TaxTMI 
TaxTMI 
2017 (6) TMI 958
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....ompany. For ready reference only the relevant portions of the impugned Application are extracted below : " (a) This Petition is filed by the Petitioner under Section 397 and 398 of the Act in respect of Kanodia Tex Industries Limited which is the 1st Respondent herein. The Petition is filed on the basis of a false averment by which the Petitioner claims to be the owner of 50% shareholding in the 1st Respondent but without producing either the share certificates or even giving particulars of his alleged shareholding. (b) The Petitioner is the son of one Kailashchand Kanodia, Kailashchand Kanodia, Mahavir Prasad Kanodia and Brishbhan Kanodia are brothers. Prlortol990, the families of Kailashchand Kanodia, Mahavir Prasad Kanodia and Brishbhan Kanodia were joint and carried on joint family businesses, particularly textile business, under diverse partnerships and limited companies including the 1st Respondent In or around 1987, with the downturn in the textile business, the family businesses were adversely affected and ran into huge losses. The said Kailashchand Kanodia and his family decided to separate out from the joint family businesses including the 1st Respondent....
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....." 3. On receiving the aforementioned preliminary objection, i.e. the impugned Application, now under consideration, the Petitioner (Respondent to the Application) has filed Reply on 10th February, 2014 wherein it was vehemently objected that the Petitioner was not a signatory of the alleged Family Settlement dated 8th January 1991, as well as, challenging the authenticity of the said document. The Petitioner has also submitted that being an original Director, he subscribed 21 Equity Shares at the time of incorporation, which constituted 50% Shareholding. It is stated that although the Petitioner was not in possession of the Share Certificates but the Respondents have also failed to provide inspection of the relevant documents. For ready reference only relevant portions of the Reply are extracted below :- "2. The Answering Respondent's Application contending that the Petitioner is not a member/shareholder in the 1st Respondent Company is premised on a family settlement alleged to have been recorded in a document dated 8th January 1991, However, the Petitioner is not a signatory to the alleged Family Settlement dated 08 January 1991 annexed and marked as Exhibit A to....
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....ioner's shareholding at the time of incorporation of the Respondent No.l Company is incontrovertibly established by the documents annexed to the Petition, including the Articles of Association and Memorandum of Association, and the Answering Respondent has failed to either deny the same, or produce any documents that demonstrate any change in circumstances since incorporation. 6. ............. 7. The Petitioner puts the Answering Respondent to strict proof of the contents of Paragraph 4 that the Petitioner and his brother Sanjay Kanodia resigned as directors of the 1st Respondent Company. It is denied that the Petitioner transferred his entire shareholding to the family members of Mahavir Prasad Kanodia and Brishbhan Kanodia. The Answering Respondent, while making these false and baseless allegations in regard to the Petitioner's resignation as a director and/or transfer of shareholding, has failed to produce any documents in support of such allegations. Without any such documents in support, no allegation made by Answering Respondent is liable to be taken cognizance of. It is denied that it was in terms of any alleged family settlement that the Petitioner....
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....nch of the family will not have any right, title or interest in (i) Family firm of M/s. Nanduka Dyeing and Printing Mills; (ii) Nandlal & Sons; (iii) Shree Kanodia Fabrics; (iv) Kanodia Tex Industries Pvt. Ltd. (The Respondent No. 1 Company); and (v) Agarwal Textiles. c. The Petitioners branch of the family will not have any right on (i) office on the 2nd Floor at Dadi Seth Agiary Lane, (ii) Badlapur Factory; (iii) Ameeta Building; and (iv) premises at 57, Dadiseth Agiary Lane office. A copy of the Family arrangement along with hindi typed version and along with the translation thereto is collectively marked as Exhibit A to the Company Application. The said Family Arrangement, by which the shares in the Respondent No. 1 company had been transferred to the 2nd Respondent, has been time and again acted upon by the Petitioner and his branch of the family. This is evidenced by the following: a. On November 15, 1990, Kailashchand Kanodia (the Petitioners father) addressed letters intimating his retirement from the partnership firm of Nanduka Dyeing and Printing Mills in furtherance of the Family Arrangement to the balance three partners. Copies of these letter....
