TaxTMI 
TaxTMI 
2001 (4) TMI 939
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (b) to direct payment of dividend to the petitioners in respect of the impugned shares. After the petition was filed, other legal heirs of the deceased M.A. Coelho were impleaded as petitioners Nos. 2 to 9. The petitioner No. 1 and 8 are sons; petitioner No. 2 and 7 are daughters and the other petitioners are wife and children of I.R. Coelho, deceased son of Mrs. Coelho. 2. The petition in CP 84 of 99 is filed by the petitioners holding 16.20 per cent of the total issued and paid up capital of the Company under sections 397 and 398 of the Act alleging that the affairs of the' Company are being conducted in a manner prejudicial to the interest of the Company as well as respondents and seeking the following reliefs :-- (a) to rectify the register of members of the Company (i) by deleting the name of the third respondent in respect of 3,250 equity shares belonging to the estate of the deceased Mrs. M.A. Coelho and the corresponding rights shares of 9,750 equity shares and entering the name of the petitioners in respect of their interest therein; (ii) by deleting the name of third/fourth respondent in respect of 21,000 rights shares which should ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....allotting shares in the ratio of 3:1, i.e., 9750 shares on 15-3-1989. The second respondent has, therefore, illegally placed 13,000 shares in favour of the third respondent to which otherwise all the legal heirs of the deceased M.A. Coelho are entitled. The first petitioner had sent a legal notice on 24-4-1993 for which respondents 1 to 3 caused a reply dated 15-6-1993 making absolutely false and unsubstantiated allegations that the shares were transmitted in the name of the third respondent in accordance with the understanding among the members of the family and in accordance with the wishes of the deceased M.A. Coelho. Mrs. M.A. Coelho had not executed any instrument of transfer during her life time and for several years after her death the impugned shares were shown as belonging to the estate of the deceased M.A. Coelho. The deceased has not left behind her any will. No succession certificate has also been produced before the transfer of shares in favour of the third respondent. The impugned shares should have gone to all legal heirs of the deceased M.A. Coelho by virtue of the rule of succession. The Company has been always held and managed as a family company based on maintain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ircumstances, the impugned shares are liable to be automatically restored to the name of the petitioners and other legal heirs. The transmission of impugned shares was never effected with consent of legal heirs of the ceased M.A. Coelho nor was approved at the Board meeting held on 23-7-1986. There was no understanding among the legal heirs of the deceased M.A. Coelho on appropriation and division of the assets and interest in the estate of M.A. Coelho and consequent transmission of shares in favour of the respondent 3. However, whenever any such consensus was reached on certain specific items they were duly recorded in one form or another. The impugned shares were left undivided and or yet to be divided among the legal heirs of the deceased M.A. Coelho. The statutory returns filed by the first respondent company as well as Wealth-tax Return of third respondent are self-serving documents from which no rights can flow. The impugned shares should therefore be restored to all the legal heirs of the deceased M.A. Coelho. Shri Ramani further submitted that the Company came out with a rights issue and though the first petitioner applied for the rights shares and advised the second respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-10, at page 91 of CP 52 of 1995) of the deceased I.R. Coelho, one of the brother of the first petitioner addressed to the second respondent containing similar request as in the letter dated 21-4-1987 sent by the first petitioner. Though the first petitioner has sought for production of certain documents regarding allotment of shares including an extract from the bank account to find out whether the respondents had paid money for the rights issue, the Company failed to produce any of those documents, thereby adverse inference should be drawn against the respondents. The letters dated 21-4-1987 and 29-4-1987 (Annexures A-9 and A-10) will show that the Company did not comply with formalities for allotting the rights shares. It is apparent that the Company allotted the rights shares in favour of Mr. I.R. Coelho acting upon the letter dated 29-4-1987 (A-10) without remitting the money for allotment of rights shares. At the same time, the Company neither acted upon the letter dated 21-4-1987 of the first petitioner nor allotted the shares. Though, the rights issue was made in March, 1987, allotment was effected only in the year 1989 after a delay of two years. He further stated that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the onus of proof, and failing, accordingly, to furnish to the Courts the best material for its decision. With regard to third parties, this may be right enough-- they have no responsibility for the conduct of the suit, but with regard to the parties to the suit it is, their Lordships' opinion, an inversion of sound practice for those desiring to rely upon a certain state of facts to withhold from the Court the written evidence in their possession which would throw light upon the proposition." * Maheshwari Khetan Sugar Mills v. Ishwari Khetan Sugar Mills [1963] 33 Comp. Cas. 114 (All.) - to state that - ... the agreements were not instruments of transfer and in view of section 108 of the Companies Act, 1956, the Company cannot make alterations in the register of Members and the alterations made were consequently unauthorised and illegal. * Tracstar Investments Limited v. Gordon Woodruff Ltd [1996] (1) CLJ 462 (CLB) and Killick Nixon Ltd v. Dhanraj Mills (P.) Ltd. [1983] 54 Comp. Cas. 432 Bom. to state that- ... any member of a Company aggrieved or not in regard to the shares can seek rectification of register of members of the Company. