2021 (4) TMI 1061 - Tri - Companies Law

Shareholders' petition dismissed under Companies Act due to lack of standing and clean hands

The Tribunal held that the Petitioners' composite petition under Sections 397/398 of the Companies Act was not maintainable as they ceased to be ... Transfer of shares - Petitioners are alleged to be non-shareholders of the Company, as early as 2007-2008 - time limitation - HELD THAT:- In the instant case, as per the contentions made by the Parties, it should be deemed that valid consideration has been paid, executed valid transfer deed and surrendered original share certificates to the Transferee. However, the Petitioner No. 1 alleges that he does not remember executing any share transfer form in connection to the R1 Company and even if executed, it would not bind on him as it is un-intentional. Similarly, while accepting to surrendering the impugned shares to the Respondents, he has further contended that they were given in different context and similarly about the consideration. Having signed Form for share transfer, surrendering original share certificates etc, the Petitioner is estopped from disputing them, that too, after lapse of considerable time. Moreover, the Petitioners are not strangers to the Company and pretending ignorance about the impugned transaction are baseless and untenable, and same are liable to be rejected and thus, those allegations/contentions are hereby rejected. The Petitioners are admittedly aggrieved by the deletion of their names as Members in the Company, as early as on 21.02.2008, however, the Petitioners chose to file the present petition only on 03.08.2012 before the then Company Law Board (CLB), Chennai Bench, after lapse of more than four years on the pretext that they are aware of it only in the year 2012, and the grounds raised on behalf Petitioners are un-tenable and baseless. Therefore, the contention of the Petitioners that the petition is within limitation is not at all tenable and liable to be rejected - Since, the Tribunal held that the Petitioners ceased to be Members of the Company as early as on 21.02.2008 and the Petition under Sections 397/398 of Companies Act, 1956 are not maintainable. Therefore, the allegations with regard to acts of oppression and mismanagement do not arise. Petition dismissed. Issues Involved1. Maintainability of the composite petition under Sections 111, 397 & 398 R/w. Section 402 and 406 of the Companies Act.2. Legality of the transfer of shares by the Respondents.3. Petitioners' approach to the Tribunal with clean hands.4. Bar of laches and limitation on the petition.5. Entitlement of the Petitioners for condonation of delay.Detailed Analysis1. Maintainability of the Composite Petition:The Tribunal considered whether the petition filed under Sections 111, 397 & 398 R/w. Section 402 and 406 of the Companies Act is maintainable, given the Petitioners were alleged to be non-shareholders since 2007-2008. The Tribunal noted that the Petitioners were aware of the company's affairs for decades and have been involved in litigation for a long time. The Tribunal held that the Petitioners' claims of ignorance about the share transfers were baseless and untenable. The Tribunal found that the Petitioners had executed valid share transfer documents and surrendered original share certificates, thus estopping them from disputing the transfers after a considerable time.2. Legality of the Share Transfer:The Tribunal examined whether the Respondents acted in accordance with law in transferring the shares. The Respondents provided evidence, including the extract of the Minutes of the Board Meeting held on 21.02.2008, which showed that the Board reviewed and approved the share transfer documents. The Tribunal found that the transfer was for valid consideration, executed in a valid form, and the original shares were surrendered. The non-production of the share transfer forms at a later time was deemed not to affect the legality of the transfer, given the Petitioners' failure to produce primary evidence to support their claims.3. Petitioners' Approach with Clean Hands:The Tribunal emphasized that parties seeking equitable relief must come with clean hands. The Petitioners were found to have mixed various facts and made untenable claims regarding their knowledge of the share transfer and consideration. The Tribunal noted that the Petitioners failed to produce the original share certificates and did not file the petition within the legal timeframe. The Tribunal rejected the Petitioners' selective reliance on case law, which was inapplicable to the present case's facts and circumstances.4. Bar of Laches and Limitation:The Tribunal addressed whether the petition was barred by laches and limitation. The Petitioners filed the petition on 03.08.2012, more than four years after the share transfers on 21.02.2008, claiming they only became aware in 2012. The Tribunal found this contention untenable and baseless, noting that all Petitioners could not plead ignorance. The Tribunal held that the petition was indeed barred by laches and limitation, as the Petitioners did not file any application seeking to condone the delay.5. Entitlement for Condonation of Delay:The Tribunal noted that the Petitioners did not file any Miscellaneous Application to seek condonation of the delay. The Respondents had raised the issue of laches and limitation, seeking dismissal of the petition on these grounds. The Tribunal found no justification to condone the delay, given the Petitioners' failure to provide sufficient reasons for their late filing.Conclusion:The Tribunal concluded that the Petitioners ceased to be members of the company as early as 21.02.2008, and the petition under Sections 397/398 of the Companies Act was not maintainable. Consequently, the allegations of oppression and mismanagement did not arise. The Tribunal dismissed the company petition, upholding the legality of the share transfers and finding no illegality or irregularity in the Respondents' actions. All related applications were also dismissed, with no order as to costs.