TaxTMI 
TaxTMI 
1993 (10) TMI 362
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....order. 2. Respondents Nos. 1 to 11 herein are respondent No. 1 in the respective petitions and they are all corporate entities. These companies, during the months of June, 1991 ; June, 1992 and September, 1992, lodged with the company, transfer instruments in respect of a large number of shares and the company registered these transfers as per the details indicated below : Sl. No. Name of the company Number of shares transferred I. Mikantra Trading P. Ltd. 61,030 2 Maxwell Dyes and Chemicals P. Ltd. 42.92 3 Swadee Chemicals P. Ltd. 61,170 4 Lazor Detergents P. Ltd. 64,430 5 Saki Agencies P. Ltd. 26,710 6 Alkelite Intermediates P. Ltd. 44,680 7 Skylab Detergents P. Ltd. 37,750 8 NavkStan Commercials Ltd. 40,700 9 Shruti Traders Ltd. 43,590 10 Prolab Synthetic and Detergents P. Ltd. 22,480 11 Oscar Chemicals P. Ltd. 32,100 Total 4.77,560 3. On January 25, 1993, the company lodged these 11 petitions seeking orders of the Company Law Board for deletion of the names of these respondent-companies from the register of members for reasons stated in the....
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....ates that the provisions of Section 108(1) of the Act are mandatory and no company could register transfer of shares unless a proper instrument of transfer duly stamped and executed is lodged with the company as provided in that section. Therefore, it is submitted that the respondents' names have been entered in the register of members of the company in respect of such shares as indicated earlier without sufficient cause, and, therefore, it has prayed for rectification of the register of members as provided in Sub-section (4) of Section 111 of the Act since mutation has taken place in the register of members contravening the provisions of Section 108(1) of the Act read with Section 2(11) and Section 12 of the Indian Stamp Act. 4. It has been further stated in the petition that the company made a rights issue of partly convertible debentures (PCDs) by a letter of offer dated October 15, 1992, to all the shareholders of the company and accordingly all the respondent companies, being in the register of members of the company, have also been issued letters of offer. These respondent-companies have applied for both rights as well as additional rights as per annexure II. The right....
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....s would be created nor would they exercise any rights vested in these PCDs. Alternatively, it was also suggested that they should be allotted the rights entitlement keeping in abeyance their application for additional rights or they should be allotted both rights and additional rights in respect of 38 per cent of the rights and additional rights pertaining to instruments which had been allegedly cancelled by the employees of the twelfth respondent. None of the above suggestions was acceptable to the petitioner-company. 7. Taking into consideration that a prima facie case had been made out, interim orders on the following terms were passed on February 5, 1993: "The entitlement to rights issue/additional rights flows, from their being the members of the company. As the status as member itself is under consideration, it would not be appropriate to bestow them with rights/additional rights till the issue regarding their membership is decided. Therefore, the best course of action would be to maintain the status quo as of today, i.e., while the respondents would be entitled to all the rights and privileges attached to the shares registered in their names as of today, allotmen....
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....nd the Reliance group by citing the observation of the Supreme Court of India in Parthasarathy (N.) v. Controller of Capital Issues [1991] 72 Comp Cas 651 (SC), wherein four companies out of the eleven respondent-companies have been held to belong to the Reliance group. 10. He then presented a few transfer forms for perusal by the Bench to show that they have not been cancelled but learned counsel for the first respondent objected to such presentation without their being introduced in evidence. This was not acceptable to Shri Zaiwala as according to him the documents being not duly stamped were illegal and faulty in law and should not and cannot be produced in evidence. He also objected to the demand of counsel for the respondents that the Company Law Board should impound these instruments and send them to the Collector for adjudication on the ground that they are not being introduced in evidence. He then explained the background of the case and also cited various legal propositions to substantiate the contents of the petition. 11. Shri M.P. Amin, senior counsel appearing on behalf of the first respondent, questioned the very basis of the petition and also argued that without....
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.... on the main petition. 13. He contended that the petitions have been filed with mala fide intentions and with some ulterior motives. The company has fraudulently deprived the respondents of over Rs. 3.5 crores invested by them for the rights and additional rights by having obtained the interim restraint order from the Company Law Board. Having registered the shares in the names of the respondents, having paid them dividends, having registered them as members of the company and having given letters of offer for PCDs, it would be against equity now to represent that their recognition as members was based on faulty instruments of transfer. It is more so when the company could attain 90 per cent subscription to PCDs only with the subscription made by the respondents. 14. Shri Cooper further stated that if the petitions succeed then the entire PCD issue would fail as in that case the mandatory minimum subscription of 90 per cent would not be reached. It is very clear from the affidavits of Sarvashri Mohandas and Narayanaswami, he stressed, that great efforts had been taken by the company to discover infirmities in the transfer documents only with the view to deprive the respondent....
