2002 (1) TMI 1321 - Board - Companies Law

Dismissal of Petition for Non-Joinder and Lack of Fraud Proof

The petition was dismissed due to the non-joinder of necessary parties and the inability to establish fraud and forgery conclusively. The ... - Issues Involved:1. Allegation of fraudulent transfer of shares.2. Maintainability of the petition under Section 111 of the Companies Act, 1956.3. Limitation period for filing the petition.4. Validity of the transfer deeds and signatures.5. Compliance with the Listing Agreement and relevant circulars.6. Non-joinder of necessary parties.Issue-wise Detailed Analysis:1. Allegation of Fraudulent Transfer of Shares:The petitioner, a shareholder of the respondent company, alleged that 500 of his shares were fraudulently transferred based on forged transfer deeds. The petitioner claimed that the transfer was executed without following proper procedures and despite his communication to stop the transfer. He requested the restoration of the shares or compensation for their value, including dividends and interest.2. Maintainability of the Petition under Section 111:The respondent raised a preliminary objection regarding the maintainability of the petition under Section 111, stating it did not apply to public limited companies. The Board, upon an oral prayer by the petitioner's counsel, treated the petition as filed under Section 111A, thereby addressing the maintainability issue.3. Limitation Period for Filing the Petition:The respondent argued that the petition was barred by limitation as the cause of action arose in August/September 1996, but the petition was filed after about three years. The Board held that since the petitioner alleged fraudulent transfer based on forged signatures, the period of limitation could not be strictly applied, and thus proceeded to hear the petition on merits.4. Validity of the Transfer Deeds and Signatures:The petitioner contended that the respondent-company acted negligently by transferring the shares without proper verification of signatures, which were allegedly forged. The respondent argued that the transfers were executed based on valid transfer deeds with signatures duly attested by a banker, as per the requirements of the Listing Agreement and the Circular dated 22-3-1993 issued by the Ministry of Law, Justice and Company Affairs.5. Compliance with the Listing Agreement and Relevant Circulars:The respondent emphasized compliance with Clause 12A of the Listing Agreement, which mandates that if the transferor's signature is attested by an authorized person, the company should not refuse the transfer on the ground of signature difference unless fraud or forgery is suspected. The respondent-company argued that they had followed this clause and the circular, transferring the shares based on attested signatures. The Board found substance in the respondent's submission, noting that the company had issued warning notices for minor signature differences and transferred the shares as per the stipulated procedures.6. Non-joinder of Necessary Parties:The Board noted that the petitioner had not impleaded the transferees or the brokers involved in the transaction, which was a serious defect. Given that the shares were dematerialized and could have changed hands multiple times, the absence of these parties made it impossible to prove fraud and forgery conclusively. The Board referenced a precedent requiring all persons to whom shares were transferred to be parties to the proceedings for effective adjudication.Conclusion:The petition was dismissed due to the non-joinder of necessary parties and the inability to establish fraud and forgery conclusively. The Board found that the respondent-company had acted in accordance with the Listing Agreement and relevant circulars, and no effective order could be passed in the absence of the transferees and brokers involved. No order as to cost was made.