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....tter dated April 15, 1991 is hereto annexed and marked Exhibit 'H'. i. On December 23, 1991 Kailashchand Kanodia addressed a letter surrendering his right in the rooms in 47, Dadi Seth Agiary Lane in favour of the Landlord in furtherance of the understanding in the family arrangement Copies of the letters dated December 23, 2016 are hereto annexed and marked Exhibit 'I-1 and 'I-2'. 5. It is submitted that since the Petitioner has, time and again of the acted upon and in furtherance of the Family Arrangements, the Petitioner is estopped from contending that it is false and/or not authenticated. The Family Arrangement has been hand written by the Petitioner in his handwriting. The handwriting of the Petitioner as reflected in the said Family Arrangement was examined by an independent Forensic Document Examiner Hiralal Mehta. By her Report dated September 11, 2014, she has certified that the handwriting as reflected in the Family Arrangement dated January 8, 1991 is the handwriting of the Petitioner. Hereto annexed and marked Exhibit 'J' is a copy of the said Report of the handwriting expert dated September 11, 2014. 6. It is pert....
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....as in the very same proceedings filed an Application dated August 5, 2004 wherein he has himself relied on his resignation from the Respondent No.l Company. Hereto annexed and marked Exhibit 'Q' is a copy of the said Application dated August 5, 2004. The Petitioner has also, in the above proceedings, filed an application dated May 3, 2001, wherein he has stated that he has no connection with the Complaints. Hereto annexed and marked Exhibit 'R' is a copy of the said Application dated May 3, 2001. 11. This resignation was also recorded in the Directors Report for the year ended March 31, 1990. A copy of the said Directors Report is hereto annexed and marked Exhibit '5'. It is submitted that the fact that the Petitioner had resigned from the Respondent No.l Company has been time and again been asserted by the Petitioner in various proceedings before other forums. 12. From the side of the Petitioner (Respondent to the Application) an Additional Affidavit is also on record filed on 21st July, 2014 wherein it was reiterated that the Petitioner had sought inspection of all those documents which were relied upon by the Respondent, but the allegation is ....
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....ents to the main Petition viz. Mahavir Prasad Kanodia, Shiv Kumar Kanodia (R-2) and Deepak Kanodia (R-4) have surrendered their rights in the Family Property to comply with one of the condition of the said Family Settlement that second floor of 47, Dadiseth Lane, Ashokvan having 3/5 Rooms in which the Petitioner along with his Family Members was staying shall remain with the Family Members of Kailashchand Kanodia and on those 5 Rooms the Family Members of Mahavir Prasad and Brishbhan shall have no right. Learned Advocate has placed before me a torn page of the Minute Book stated to be written in due course when the said Settlement was acted upon. A Resolution was passed accepting the Resignation of the Family Members of Kailashchand Kanodia. It was recorded/ resolved that the Resignation was given by Mr. Pawan Kumar Kanodia (Petitioner) and his brother Sanjay Kumar Kanodia stated to be effective from 30th November, 1990. It was also recorded that, their respective Resignations would also be forwarded to the Registrar of Companies, Maharashtra. In the said Resolution it was also recorded that the Company had received 5 Transfer Deeds from Pawan Kumar Kanodia for transferring his ent....
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....iance was placed on the Family Settlement of the year 1991. According to him, the alleged transfer of shares took place in the year 1990, hence the alleged transfer of shares had nothing to do with the said Family Settlement. According to him, the alleged transfer is also in dispute but the fact remained as it was that the Petitioner was one of the Promoter/Director since inception of the incorporation of the Company. Placing reliance on the contents of the main Petition, Learned Counsel has pleaded that the Petitioner was holding 21 Equity Shares in the Respondent No.1 Company which had never been disturbed or transferred. His next limb of argument is that the Applicant had not given the account of the balance 500 Shares. Only 1300 Shares have been described, as a result the Petitioner was having 500 Shares in R-1 Company, therefore, legally entitled to submit the Petition. The next legal argument is that as per the provisions of Section 108 of the Companies Act, 1956 it is prescribed, "Transfer not to be registered except on production of Instrument of Transfer". Learned Advocate has emphasized that a Company shall not register a Transfer of Shares unless a proper Instrument of T....
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.... (c) J.P. Srivastava & Sons (P.) Ltd. v. Gwalior Sugar Co. Ltd. [2005] 1 SCC 172 for the legal proposition that although restriction imposed in Sec. 397 to ensure that frivolous litigation be avoided but such matter also be decided on abroad common sense approach if involvement of the Company is lightly in nature . Substance must take precedence over form. (d) Scottish Co-operative Wholesale Society Ltd. v. Meyer 1959 House of Lords 324 for the legal proposition that the purpose of legislature is to put an end to the matters complained. (e) Mannalal Khetan v. Kedar Nath Khetan AIR 1977 SC 536 for the legal proposition that if an act is prohibited by statute then such contract or transfer is not operative in law. Unless a proper Instrument of Transfer duly stamped, registered and executed by the Transferor is not available, such document is not enforceable. 8. FINDINGS :- Arguments of both the sides have been heard at length. The main Petition along with the Application under consideration are duly perused. The other connected pleadings, Reply, Rejoinders etc. have also been carefully examined in the light of the evidences placed on record. A Petition had ....