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....onduct of the parties seeking reliefs. 17. He further stated that a perusal of the transfer forms shows that on some of the forms the company has impressed the rubber stamp "not duly Stamped" with dates but on the same dates they have been approved for registration clearly establishing that the company was aware that some of the instruments had not been cancelled but took the conscious decision to approve registration. If the company had, as it did in a few cases, returned all the instruments for rectification of defects, to the respondents, they could have lodged the instruments later after rectification. This opportunity has been denied, Shri Cooper stressed, by wilful and deliberate action of the petitioner. This conduct of the petitioner alone is sufficient to dismiss the petition, he asserted. 18. Elaborating that failure to implead all the transferors as parties would be fatal to the petitions, Shri Cooper stated that once the names of the respondents are removed from the register, the names of the transferors would have to be put back on the register which would create rights and liabilities in these persons and as such it cannot be done without hearing them. In this c....
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....he applicant cannot take advantage of his own laches . . . This doctrine of laches has a very great significance as otherwise such delay would be fatal to his application for rectification." Shri Cooper also contended that there is clear estoppel operating against the company in presenting these petitions as the company has already recognised the respondents as members and the respondents have also acted on such representation. The company has paid dividends to the respondents, offered rights PCDs and because of subscription by the respondents, the company could also reach the 90 per cent mandatory minimum subscription. Shri Cooper contended that the petitioner has not only by its conduct and by the long lapse of time, raised the presumption of acquiescence and waiver but has in fact expressly affirmed the said right and, therefore, is estopped from now contending to the contrary. 21. It was also argued that proceedings under Section 111 being summary proceedings, complicated or disputed facts should not be decided but should be left to be agitated in a civil suit. To strengthen, a number of cases decided by various High Courts including the case of Public Passenger Service L....
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....en created. He also further contended that lapse of non-cancellation is not a great defect and by payment of penalty, if at all there is any, these documents can be made good and this lapse as such does not give a right to the company to seek removal of the name of the respondents. He cited Paradise Motor Co. Ltd., In re [1968] 2 All ER 625 (CA) that non-compliance with the provisions of the Indian Stamp Act is merely a fiscal requirement and negligence of essential matters on transfer may not be fatal to the validity of the transfer but may amount to mere irregularity. According to Shri Cooper in the present case all the due stamp duty has been paid and that non-cancellation was only an irregularity. Even assuming it is a nullity Shri Cooper quoted Buchley "lapse of time coupled with recognition of the transferee as a shareholder may render the transfer incapable of being impeached. The registration of a defective transfer of shares may be regarded, after a long lapse of time as a mere irregularity and not a nullity". In this case, according to him, the company put the names of the respondents on the register, paid dividends and also issued an offer for rights shares. There has al....
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.... some irregularity relating to non-cancellation may be there. Since it is only a procedural irregularity, it does not make the instrument illegal or void. 27. Citing CIT v. Lakshmi Talkies [1984] 145 ITR 191 (Kar) and the provisions of Sections 35 and 36 of the Indian Stamp Act, he argued that once an instrument is validated, the validity will relate back to the original date and as such they are prepared to pay any penalty so that they would be entitled to the rights PCDs. The fiction of the Indian Stamp Act cannot be transported to the provisions of the Companies Act, he urged. Shri Cooper pointed out the provisions of Sections 62B, 63 and 12(2) of the Indian Stamp Act to highlight that "not duly stamped" and "unstamped" are two different propositions in the Stamp Act itself and since the Stamp Act provides for specific penalty for "unstamped" and "not duly stamped instruments" no other stigma can be attached to these instruments other than the payment of penalty. He also sought support from Life Insurance Corporation of India v. Escorts Ltd. [1986] 59 Comp Cas 548 (SC). 28. He further stated that Section 22A of the Securities Contracts (Regulation) Act provides for refusal....
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....e Reliance group and they have attempted to take over the control of the company in a surreptitious manner, he pointed out that recently also the Reliance group have lodged a large number of shares for transfer. Therefore, he claims that this alone would merit the consideration that equity lies with the petitioner and not with the respondents. He advocated that had the petitioner-company known that these companies belong to a single group, they could have initiated action earlier under Section 22A of the Securities Contracts (Regulation) Act. He stoutly refuted the allegation that the petitioner-company searched for some infirmities in the instruments only with a view to deprive the respondents of the right to their entitlement of rights PCDs. 30. He questioned the need for impleading all the transferors. According to him, there is no such need as decided in Luxmi Tea Co. Ltd. v. Pradip Kumar Sarkar [1990] 67 Comp Cas 518 (SC). If necessary, he pleaded that instead of issuing individual notices to all the transferors, this may be done by an advertisement in the newspapers. For this reason alone, he contended that the petition does not deserve to be dismissed. 31. In regard to....
