TaxTMI 
TaxTMI 
2016 (3) TMI 33
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....rs' share as null and void with the consequential relief of rectification of the register of members maintained by Respondent No. 1-Company. A further prayer has also been made for termination of lease deed dated 03.05.2007 executed in favour of Respondent No. l-Company by Petitioner No.2 and Respondent Nos. 4 & 5. When the matter came up for consideration this forum passed a detailed interim order on 10.03.2014 which is as under:- "In compliance of the direction contained in order dated 20.02.2014, Shri P. Nagesh, learned Counsel for the Respondents filed an affidavit of Shri Ishwar Dayal Goel (R-2), along with documents Annexure R-l to R-9. Prima facie an appraisal of the documents does not appear to me to be sufficient material to substantiate that the share held by the petitioner were transferred to R-2 in accordance with taw. Therefore, after hearing the learned Counsel on grant of interim relief I deem it necessary to direct the respondents as follows: (a) To maintain status quo on shareholding and fixed assets of the Respondent No. 1 Company as on today till further orders. (b) To maintain status quo on the Board of Directors ....
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....Transferred in favour of Mr- Ishwar Dayal Goel on 27.06.2013. No endorsement on back page] 20000 6 04 7 Ms. Prabha Goel 25000 7 05 8 Ms. Ishal Goel 17500 8 06 9 Ms. Savita Jain [Transferred in favour of Sh. Ishwar Dayal Goel on 27.06.2013] 5000 9 01 11 Mr. Ishwar Dayal Goel 90000 10 02 12 Mr. Abhishek Goel 25000 11 03 13 Mr. Sudhir Kumar Jain [Transferred in favour of Sh. Abhishek Goel on 27.06.2013]. 90000 12 04 14 Ms. Prabha Goel 27500 13 05 15 Ms. Isha Goel 40000 14 08 16 Mr. Ishwar Dayal Goel & Sons (HUF) 12500 15 09 17 Mr. Sudhir Kumar Jain & Sons (HUF) 15000 16 02 18 Mr. Abhinav Goel 500 17 01 19 Mr. Ishwar Dayal Goel 250 Photocopy of aforesaid share certificates bearing faint signature and stamp of Sh. Alok Tandon, Asstt. Registrar of Companies have also been produced and taken on record. A perusal of the backside of photo-copies of share certificates No. 6, 9 and 13 in favour of Mr. Sudhir Kumar Jain. Ms. Savita Jain and Mr. Sudhir Kumar Jain shows that these pages a....
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....itioners' shareholding they have placed reliance on the annual returns filed by the company in the year 2012. The petitioner has further claimed that there is a plot measuring 5257 sq, yards which is jointly owned by petitioner No. 2 Ms Savita Jain & Respondent Nos. 4 & 5 namely Ms Prabha Goel and Ms Esha Goel. It is thus claimed that the shareholding pattern and average between the parties was also designed on the same model of percentage and average. 6. The petitioner No. 1 has claimed that he has been a key person who through his skill, expertise, business acumen and sincerity played an instrumental role in the growth and development of the company. The company has progressively grown and its turn over since its inception is as under:- S. NO. Year Turnover in Rs. 1 2009 3,23,45,000 2 2010 5,38,05,000 3 2011 7,39,12,000 4 2012 2,78,50,000 7. The petitioners have further claimed that an amicable settlement was reached after several rounds of negotiations with respondents. It was an oral settlement According to the settlement the petitioners were to leave Respondent No. 1-company on mutually agreed conditions which ar....
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..... However Respondent No. 2 out rightly rejected any such proposal and claimed that respondents had made full and final payment of all the shares to the petitioners group @ Rs. 10/- per share being the face value of the share. As a result the petitioner wrote and notified the authorities and the bankers of the Respondent No. 1 company about the fraud perpetuated against them. They also highlighted mismanagement in conducting the affairs of the Respondent No. l-company on account of forged and fabricated record. Elsewhere, the respondents have however managed to nullify the notice concerning fraud and fabrication. 9. In para 5A an attempt has been made to highlight various acts of oppression and mismanagement. The petitioners have claimed that they were illegally removed from the directorship of Respondent No. l-company w.e.f, 27.06.2013. This illegality was perpetuated by sending the information to the Registrar of Companies by way of filing E-form 32 on 04.07.2013. The act of their removal is in gross violation of mandatory provision and procedure envisaged by 1956 and 2013 Act. According to them the respondents have removed them by invoking section 284(2) of the Act which is ev....