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....avan, the three rooms in which we are staying and two rooms on third floor are ours. In these five rooms you (Mahavir Prasadji) and Brishbhan will have no right. We can do anything with these rooms, whether rent out or sell.) It is clarified that since the said Deed was written by the Petitioner for the family of Shri Kailashchand Kanodia therefore, he has used the term "we" representing Kailashchand Kanodia, his wife Geetadevi and two sons Pawan Kanodia and Shri Sanjay Kanodia. The said property had thus fallen into the bucket of assets of the family of Kailashchand Kanodia, whose son Shri Pawan Kanodia is the Petitioner. 8.4 As per clause 5 of the said Settlement, the family of Kailashchand Kanodia, in lieu of the property, bequeathed their right/interest in certain firms and the company written as (we will not have any relation with Nanduka Dyeing & Printing Mills, Nandlal & Sons, Shri Kanodia Fabrics, Kanodia Tex Industries Pvt. Ltd., Agarwal Textiles, meaning we will not have any give and taken in the above firms. We will not have any contact or responsibility with Khata-Peta, Bank, Market). It is reiterated that the term "we" represented Mr. Kailashchand Kanodia and his fa....
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....s. Kanodia Tex Industries . One of the document, i.e., Form No. 32, stated to be submitted before Learned ROC was in respect of the Intimation of the Resignation of Shri Pawan Kumar Kanodia from the Company viz. Kanodia Tex Industries Private Limited. 8.6 A fundamental question has been raised by the Respondents/Applicant that in a situation when rest of the terms and conditions of the said Family Settlement have been agreed upon, as well as acted upon by the concerned family members then the Petitioner had no locus standi to submit the main Petition staking claim in the R-l Company. It has also been challenged that the Petitioner otherwise had accepted the terms of the Settlement in respect of rest of the properties, but chosen to be selective in not accepting the rest of the terms and conditions. The Petitioner should have accepted the said settlement in toto and not partially. Once it was agreed upon that the Family Members of Kailashchand Kanodia shall have no interest, whatsoever, and shall not "give and take" from the Firms and the Company then it is ethically wrong to stake claim in the R-l Company by the Petitioner. Learned Advocate of the Applicant has raised a quest....
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.... said settlement was written in the hand-writing of the Petitioner. Further, one of the witness of the said Deed viz. Shri Sawarmal Lohia had also been examined who had affirmed that the existence of the said Settlement Deed. Therefore, it is worth to make a remark that 'much water had flowed under the Bridge' since the said Deed was documented, hence it is improper and very late on the part of the Petitioner to raise issues which may thwart the basic intent of the "Settlement" amongst the family members. At present it is pointless to change the past because long time ago number of events have taken place and actions taken in recognition the Family Settlement which should not and could not be un-done now. 8.9 Another legal question has been raised that in the absence of Share Transfer Deed the Company made a mistake is rectifying the Register of Shareholders. On perusal of the contents of the said Register it was noticed that the date at which Mr. Pawan Kanodia ceased to be a Member was 30th November, 1990 and that information was furnished to the ROC Office. Although it is correct that the provision Section 108 of the Old Act prescribe that a company shall not regist....
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....at very property, as a result, there was no question of payment of Stamp Duty. 8.11 In the case of J.P. Shrivastav and Sons v. Gwalior Sugar Co. [2005] 1 SCC 172 an observation has been made that the object of prescribing a qualified percentage of shares under section 397 and 398 is clear to ensure that frivolous litigation to be avoided. Only real stake holder in the Company should be allowed to indulge in the affairs of the Company. Undoubtedly, this condition does help in curtailing uncalled for litigation. If a party to the litigation raises an objection about the requisite number of shareholding then the Petitioner is under a strict obligation to place on record sufficient evidence to demonstrate his percentage of shareholding so as to validate the filing of the Petition. In the present case the Petitioner has not discharged his part of onus which had caused a serious doubt on the maintainability of the Petition. In the case of Murat Viniyog Ltd. (supra) a view has been expressed that if contemporaneously action have been taken such as Rectification of the Register of the Company then the Court has to go by the action taken as also to acknowledge the contemporaneous steps t....