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....68] 2 All ER 625 (CA) stating that in this case the issue related to the provisions of the articles and not statute. He also contended that Section 75 of the English Act is not in pari materia with Section 108 of the Indian Act. He also relied on Guide to the Companies Act by Ramaiya, twelfth edition, at page 523. "But as the language of the present section appears to be mandatory, the words used are 'shall not register', and any transfer which does not comply with its requirements will not be valid." 33. Dealing with the contention of the respondents that the proceedings under Section 111 are summary in nature and as such disputed questions of fact or complex issues are not to be decided but should be relegated to be settled in a suit, Shri Zaiwala contended that there are no complex issues involved in the case and even assuming there are such issues, the Company Law Board has full powers under Section 111(7) of the Act to decide all issues arising in a Section 111 petition. In support of this, he cited the decisions in Gulabrai Kalidas Nath v. Laxmidas Lallubhai Patel of Baroda [1978] 48 Comp Cas 438 (Guj) and Mrs. E.V. Swaminathan v. K.M.M.A. Industries and Roadways P....
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..... Shri Zaiwala refuted the arguments that the provisions of the Indian Stamp Act cannot and do not override the provisions of Section 108 of the Act. Non-compliance with the provisions of Section 108 makes the instrument ab initio void. The non-cancellation of the stamps makes the instrument "not duly stamped" and as such it cannot be registered as it would be against the provisions of Section 108. When the provisions of statute are mandatory, the ab initio defect cannot be cured and the doctrine of relating back cannot be applied, he asserted. 37. According to him, Section 111(4) of the Act stipulates that there should be sufficient cause either for putting the name of a person in the register or removal thereof, and in the present cases the company had no justification to put the names of the respondents in the register of members in view of the violation of the provisions of Section 108 and, therefore, can seek removal of the same. The justification for the company in seeking the removal is strengthened by the fact that all the respondent-companies belong to the Reliance group and their being members of the company would be detrimental to the interest of the company. He state....
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.... Section 108, he stated that they are both positive and negative. Non-fulfilment of mandatory provisions makes the instrument void and the registration unlawful. Quoting Palmer, Shri Zaiwala pointed out that once an act is found to be unlawful, its rectification is imperative. In support of this, he once again cited Nuddea Tea Co. Ltd.'s case [1988] 64 Comp Cas 775 (Cal) in which it was held that an unstamped instrument is a nullity. Since Section 63 of the Indian Stamp Act provides penalty for infringement of Section 12, it is clear that infringement of Section 12 is illegal and, therefore, such instrument should be treated as null and void. In view of the decision in AIR 1938 Bom 280 (sic) in which it was held "what is invalid must remain invalid", Shri Zaiwala argued that no time lapse, consent, etc., can correct an unlawful and void transfers irregular and voidable (sic). He also relied on Mahindra and Mahindra Ltd. v. Union of India [1993] 64 ELT 172 (Bom) and Firestone Tyre and Rubber Co. v. Synthetics and Chemicals Ltd. [1971] 41 Comp Cas. 377 (Bom) to strengthen his argument that there is no estoppel against statute. Shri Zaiwala also pointed out that the respondents ha....
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....sive. He questioned the ratio of counsel for the petitioner citing the Privy Council decision in Dottikaran's case, AIR 1928 PC 92. He asserted that in the Privy Counsel case the issue was impersonation and it has no relevance in a stamp case. He drew our attention to Ma Pwa May v. S.R.M.M.A. Chettiar Firm, AIR 1929 PC 279, to show that documents not duly stamped and admission to registration is an error in procedure and curable under Section 87 of the Registration Act. According to him, the same ratio was followed in CIT v. Lakshmi Talkies [1984] 145 ITR 191 (Kar). He also relied on the decision in CIT v. Lakshmi Talkies [1984] 145 ITR 191 (Kar) that the Stamp Act is a fiscal measure enacted to secure revenue for the State and is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. Once the object is secured, the parties staking their claim on the instrument will not be defeated on the ground of initial defect in the instrument and once the deficiency in the stamp duty is made good it shall be acted upon as if it has been duly stamped. 42. Drawing an inference from the affidavits of Shri Narayanaswamy and Shri Mohan Das, Shri Cooper ....