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....ompany would be held almost in the ratio of land holding i.e. 2/3rd and 1/3rd. Hence on 03.05.2007 the said land was leased to Respondent No. l-company for a period of 15 years on a yearly rent of Rs. 5000/- in total. It was later converted into monthly rent of Rs. 5000/- each. It is important to mention here that Respondent No. 1-Company constructed a factory on the said land and Respondent No. 1-company was incorporated as quasi-partnership. It is further submitted that the respondents have fraudulently transferred the entire shareholding of the petitioners and have conspired to exploit the land which was leased to the company at concessional rate by the petitioners. The unethical acts carried out by Respondent No. 2 were totally oppressive to the interests of the petitioners and Respondent No. l-company. The actions of the respondent No. 2 are in breach of the fiduciary duty. 13. It is pertinent to mention here that on 10.10.2007 Respondent No. 1-company availed a secured loan in the form of cash credit limit of Rs. 30 lacs and then availed term loan of Rs. 13.40 lacs from State Bank of India, Baraut Branch Uttar Pradesh, Respondent No. l-company had secured the loan on the b....
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....return for the year 2012 is mala fide. Consequently it is claimed that the petitioners do not satisfy the condition of minimum shareholding of 10% as contemplated by section 399 of the Act. Secondly, the petitioners are debarred from claiming any oppression and mismanagement before establishing their entitlement to have the register of members rectify under section 59 of the Act, therefore, the prayer of the petitioners u/s 59 of 2013 Act has to be decided first. It has also been claimed that the issue of adequacy of price for transfer of share cannot be decided by this forum where the disputes are decided in a summary manner without any full- fledged trial. After admitting that the petitioners have received partial consideration thereafter no adjudication about the adequacy of consideration could be gone into. According to respondents the conduct of the petitioner in accepting unsecured loan of Rs. 894059/- by cheque, acceptance of sum of Rs. 13,52,500/- as consideration amount of share and handing over the share certificate alongwith share transfer deed, withdrawal of bank guarantee and opening of their own business under the name of Vijay Lakshmi Industries would go a long way t....
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....are. The petitioners have actually transferred their shares at face value of Rs. 10. Accordingly a sum of Rs. 13,52,500/- has been paid. 18. Respondents have further stated that all the allegations and averments made by them are vague and baseless; and there is no supporting evidence whatsoever. On the contrary, the respondents have evidence to show that the petitioners have accepted the unsecured loan without any protest, accepted the sale consideration of their shares @10/- per share without any protest, wrote a letter to the bank seeking withdrawal of their personal guarantee after transferring the shares. All these facts go to prove that the petitioners consciously withdrew themselves from the affairs of the Respondent No. 1-company and the filing of present petition is only an afterthought by concocting false allegations against the respondents. 19. Under the heading acts of oppression and mismanagement the respondent did not file any reply and on 10.1.2014 this forum passed an order granting time to the respondent to file documents to substantiate that shareholding of the petitioners have been transferred to Respondent No. 2 in accordance with law. Accordingly on 10.03.....
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....I had lost the bag containing the Memorandum and Articles of Association of the company and share transfer deed issued by the Petitioners alongwith a few other documents and for that I lodged a complaint with the police station Baraut on 15.06.2013, True copy of the complaint is annexed herewith as Annexure: R-5." (Emphasis supplied). 21. It is thus evident that no regular reply was filed controverting the averments made in the petition concerning execution of transfer deed and then in pursuance of order dated 10,1.2014 passed by this forum an affidavit has been filed on 06.03.2014 taking the plea that duly endorsed share certificates were received alongwith transfer deed duly executed by the petitioner. Shri Iwhwar Dayal Goel has further stated that he decided to meet his Chartered Accountant at the company office alongwith Memorandum and Article of Association of the company for completing the formalities of the transfer of petitioners' share. He had however lost the bag on the way containing, inter alia, transfer deed executed by the petitioner. In that regard a complaint was lodged with the Police station Baraut on 15.6.2013. 22. The petitioners have filed a rejoinder....
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....g and resolution are liable to be declared as illegal which resulted in removal the petitioner as Directors. 2. The transfer of shares belonging to the petitioner grossly violated the provision of s, 108 of the Companies Act in as much as no transfer deed has ever been executed by the petitioners nor it was duly witnessed and signed by the Respondents. The averment of the respondent that the bag containing transfer deed and the memorandum and articles of association was lost is all concocted story which is liable to be thrown out. Therefore transfer of share is liable to be set aside. 3. There was an oral understanding between the parties which is inferable from various acts of the petitioners and the respondents. They had agreed to pay Rs. 120 per share and the total amount calculated was Rs. 1.63 crores which have never been paid. 26. In support of his submission learned counsel has placed reliance on a judgment of this Board in the case of Ansar Khan v. Finecore Cables (P.) Ltd. [2007] 2 Comp. LJ 298 (CLB) for the proposition that s. 284 is mandatory. It postulates that before passing an ordinary resolution at EGM, a special notice to remove somebody as dire....