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndent and the first petitioner. Consequently, the second respondent caused a notice dated 16-12-1992 which prompted the first petitioner to retaliate by issuing the notices dated 24-4-1993 (A-6 & A-11 annexed to the petition CP 52 of 1995) in relation to the Company. Shri Raghavan further submitted that Mrs. M. A. Coelho died on 24-9-1981 leaving behind her, a number of properties and also the impugned shares. After the demise of Mrs. M.A. Coelho, the question of distribution of assets was discussed among the legal heirs and after such mutual discussion all the properties and the interest in the estate of the deceased M.A. Coelho were distributed among the legal heirs as per the understanding. The 2nd respondent was not allotted any share in the aforesaid assets. Mrs. M.A. Coelho had indicated that her shares in the Company should go to the 2nd respondent. It was agreed among all the legal heirs that the 2nd respondent would be entitled to the impugned shares standing in the name of the deceased M.A. Coelho. Accordingly, with the consent of all the legal heirs of the deceased M.A. Coelho, the impugned shares were transmitted to the 3rd respondent, being the wife of the 2nd responde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o subscribe to the rights issue after having received rights issue offer. Even if the letter dated 21-4-1987 of the first petitioner, namely, A-9 is a genuine letter, it has no legal sanctity in view of the fact that A-9 is conditional. No payment has been made. Hence, no allotment can be made in favour of the 1st petitioner. Moreover, the legal notice caused by the 1st petitioner does not make a reference to the disputed letter dated 21-4-1987 (A-9). The CLB cannot compel the parties to allot shares in a section 111 proceedings. The petitioners cannot ask for rectification without allotment of shares. If the prayer of the petitioners is allowed it will amount to the reduction of share capital. It is against the interest of the creditors and members. Neither the petitioners, nor any other legal heir of the deceased M.A. Coelho had raised the issue of entitlement to rights shares held in the name of the deceased M. A. Coelho. In view of the fact that the Company was not in a sound financial position, three family members renounced their entitlement. However, the respondent Nos. 2 and 3 invested their funds for allotment of shares. The board of directors of the Company completed allo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es were registered in the name of the 3rd respondent in the year 1986. The petitioners' action to dispute the said transaction after a period of 11 years is barred by time. The CLB is a Court within the meaning of the Indian Limitation Act, 1963 and the present proceedings would be barred by the provisions of the Indian Limitation Act. The transmission of impugned shares reflected in the Annual Return is a public document. The petitioners have public notice of the transmission of the impugned shares even in the year 1986 by which time section 155 of the Act was in force and not section 111(4). The proceedings under section 155 would He before the High Court and by virtue of article 137, the remedy of the petitioners before the High Court is barred. The petitioners' right extinguished after October, 1989. The High Court was only the forum before which the petitioners ought to have agitated their rights. Any right barred by limitation cannot be revived. The petition (CP 52 of 1995) was filed on 7-8-1995. Applications by the legal heirs of the deceased M.A. Coelho impleading them as petitioners were filed on 1-1-1996. When the Depositories Ordinance came into existence with ef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt will be upheld and the Courts will find no difficulty in giving assent to the same." * Muthuveeran Chetty v. Govindan Chetty AIR 1961 Mad. 470 - to state that "A member to whom a promissory note is allotted at a partition of the joint family properties, is entitled to sue on the note without an endorsement or deed of assignment in writing." * Ramprasad Dagaduram v. Vijaykumar Motilal Hirakhanwala AIR 1967 SC 278--to state that- "the Court has power to add new plaintiff at any stage of the suit, (under Order 1 Rule 10 of Civil Procedure Code, 1908) and in the absence of statutory provision like section 22 (of the Limitation Act, 1908), the suit would be regarded as having been commenced by the new plaintiff at the time when it was first instituted. But the policy of section 22 is to prevent fhis result, and the effect of the section is that the suit must be regarded as having been instituted by the new plaintiff when he is made a party." * Krishna Moorthy v. Bangalore Turf Club--1975 (2) Kar. L.J. 428 - to state that "...the Court always must look to the conduct of the plaintiff and will refuse to interfere even in cases where it acknowledges h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e could be considered to be an act of oppression. Keeping in view this legal proposition in mind, allegations contained in the petition have to be examined. In so far as the registration of 3,250 shares held in the name of the deceased M.A. Coelho, in the name of the third respondent is concerned, the challenge is that since the third respondent is not a legal heir, the shares should not have been registered in her name and should have been registered in the name of the legal heirs. The respondents have relied on an alleged family settlement among the family members and also the wishes of the deceased M.A. Coelho for getting the shares registered in the name of the third respondent. We find from the reply of the respondents to the legal notice issued by the petitioners at page 15 that these shares were transmitted in the name of the third respondent. Article 16 of dealing with transmission of shares provides as follows :-- "The executors or administrators of a deceased shareholder or a holder of a succession certificate shall alone be recognised by the Company as having title to the shares, unless the Directors, in their discretion resolve to recognize the title of any per....
X X X X Extracts X X X X
X X X X Extracts X X X X
....held she was not entitled to, her name in respect of these rights shares of 9,750 will also have to be removed from the register of members provided the other legal heirs are interested in acquiring these shares in the same proportion in which the shares held in the name of Mrs. M.A. Coelho are distributed among the legal heirs. In case these legal heirs are not interested in acquiring the proportionate shares, these shares will be retained in the name of third respondent. The legal heirs should exercise their option of getting these shares within a month from the date of transmission of shares as directed in the earlier paragraph, along with the remittance of consideration at the same value at which the shares were originally allotted and send the communication to the Company. On receipt of this communication, the Company will ensure payment of the consideration to the third respondent and simultaneously get transfer deeds from her in favour of the legal heirs who Have exercised this option and register the shares in the name of her legal heirs within one month thereafter. 11. In regard to the complaint regarding non-allotment of 21,000 shares to the first petitioner, we note t....