2018 (3) TMI 1438 - HC - Companies Law

Court upholds order to rectify register of members and issue share certificates

The court dismissed the company appeal, upholding the Company Law Board's order to rectify the register of members, issue fresh share certificates, and ... Prayer seeking re-instatement of shares in the name of the first respondent by directing the appellant to rectify the register of members - Held that:- There is absolutely no material to hold that the first respondent was put on notice, received the option form as per approved scheme and the cheque sent. A fraud was committed against the first respondent though not by the appellant, but by some one acted on its behalf, resulting in registration of case in Crime No.57 of 1999 under Sections 406, 420 and 120 of IPC. It is also an admitted fact that the members of the first respondent was fraudulently changed. Hence, as rightly found by the Company Law Board, such a negligence on the part of the appellant cannot enure to its benefit as against the first respondent. The change of address of the first respondent was expressly unauthorised and illegal. The first respondent has taken a consistent stand throughout. It is not, as if, she has made the claim only after seeking escalation of the price of the shares. As rightly submitted by the learned Senior Counsel appearing for the first respondent, the Scheme, as approved by the Court cannot have an application to the person, who was not being issued with even the option form as a fraud has been committed against her. Thus, the abovesaid decision approving the scheme cannot have an application to the case of the first respondent. The concession given by the learned counsel and accepted by the Court has been made applicable to those shareholders, who expressed their desire to obtain shares. Thus, the aforesaid proceedings, as rightly held by the Company Law Board, cannot bind the first respondent. This Court does not find any complicated questions of fact involved. As discussed earlier, there is no dispute on primary facts. Though the proceedings before the Company Law Board is summary in nature, as no complicated questions of fact involved warranting a detailed trial on examination of parties, this Court is unable to accept the submissions made by the learned counsel appearing for the appellant in this regard. Company appeal dismissed. Issues Involved:1. Re-instatement of shares and rectification of the register of members.2. Fraudulent change of address and non-receipt of dividends and notices.3. Validity and implementation of the Scheme of Arrangement.4. Delay and laches in filing the company petition.5. Jurisdiction of the Company Law Board under Section 111A read with 111(4) of the Companies Act, 1956.Detailed Analysis:1. Re-instatement of shares and rectification of the register of members:The appellant challenged the order of the Company Law Board (CLB) which directed the appellant to rectify the register of members by reinstating the name of the first respondent to an extent of 2911 equity shares and issue fresh share certificates. The CLB also declared the entitlement of the first respondent to bonus shares and dividends. The first respondent had originally purchased equity shares and fully convertible debentures in the appellant company, which were later converted into equity shares.2. Fraudulent change of address and non-receipt of dividends and notices:The first respondent's address was changed without her knowledge, leading to non-receipt of dividends and notices. This was acknowledged as a fraudulent act, resulting in the first respondent not being informed about the buyback offer and other relevant communications. The first respondent consistently pursued the matter, seeking issuance of share certificates and unpaid dividends.3. Validity and implementation of the Scheme of Arrangement:The Scheme of Arrangement involved the merger of Sterlite Industries (India) Limited and Sterlite Optical Technologies Limited, approved by the High Court of Bombay. The scheme included provisions for buying back shares from shareholders who did not express their intention to continue holding shares. The first respondent contended that she was not put on notice about the scheme and did not receive the option form or the cheque sent by the company. The court noted that the scheme could not bind the first respondent due to the fraud committed against her.4. Delay and laches in filing the company petition:The appellant argued that the company petition should have been dismissed on the grounds of delay and laches. However, the court observed that the first respondent had been actively pursuing her case since 2001, and there was no material to suggest that she was put on notice about the scheme. The court concluded that the first respondent's consistent efforts to address the issue negated the appellant's argument of delay and laches.5. Jurisdiction of the Company Law Board under Section 111A read with 111(4) of the Companies Act, 1956:The appellant contended that the jurisdiction of the CLB under Section 111A read with 111(4) of the Companies Act, 1956, is limited and does not extend to adjudicating disputed questions of fact. The court, however, found that the primary facts were not in dispute and that the CLB's proceedings were summary in nature. The court emphasized that the negligence and fraud committed against the first respondent justified the CLB's decision to grant relief.Conclusion:The court dismissed the company appeal, upholding the CLB's order to rectify the register of members, issue fresh share certificates, and grant entitlement to bonus shares and dividends to the first respondent. The court found no merit in the appellant's arguments regarding delay, laches, and jurisdiction of the CLB. The court also highlighted the consistent efforts of the first respondent to seek redress and the fraudulent actions that prevented her from receiving relevant communications. Consequently, the connected miscellaneous petition was also dismissed, and no costs were awarded.