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....s ; 4. On account of delay and laches the petitions should be dis­missed; 5. Estoppel operates against the petitioner. Even though learned counsel has projected these issues as prelimi­nary issues, we are of the view that issues relating to equity and estoppel deserve to be dealt with along with the merits of the case and not as preliminary issues. We have accordingly done so. 45. The main objection relates to the scope and the powers of the Company Law Board under Section 111(4). Shri Cooper strongly advocated by citing decisions in a number of cases, that the proceedings under Section 111(4) are of summary nature and, therefore, disputed facts or complex issues should not be decided by us but the parties be relegated to a civil suit. Shri Zaiwala, on the other hand, cited a number of cases to show that the Company Law Board can decide any issue under this section and there is no need to relegate the matter to a civil suit. 46. Section 111 consists of two parts. The first part in Section 111(1) to (3) relates to appeal to the Company Law Board in the case of refusal by a company to register transfer of shares and the second part in Section 111(4)....
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....ief under Section 155 in exercise of the discretionary jurisdiction and relegate the parties to a suit" used only the word "may" and not "shall". In other words, it is not mandatory that whenever complicated issues are involved in proceedings under Section 155 (now Section 111) the same should be relegated to a suit. 48. We have come across a recent decision by the Division Bench of the Karnataka High Court in Muniyamma v. Arathi Cine Enterprises Pvt. Ltd. [1993] 77 Comp Cas 97 (Kar) ; [1993] 2 Comp LJ 327 reversing the deci­sion of the single judge (see [1991] 72 Comp Cas 555). Paragraph 55 states thus (at page 124 of 77 Comp Cas): "Thus, a conspectus of these decisions lead us to the conclusion that even though the proceeding under Section 155 of the Companies Act is a summary proceeding, as it is a relief provided under the statute, in a proper and appropriate case, it is open to the court to grant relief even though it may involve complicated questions of law and fact. Whether in a particular case relief should be granted or not, because the jurisdiction is discretionary as the word used is 'may' in Section 155 of the Act, would depend upon facts and cir....
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....subscription only on account of the respondents applying for the rights PCDs. (2) The rights partly convertible debentures would go to the directors who actually approved the transfer and this would mean putting a premium on dishonesty. (3) The company should have returned the original transfer instru­ments in June, 1991/June, 1992, as not duly stamped so that the deficien­cies could have been rectified. (4) Mala fides on the part of the petitioner are apparent from the fact that one of the grounds relied on for rectification is the allegation that the respondents belong to the Reliance group. In regard to the first, the company has furnished details of subscrip­tion to the rights partly convertible debentures from which it is clear that even without the respondents' applications the company had reached the minimum subscription and as regards the second, the company has explained that the rights partly convertible debentures in the event of rectification of register of members, would be allotted as per stock exchange approval. In view of these clarifications furnished by the company, no further elaboration is needed on these two points.....
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....st the transferor for breach of any implied warrantee to have the transfer registered or for the recovery of the purchase price and rescission of the contract. Any such term must be expressly provided for. Otherwise the seller's duty is performed when he hands over to the buyer a duly executed instrument of transfer, together with the certificate or its equivalent." If the buyer wishes to protect himself, he must buy with 'registration guarantee'." In Stray v. Russel [1859] 1 E & E 888, the Queen's Bench held that in case of sale of shares, there is no undertaking on the part of the transferor that the company would register the name of the transferee and the plaintiff's claim on this account should be rejected. 55. Thus, there is no basis for the apprehension of the respondent that stamp duty would become payable by the transferor (that is the first) and he may also have to refund the consideration if the respondents choose to rescind the contract of sale/purchase of shares on account of frustra­tion. In most of the cases cited by the respondents the contracts of sale and purchase were directly between the first transferor in whose name the shares stood ....
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....f the rights partly convertible debentures, with a view to deprive the respon­dents, of the rights partly convertible debentures the company laboured to find deficiencies in the instrument of transfer. In other words, it is fairly clear that whatever may be the motive for filing these petitions, there has not been any undue delay and the petitions have been filed within the period of limitation even assuming the provisions of Section 113 of the Limitation Act are applicable. Therefore, we are not inclined to sustain this objection of the respondents. 58. Accordingly, with the decision that the petitions are maintainable, we dispose of Miscellaneous Application No. 67/SRB/93 filed by respon­dents Nos. 1 to 11. 59. As far as the main petitions are concerned, on the basis of the plead­ings and arguments advanced by all the parties, the following issues emerge for decision : 1. Do the transfer instruments suffer from infirmities/deficiencies as alleged by the petitioner? 2. If so, when the company registered the shares in the name of the respondents, was it without sufficient cause? 3. If so, are the alleged deficiencies capable of being rem....
