to the company, the company may, within 30 days from having knowledge of such order or within such further time, as may be given by the court make an appeal to the court in reference to such terms and conditions. The decision of the court on such appeal will be final and conclusive.