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....al share certificate were handed over to by the transferor then the loss of transfer deed would be insignificance especially when the price of the share has been paid by cheque. 29. It has further been submitted that the petitioner group is no more the shareholder in the R-1 company on the date when the instant petition was presented. If the present case is examined in the light of the provision of section 41 of the Act the petitioners were not the shareholder on the date when the petition was presented because their name did not figure in the register of members nor their names were reflected in the annual return filed for the period 2012-2013. 30. It was further submitted that inadequate payment for share pursuant to an agreement cannot constitute a basis for filing a petition to set up the ground of oppression and mismanagement. It is simply breach of an agreement and no adjudication under sections 397 and 398 of the Act could take place. In that regard reliance has been placed on a judgment of this Board rendered in the case of Heeral Constructions (P.) Ltd. v. Blue Pearl Developments (P.) Ltd. [2009] 150 Comp Cas.234 (CLB-chennai). Reliance has also been placed on the ot....
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....share nor a member of Respondent No. l-company whereas section 399 of 1956 Act require him, inter alia, to have atleast 10% or more shareholding in the Respondent No. l company. It is conceded fact that dispute raised in the company petition is necessarily related to transfer of 135250 shares which is about l/3rd of the total shareholding of Respondent No. l-company. It is well settled that in such a situation a petition for rectification of Members' register is maintainable by the erstwhile member irrespective of the fact whether the petitioner qualifies in terms of section 399 of the Act at the time of filing of the petition. 36. In that regard reliance may be placed on the judgment of the Supreme Court in the case of World Wide Agencies v. Mrs. Margaret T. Desor [1990] 67 Company. case. 607 at P. 618. In that case the issue canvassed before the Hon'ble Supreme Court was whether the legal representatives of the Managing Director and Chairman of a company were entitled to enter their names in the register of members In place of deceased member. The argument of the other side was that the Legal Representative lacked locus standi because they were neither shareholder nor ....
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.... Thus their petition cannot be thrown at the threshold. Any contrary view would result in high-jacking the company by those who have entered the register of membership illegally. Entry of such persons in the company may prove entry of a bull in China Shop completely forsaking the interests of the company. 38. Moreover section 111A added w.e.f. 20.09.1995 postulates registering a request for rectification which could be made by initiating appropriate proceedings by a depository company participant etc. If the transfer of share has been made Inter alia in contravention of any of the provisions of any law for the time being in force. The substantive s. 111A(3)(4) are relevant to the facts of this case which reads thus: 1. . . 2. . . 3. The Tribunal may, on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India, if the transfer of shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) or any other law for the time being in force, ....
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....itioner No, 1 as a director in accordance with the provisions of s.284(2) of 1956 Act. For failure to serve notice the petitioner has been deprived off an opportunity of participation in the EGM and also making a representation against his removal as director. At this stage it would be appropriate to notice the provisions of s. 284 which are set out below for facility of reference:- 284. Removal of directors.- (1) A company may, by ordinary resolution, remove a director (not being a director appointed by the Central Government in pursuance of section 408) before the expiry of his period of office: Provided that this sub- section shall not, in the case of a private company, authorise the removal of a director holding office for lire on the 1st day of April, 1952, whether or not he is subject to retirement under an age limit by virtue of the articles or otherwise: Provided further that nothing contained in this sub- section shall apply where the company has availed itself of the option given to it under section 265 to appoint not less than two- thirds of the total number of directors according to the principle of proportional representation. (2) Sp....
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....de by the petitioners has not been controverted specifically. Only a bald statement has been made without substantiating any fact or by placing on record a copy of the notice of meeting sent to the petitioner. Respondents have failed to show the service of notice and the mode adopted to serve the same on Petitioner No. l. During the course of arguments a faint attempt was made by making a reference to a notice dated 5.6.2013. However, such an attempt is meaningless because in the absence of any specific averment in that regard in the pleadings no notice could be taken of such a document. Thus the document has not been made a part of the pleadings authenticated and duly signed by the respondent No. 2. It is elementary proposition of law that in the absence of pleadings no evidence could be adduced to prove a fact because the other side would be deprived of an opportunity to meet the case of Respondent. Moreover the mode of service adopted for sending notice has remained a mystery. Therefore, I am of the considered view that removal of petitioner No. l as a director of respondent No. l company is patently illegal and the resolution passed in the EGM held on 27.6.2013 is null and void....
