Board defers forgery decision pending criminal court ruling, instructs name re-entry in register.

The Board deferred to the criminal court for a final decision on the alleged forgery in the transfer instrument due to the pending criminal case. They directed the company to re-enter the petitioner's name in the register of members and provide share certificates if the criminal court determined the petitioner's signature on the instrument was forged. No costs were awarded in the case.

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Issues:
Rectification of register of members in a company under Section 111A of the Companies Act, 1956 due to alleged illegal transfer of shares.

Analysis:
The petitioner sought rectification of the register of members of a company, alleging that 40,000 shares allotted to him were illegally transferred to the second respondent without his authorization. The petitioner claimed that no share certificates were issued to him, and he never executed any transfer instrument or received any consideration for the shares. The petitioner accused the managing director, who is the brother of the second respondent, of altering the register of members through forged transfer deeds. The company, in response, contended that the petitioner had willingly transferred the shares to the second respondent for a consideration of Rs. 20,000. The company maintained that the transfer was valid and that the second respondent's name was rightfully entered in the register of members for the shares.

During the proceedings, the petitioner filed a criminal case against the second respondent and the managing director, alleging forgery in the transfer instruments. The petitioner's advocate argued that the burden of proof regarding the alleged transfer of shares lies with the respondents, emphasizing that the company never issued share certificates for the 40,000 shares. The petitioner's advocate also highlighted the respondents' refusal to produce the transfer instruments, citing relevant case laws to support the argument that the Company Law Board (CLB) has jurisdiction to adjudicate the issue of share transfer despite the criminal case.

The respondents contended that the petition was not maintainable under Section 111A, as the petitioner, being the transferor, lacked standing to file the petition. They argued that the transfer occurred in 1997, and since the petition was filed beyond the two-month period, it was time-barred. The respondents claimed that the petitioner willingly transferred the shares and that he never complained about the non-issuance of share certificates during his tenure as a director. They also stated that the criminal case filed by the petitioner post-petition was already in progress and that producing the transfer instrument in the current proceeding could prejudice their case.

The Board considered the arguments and facts presented by both sides. They noted the pending criminal case regarding the alleged forgery in the transfer instrument. As the Board could not conclusively determine the authenticity of the petitioner's signature on the transfer instrument, they decided to defer to the criminal court for a final decision on the matter. The Board directed the company to re-enter the petitioner's name in the register of members and deliver the share certificates if the criminal court found the petitioner's signature on the instrument to be forged. No costs were awarded in the case.

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