2003 (5) TMI 525 - Board - Companies Law

Court Upholds Petition Under Companies Act, 1956; Invalidates Share Transfer

Sailesh Rajnikant Parekh Versus Starline Travels Private Limited, Sanjay Jayvarthanavelu, Asha Raje Geakwad and Bipin B. Shah

The court found the petition maintainable under Section 111A of the Companies Act, 1956, due to the company's change in status. The petition was not ... - Issues Involved:1. Applicability of Section 111/111A of the Companies Act, 1956.2. Maintainability of the petition under the Limitation Act, 1963.3. Validity of the transfer of shares.4. Allegations of fraud and collusion.5. Rectification of the register of members.Issue-wise Detailed Analysis:1. Applicability of Section 111/111A of the Companies Act, 1956:The petition was initially filed under Section 111 of the Companies Act, 1956, which applies to private limited companies. However, at the time of filing the petition, the company had become a public limited company. The judgment notes, 'With coming into force of Sub-section (14) of Section 111, with effect from 20.09.1995 this section is not applicable to public companies.' The petitioner invoked Section 111A, which applies to public limited companies. The judgment states, 'I have treated this petition as filed under Section 111A and accordingly considered the same on merits under Section 111A to meet the ends of justice.'2. Maintainability of the Petition under the Limitation Act, 1963:The respondents argued that the petition was barred by limitation as it was filed in 1999 for a cause of action that arose in 1995. The judgment refers to the decision of the Calcutta High Court in Smt. Nupur Mitra v. Basubani Pvt. Ltd., upheld by the Supreme Court, which states that the Limitation Act applies to proceedings under Section 111. The judgment concludes, 'In the present case, it is on record that the cause of action arose in March, 1997, but the petition was filed in May, 1999, within a period of three years.' Therefore, the petition was deemed maintainable.3. Validity of the Transfer of Shares:The petitioner claimed that the company failed to register the transfer of shares in his favor since March 1997. The respondents contended that the shares were transferred to the third respondent in 1995 and subsequently to the second respondent. The judgment highlights discrepancies in the transfer process, noting, 'the mandatory provisions of Section 108 were not complied with while registering the transfer of shares in favour of the third respondent.' It also points out that the duplicate share certificates issued to the third respondent were invalid, stating, 'The duplicate share certificates so issued, in my view, amount to dead security.'4. Allegations of Fraud and Collusion:The petitioner alleged that the company colluded with other respondents to fraudulently transfer the shares. The judgment finds merit in these allegations, noting, 'the plea of the respondents is not convincing and must fail.' It also states, 'the period of limitation, if any, cannot strictly be applied, as held in Bhuwaneshwar Nath Nigam v. Hindustan Lever Ltd.'5. Rectification of the Register of Members:The judgment directs the company to rectify its register of members by registering the transfer of shares in the petitioner's name and deleting the second respondent's name. It states, 'it is hereby directed that the Company shall rectify its register of members by registering the transfer of impugned shares in the name of the petitioner and deleting the name of the second respondent within thirty days of receipt of the order.'Conclusion:The judgment concludes with the directive for the company to rectify its register of members and return the original share certificates to the petitioner, stating, 'With the above directions, the petition stands disposed of. No order as to costs.'