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.... or debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law, (1A) Every instrument of transfer of shares shall be in such form as may be prescribed, and- (a) every such form shall, before it is signed by or on behalf of the transferor and before any entry is made therein, be presented to the prescribed authority, being a person already in the service of the Government, who shall stamp or otherwise endorse thereon the date on which it is so presented, and (b) every instrument of transfer in the prescribed form with the date of such presentation stamped or otherwise endorsed thereon shall, after it is executed by or on behalf of the transferor and the transferee and completed in all other respects, be delivered to the company, - (i) in the case of shares dealt in or quoted on a re-cognised stock exchange, at any time before the date on which the register of members is closed, in accordance with law, for the first time after the date of the presentation of the prescribed form to the prescribed authority under clause (a) or within twelve months] from the date of such prese....
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....nsfer form as prescribed by s. 108(1A) is set out below:- * To be filled only if the documents are lodged by a person other than the transferee. 53. In exercise of power conferred by sub-section (1) of section 621 of the Act, the Central Government has framed the rules known as the Companies (Central Government's) General Rules and Forms, 1956 (for brevity '1956 Rules'). Rule 5 engrafted on section 108 is under:- 5A. Section 108 -(1) For purposes of clause (a) of sub-section (1A) of section 108, the prescribed authority shall be the Registrar, or such other authority as the Central Government may from time to time appoint in that behalf by notification in the Official Gazette, (2) An instrument of transfer shall be in Form 7-8 set forth in Annexure A. [(2A) An instrument of transfer in respect of counter receipt allowed to be traded by Over The Counter Exchange of India (OTCEI) shall be In Form 7BB.] (3) When an instrument of transfer is presented to the prescribed authority referred to in sub-rule (1), that authority shall forthwith stamp or otherwise endorse thereon the date of such presentation, affix its signature thereto and r....
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....d agreed to exit from the respondent No. l-company and start their own business. They also agreed and have transferred on 15.6.2013 their total shares numbering about 1,35,250 to him and to his family members for a total consideration of Rs. 13,52,500/ which was paid in the form of various cheques. The share certificates were handed over to respondent No.2 after the receipt of the amount along with share transfer deed on 15.06.2013. It was thereafter respondent No.2 decided to meet his chartered Accountant at the company's office alongwith copy of the memorandum and articles of association of the company to comply with the formalities of the transfer of the petitioner's shares. When Respondent No.2 was on his way then he had lost the bag containing share transfer deed issued by the Petitioners alongwith a few other documents and a complaint was lodged with the police station Baraut on 15.06.2013. 57. The stand of respondent No.2 does not inspire confidence and is full of doubts. 58. A perusal of interlocutory order dated 13.11.2014 passed by this court would show that reference has been made to the minutes authenticating the record by the Assistant Registrar of Compan....
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....anything which may show that original was executed. The best evidence in that regard could have been the attesting witnesses who authenticated the signature of transferee as well as transferor. The parties belong to Baraut, which Is not a big city and it was not difficult to locate those witnesses. The self serving statements made by respondent No. 2 fall to satisfy the test of a prudent man. Furthermore, the stamp duty is required to be affixed. It has not been pointed out who amongst transferee and transferor purchased stamp duty and the amount paid for the stamp duty. Even the affidavit of stamp vendor or his register have not been produced. The transfer of share at its face value of Rs. 10/- also raises a doubt keeping In view the turn over, goodwill and further prospect of the respondent No. 1 company. 61. The theory propounded in the complaint before the Police is only a self serving theory. It is true in a complaint of this nature some self serving statements are bound to surface. But it cannot be so blatantly a bluff that it result a reasonable man's intelligent. Respondent No. 2 is director in respondent No. 1-company. It is not a case where transferee and transfero....
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....so advanced another argument that adequacy of consideration for purchase of share cannot be a subject matter of a petition u/s 397 and 398 of the 1956 Act. The argument has failed to impress me because I have not considered the adequacy or non-adequacy of price of the shares. The question which has fallen for determination is whether the procedure laid down for transfer has been followed or not. Therefore I have no hesitation to reject the aforesaid argument. 64. As a sequel to above discussion I am of the considered view that there is nothing on record first to establish that share transfer deed was ever executed by the petitioner. The theory of lost documents in bag and lodging of police complaint fail to inspire any confidence. Therefore the shareholding of the petitioners in Respondent No. 1-company is restored. The annual return for the year 2013 showing transfer of petitioners' share is declared null and void. A direction is issued to respondent No. 1. Company to rectify its register of members by re-entering the names of the petitioners as existed in the register of 2012. A new e-form 32 be uploaded on the website of ROC, Kanpur within two weeks. The petitioners shall....