2024 (8) TMI 1217 - AT - Companies Law

Company withdraws from share transfer appeal, leaving individual appellant without standing to contest register rectification under Section 154

Vyapar Mandir Palarivattom Private Limited, Kaniyamparambil Madhavan Babu Managing Director Versus Usha O.K.,V.D. Viju, Babu Foustine, Saramma Mohan, Alice P.M., Neethu Joy, Nithin Joy, Omana T.H.,K.G. Lekha, Ramesh O.T.

The NCLAT dismissed company appeals concerning share transfer and rectification of the Register of Members under section 154 of NCLT Rules. The primary ... Prayer for rectification in the Register of Members - controversy pertaining to the transfer of shares - section 154 of the NCLT Rules - HELD THAT:- What is being observed here is that in the light of relief granted by NCLT in the Principal Company Petitions to the Respondents herein, the cause for Appeal against such reliefs itself was subsisting only during the time when the Appellant No.1 i.e. the Company, having legal status, being a juristic person, was contesting the matter, but, upon its withdrawal, the Appellant No. 2 individually, will have no cause, as such, which could at all flowing from the Appellant No. 1. In the absence of there being any plausible answer extended by the Learned Counsel for the Appellant No. 2, on the objection raised by the Learned Counsel for the Respondent / Petitioner, this bunch of Company Appeals, would stand dismissed, without prejudicing the rights of the Appellant No. 2, to resort to the appropriate remedies, as available to him, under Section 59 of the Companies Act, the reason behind it being that the relief prayed against the order of rectification of Register of Members of the First Appellant, by re-entering the names and the configuration of the Shares, held by the Shareholders, under the respective Folio, could have had been possible only when the Company was contesting the proceedings and in the event of Company itself having chosen not to contest the Company Appeal, no such relief can be pressed for by Appellant No. 2 in the absence of an effective contest by Appellant No. 1. It will be open for the Appellant No. 2, to resort to the appropriate proceedings, under Section 59 (2) of the Companies Act, 2013, which would be decided, exclusively, in accordance with Law - Appeal dismissed. Issues Involved:1. Rectification of Register of Members2. Legitimacy of Shareholding3. Lien on Shares4. Conduct of Company Meetings5. Withdrawal of Appeal by Appellant No. 16. Maintainability of Appeal by Appellant No. 2Issue-Wise Analysis:1. Rectification of Register of Members:The Respondents filed Company Petitions under Section 59(1) of the Companies Act, 2013, seeking rectification of the Register of Members of M/s. Vyapar Mandir Palarivattom Private Limited. The NCLT, Kochi Bench, passed orders on 05.03.2020, directing the rectification of the Register by re-entering the names of the Respondents and restoring their shareholding as it existed prior to 08.02.2019. The Appellants challenged these orders, but their rectification applications under Rule 154 of the NCLT Rules, 2016, were dismissed on 20.08.2020, as the Tribunal found no clerical or arithmetical mistakes in its original orders.2. Legitimacy of Shareholding:The Respondents contended that they were entitled to hold certain equity shares, which were duly registered and transferred in their names. They argued that their shares were wrongfully omitted from the Register and vested in the Appellant Company. The NCLT declared the Respondents as legitimate equity shareholders and directed the re-entry of their shares into the Register.3. Lien on Shares:The Respondents argued that the Appellant Company wrongfully exercised a lien on their shares to recover rental arrears, contrary to Clause 6(2)(3) of the Articles of Association, which limits the lien to dividends payable on the shares. The NCLT agreed, stating that the Company had no right to sell the Respondents' shares or issue duplicate share certificates against the original ones.4. Conduct of Company Meetings:The Respondents sought to restrain the Company from holding any Annual General Meeting or Extraordinary General Meeting until the Register of Members was fully rectified. The NCLT granted this relief, preventing the Company from conducting any such meetings or transferring shares without the Respondents' consent until the rectification was completed.5. Withdrawal of Appeal by Appellant No. 1:Appellant No. 1 (the Company) sought to withdraw its appeal, which was allowed by the Tribunal on 12.06.2024. Consequently, the appeal continued only for Appellant No. 2. The Tribunal noted that the Company, being a juristic person, had the primary legal status to contest the proceedings, and upon its withdrawal, the appeal could not be maintained solely by Appellant No. 2.6. Maintainability of Appeal by Appellant No. 2:The Respondents raised a preliminary objection, arguing that Appellant No. 2, as the Managing Director, had no independent right to maintain the appeal after the Company's withdrawal. The Tribunal agreed, stating that Appellant No. 2's status and rights were derived from the Company. Without the Company's participation, Appellant No. 2 had no cause of action to continue the appeal. The Tribunal dismissed the appeals but allowed Appellant No. 2 to pursue appropriate remedies under Section 59(2) of the Companies Act, 2013.Conclusion:The Tribunal affirmed the NCLT's orders for rectification of the Register of Members and declared the Respondents as legitimate shareholders. The appeals were dismissed due to the withdrawal of Appellant No. 1 and the lack of independent standing for Appellant No. 2 to maintain the appeal. Appellant No. 2 was advised to seek remedies under Section 59(2) of the Companies Act, 2013.