A legal row has erupted between directors of an Irish company, whose primary asset is a troubled theme-restaurant business in the US, over the nature of a rescue package for the US business.

Mr Michael Howard, for three of the directors of Mars 2112 Group Ltd, yesterday secured an interim injunction at the High Court in Dublin. The injunction restrains Mr Paschal Phelan from taking any further steps in relation to a proposed rights issue which, counsel for Mr Phelan argued, was intended to save the US business from bankruptcy.

However, three of Mr Phelan's fellow directors - Mr Tim Brosnan, Mr Paul McGowan and Mr Patrick Gleeson - say a team of US experts has already put together rescue proposals for the business, which has been under Chapter 11 bankcrupcy protection for the past two years, and these should be implemented.

They claim Mr Phelan is seeking to undermine the US proposals and that the proposed rights issue would dilute their shareholding and undermine their rights.

If they were forced to take up the rights issue and the US company was wound up, they would be unable to recover any of the $18 million they had invested.

The three directors say they do not wish to invest any more money in the company pending the determination of a number of matters, including the composition of the board and the operation of a dispute-resolution procedure.

The trio had previously sought an injunction to prevent a board meeting dealing with the proposed rights issue taking place last week.

They claimed this was part of an "orchestrated campaign" by Mr Phelan of excluding and preventing the plaintiffs from exercising their rights as directors. They alleged the meeting was invalid because no notice of it was given to a Mr Tony Hickey, whom they claim is a director, while notice was given to Mr Mark Phelan, whom they allege is not a director.

However, the application to stop the meeting was refused after the court noted that, even if the meeting proceeded and resolutions were adopted, these could be set aside later if the plaintiffs' claims were upheld regarding the convening of the meeting. Instead, the court returned the matter to yesterday.

The proceedings arise in relation to Mars 2112, a 400-seat, 35,000 sq ft restaurant near Times Square in New York that opened in September 1998. The business is owned by Irish-registered companies Mars 2112 Group Ltd and Mars 2112 Global Ltd.

A second Mars 2112 restaurant was opened in Chicago in October 2000 at a cost of $8 million but later closed.

The New York business was said to have been affected by the September 11th, 2001, terrorist attacks but to have improved since.

In court yesterday, Mr Howard said there had been "a significant breakdown" of relations between Mr Phelan and other investor/ directors of Mars 2112. The board meeting that his clients had sought to stop had in fact taken place and those present had resolved to engage in a rights issue.

His clients represented 63 per cent of the investors and shareholders in the company and had raised some $18 of $21 million invested in the project.

However, they had no wish to invest further in the company until a number of issues were dealt with. These included the appointment of directors, the position of the chairman and identification of who constitutes the board of directors. He said Mr Phelan was obliged to give 107 business days notice of a board meeting to the other investor/ directors but notification of a meeting of July 8th (later reschedule to July 14th) was instead given, via email, on June 7th. Email notification was not provided for in the articles of the company.

Last week's board meeting was in breach of the articles of the company and of the subscription agreement and he was seeking to have the decisions made at that meeting declared invalid and to restrain any steps being taken to further promote the rights issue.

His side also wanted the company's dispute resolution procedure put into effect. If that was not done, the company had no future, he said.

Mr Howard said Mr Phelan had engaged a solicitor and was looking for time to put in an affidavit. But, counsel said, his clients could be severely prejudiced if the case went back and the rights issue proceeded.

Counsel for Mr Phelan said his side wanted a week to reply. The company's principal asset was a business in the US, which was in Chapter 11 protection. The purpose of the rights issue was to save this asset.

Mr Phelan was not seeking to undermine the proposed rescue package, he was merely looking at sources of funding for it. He had also agreed to the dispute resolution procedure.

Mr Justice Kelly said the only evidence he had so far was from the three plaintiff directors.

It appeared the plaintiffs had raised serious issues regarding the validity of the board meeting and the share issue and these met the criteria for the intervention of the court.

The judge granted an interim order restraining Mr Phelan from implementing or acting on the rights issue and returned the matter to next week.