Delhi HC rejects permanent injunction against share transfer, upholds defendant's statutory shareholder status under Companies Rules 2014

Delhi HC denied plaintiff's application for permanent prohibitory injunction against defendant regarding share transfer restrictions. Court held that defendant's inclusion in company's register of shareholders followed statutorily mandated process under Companies Rules 2014, creating statutory presumption of validity. Plaintiff admitted executing Form SH-4 and defendant was consistently represented as shareholder in agreements between parties. Court found no merit in plaintiff's contention that share sale contract did not fructify under Sale of Goods Act 1930 or that title did not pass to defendant. However, court directed defendant to provide prior intimation before any proposed share transfers, considering ongoing suit and plaintiff's alternative damages claim.

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Issues involved:

1. Validity of the oral agreement dated 02.07.2018.
2. Payment of purchase consideration.
3. Transfer of title and ownership of shares.
4. Plaintiff's entitlement to rescind the agreement.
5. Plaintiff's claim for interim injunction.

Summary:

1. Validity of the oral agreement dated 02.07.2018:
The plaintiff sought a declaration that the oral agreement dated 02.07.2018 for the transfer of 2,447 equity shares in RIPL to the defendant was rescinded and terminated. The plaintiff also executed "Form SH-4" on the same date but claimed not to have received the purchase consideration.

2. Payment of purchase consideration:
The plaintiff alleged that the defendant did not pay the purchase consideration of INR 24,470. The defendant, however, contended that the amount was paid in cash at the time of the agreement. The plaintiff issued a "Rescission and Termination Notice" on 18.03.2023, asserting non-payment of consideration.

3. Transfer of title and ownership of shares:
The court noted that "Form SH-4" was duly executed, reflecting the consideration received, and the defendant was recorded as a shareholder in the company's register. The court emphasized that the statutory process under the Companies Act and Sale of Goods Act was followed, indicating the transfer of shares to the defendant.

4. Plaintiff's entitlement to rescind the agreement:
The court held that the plaintiff's contention of non-payment did not invalidate the contract. The Sale of Goods Act allows for the transfer of title even if the payment is postponed. The plaintiff's own legal notice admitted the postponement of payment, and the court stated that the plaintiff's remedy lies in suing for the unpaid consideration or claiming damages.

5. Plaintiff's claim for interim injunction:
The court found no merit in the plaintiff's case for interim relief. The plaintiff's acknowledgment of the defendant as a shareholder in multiple agreements and the statutory compliance in transferring shares negated the claim for an injunction. The court directed that the defendant must inform the court of any proposed transactions involving the disputed shares.

Conclusion:
The court dismissed the plaintiff's application for interim injunction, emphasizing that the observations were solely for deciding the application.

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