TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 33
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.... 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 as on today till further order; and (c) Not to hold any Board meeting wi....
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....0 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 are blank. Original share certificates compared with their photocopies which have been produced today it is seen that the backside of these original share certificates showing transfer endorsement in favour of Sh. Ishwar Dayal Goel on 27,06.2013 have not been authenticated by the AROC in the photocopi....
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.... 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 are as under:- (i) That considering inter-alia the turnover, good will and future prospects the value of settlement was arrived at Rs. 1.63 crores and for rounding up as share consideration equivalent it was determined at Rs. 120/- per share and accordingly respondents were to pay a sum of Rs. 1,62,30,000/- (135250 @ Rs. 120 each share) (ii) That respondents shall get ....
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....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 evident from a perusal of Form No. 32 filed by the respondents. It is alleged that as per the provision of section 284 special notice and also notice for calling EGM were required to be served on the petitioners, yet no special notice nor any notice purportedly calling EGM on 27.06.2013 was ever served on the petitioners. They were all kept in dark about the illegal activities which w....
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....ed 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 basis of guarantee given by respondents and petitioners group. They also mortgaged the leased land alongwith the factory. On 05.02.2009 the said loan was modified and the CC limit was increased to Rs. 70 lacs. Copies of form No. 8 dated 10.10.2007 and Form No. 8 for modification dated 05.02.2009 have been placed on record as marked annexure A-9. The mortgage of land and the personal guarantees given by the directors were s....
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....9 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 to show that this present petition is completely mala fide and is founded on falsehood. 16. The relief concerning the termination of lease deed dated 3.5.2007 has also been opposed because the arrangement is purely contractual and cannot constitute a basis for filing a petition u/s 397 and 398 of the Companies Act. This piece of land has been utilized for construction of factory and if the lease is terminated then the Respond....
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....ted 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 10.03.2014 an interlocutor order was passed by this forum which has already been noticed in the preceding paras. The petitioner in para 5A.3 has alleged as under:- "Respondent No. 2 and his accomplice conspired to play fraud with relation to shareholding of the petitioner and have illegally transferred the shares of the Petitioner without execution of share transfer deeds and without payment of full and final agreed consideration, the pu....
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....on 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 to the reply filed by the Respondent and have reiterated the averments made in the petition. They have reiterated that no transfer deed in favour of the respondent has ever been executed for transferring 1,35,250 shares and therefore no valid sale transaction have ever taken place. The claim of the respondent based on the annual return 2012-2013 filed by Respondent No. l-company cannot confer any legitimacy of ownership of such shares merely on that basis. Th....
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....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 director was required to be issued. For the purpose of violation of s. 102 learned counsel has placed reliance on the judgment of the Supreme Court in the case of Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp. Cas. 185. It has further been argued that there is no bar that before passing an order of rectification the issue of oppression and mismanagement cannot be adjudicated. In that regard reliance has been placed on the judgment of Supreme Court in the case of Ammonia Supplies Corpn. ....
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....as 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 other judgment of Company Law Board in the case of K. Venkatachalam v. Premier Roller Floor Mills Ltd. p[2012] 111 CLA 266. 31. Learned counsel has also submitted that matter concerning mere breach of contract must be left for decision of competent Civil Court and should not be decided in summary jurisdiction which are exercised by this Board. In that regard reliance has been placed on a judgment of Chennai Bench of the Company Law Board in the case of R. Balakrishnan v. Vijay Dairy and Farm Produ....
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.... 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 members of the company. Rejecting the arguments challenging the locus standi of legal representative to file a petition u/s 397 and 398 Hon'ble Supreme Court observed that it would be "wrong to insist that their names must be first put on the register before they can move an application u/s 397 and 398. This would frustrate the very purpose or necessity of action" and to went on observe as under:- "....... it was contended on behalf of the appellant before the High Court that if legal representatives, who were only potenti....
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....ade 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, within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or intimation of the transmission was delivered to the company, as the case may be, after such inquiry as it thinks fit, direct any depository or company to rectify its register or records. (4) The Tribunal while acting under sub-section (3), may at its discretion make such interim order as to suspend the voting rights before making or completing such inquiry. 39. A bare perusal of these provisions ....
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....re 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) Special notice shall be required of any resolution to remove a director under this section, or to appoint somebody instead of a director so removed at the meeting at which he is removed. (3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director (whether or not he is a member of the company) shall- be entitled to be heard on the resolution at the meeting. (4) Where notice is given of a resolution to remove a director under this section and the director concerned makes with r....
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....de 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. 45. As a sequel to the above discussion the E form No,32 uploaded on 4.7.2014 on the website of ROC, Kanpur is declared as illegal and the resolution passed on 27.6.2013 is declared null and void. Petitioner No. 1 is reinstated as director but he would not be entitled to sign any cheque because he has already withdrawn his bank guarantee. RE: QUESTION No.II & III II. Whether the transfer of share and its registration without a proper instrument of transfer is valid and if not the effect thereof. III. Whether the case of the respondent is covered by unnumbered proviso 1 of section 108 of the Act or that proviso is i....
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....reon 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 presentation, whichever is latter; (ii) in any other case, within two months from the date of such presentation." 48. A bare perusal of Sections 108(1) and 108(1A) of the Act reveals that an essential condition for registering transfer of shares is that a duly stamped instrument satisfying the requirements of this provision must be delivered to the company. Further, it must be accompanied by a certificate or letter of allotment relating to the shares. 49. It is significant to notice that while the proviso excuses the production of the instrument of transfer in case it was lost, there is no excuse for the non-production of the certificate or allotment letter relating to the shares. In othe....
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....nstrument 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 return the instrument to the party presenting the same : [Provided that the said instrument presented in Form 7B as was in force immediately before the 22nd day of April, 1988, the date of commencement of the Companies (Central Government's) General Rules and Forms (Amendment) Rules, 1988, shall be valid, if it is presented and stamped or endorsed by the prescribed authority on or before the 30th day of July, 1988. [Provided further that] when the said instrument is sent to the prescribed authority by post, it shall be accompanied by a self-addressed envelope with the requisite postage stamps for the return of the instrument to the sender. (4) Every application to the Central Government for extension of time under sub-sectio....
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....re 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 Companies. According to the order only copies of share certificates were produced and the original share certificate were not produced before Shri Alok Tandon, Assistant Registrar of Companies. The position of the original share certificate reflected in the order is that the backside of the original share certificate showing transfer endorsement in favour of respondent No. 2 on 27.6.2013 have not been authenticated by the Assistant Registrar of Companies. So there is contradiction in the date of transfer stated by the respondent No. 2. The respondent No.2 claims primarily that share certificates were handed over to him on 17.6.2013 and the date of the transfer endorsement is 27.6.2013. The dates are different. In the order dated 10.3.2014 doubts were expressed by this f....
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....rospect 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 transferor are mere shareholders in a company without being its director Respondent No. 2. is a controlling director and as such, in fact both the petitioner and respondent No. 2 were the directors in respondent No. 1 company and respondent No. 2 is at the helm of affairs. He alongwith other respondents are close relatives. Therefore to say that respondent No. 1-company was satisfied with regard to loss of documents would again be a self serving act violating the basic cannon of justice namely no one can be judge in his own cause. Respondent No. 2 on behalf of respondent No. 1-company could not have resorted to transfer of shares and sent intimation to the Registrar of Companies. 62. The requirements of proviso are also not satisfied. Primarily the proviso postulates that the B....