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....nsferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of allotment of the shares or deben­tures." Section 2(11) of the Stamp Act, "duly stamped" : " 'duly stamped', as applied to an instrument, means that the instrument bears an adhesive or impressed stamp of not less than the proper amount and that such stamp has been affixed or used in accordance with the law for the time being in force in India. 63. Section 12 of the Indian Stamp Act : "12. Cancellation of adhesive stamps.--(1)(a) Whoever affixes any adhesive stamp to any instrument chargeable with duty which has been executed by any person shall, when affixing such stamp, cancel the same so that it cannot be used again ; and (b) Whoever executes any instrument on any paper bearing an adhesive stamp shall, at the time of execution, unless such stamp has been already cancelled in manner aforesaid, cancel the same so that it cannot be used again. (2) Any instrument bearing an adhesive stamp which....
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....ring in the section was not the main issue. 66. In this connection, it is essential to note that the Companies Act does not define the term "duly stamped", while the same is defined in the Indian Stamp Act in Section 2(11). Normally, the definition clause in a statute can be used only for the purpose of interpreting the words appear­ing in that particular statute and not for the purpose of interpreting the words appearing in other statutes (Geyer v. Geyer [1949] Lah 867). It was also held in Rao Bahadur Ravulu Subba Rao v. CIT [1956] 30 ITR 163 (SC) that it is not safe to pronounce on the provisions of one Act with reference to provisions dealing with other Acts which may not be in pari materia. However, as indicated later, various courts have adopted the defi­nition of "duly stamped" in Section 2(11) of the Stamp Act for the words used in Section 108(1) of Act in the absence of definition in that Act itself. 67. Under Section 2(11) of the Stamp Act, there are two main points to be considered. One, the amount of stamps to be used and two, the mode of using them. In the second one comes Section 12 of the same Act which deals with cancellation of adhesive stamps. Shri C....
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....e, the Division Bench in Muniyamma's case [1993] 77 Comp Cas 97 (Kar) reversing the decision of the single judge (see [1991] 72 Comp Cas 555) held that "the instrument of transfer of shares should bear the requisite stamps and the adhesive stamps should be cancelled at the time of affixation of stamps or execution of the docu­ment. In case it is not so cancelled then it cannot be said to be duly stamped. The provisions of Section 108(1) of the Act and Section 12 of the Karnataka Stamp Act are mandatory. These two provisions should be read together. If the stamps are not cancelled, the document must be held to be not duly stamped. Consequently, it must be held to be invalid." 71. Shri Cooper relied on the decision of a Division Bench of the Karnataka High Court in Lakshmi Talkies' case [1984] 145 ITR 191 (Kar) to support his claim that the Stamp Act is only a fiscal measure and not to arm a litigant with a weapon of technicality. In this case, the dispute was only on the provisions of the Stamp Act and not read with Section 108 which has been declared to be mandatory provision. Secondly, this decision of the Division Bench of the Karnataka High Court has not been cite....
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....ered without sufficient cause and accordingly we hold so. 75. As far, as List B is concerned, no doubt, affidavits have been filed by two employees of the twelfth respondent to the effect that the stamps on the instruments covered in that list were either cancelled by rubber stamp or by hand by themselves. We are unable to accept this submission. Annexure I shows that the shares were lodged by the respondents in three lots on three different dates, viz., June 29, 1991, June 11, 1992, and Septem­ber 21, 1991. On June 29, 1991, in all about 2,500 transfer instruments were lodged with the company by the respondents of which only 15 remain uncancelled today. If we consider the submission that all these forms were cancelled by the employees of the twelfth respondent, then it must have been done with record speed as the transfers were approved on July 1, 1991, i.e., within the next two days. While we do not dispute the possibility of doing so in view of the book closure commencing on July 2, 1991, yet we also have to consider as to why such cancellation was not done by the twelfth respondent in respect of instruments lodged on the other two dates. On June 11, 1992, the respondents....
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.... 77. As far as the impounding is concerned, it is to be pointed out that the grounds on which the petitions have been filed relate to infringement of the provisions of the Companies Act and the decision we are called upon to give is whether there has been infringement or not and the effect thereof. Therefore, we are unable to accede to the prayer of Shri Cooper for impounding the documents as per the Indian Stamp Act. We draw support from the observation of the Calcutta High Court in Nuddea Tea Co. Ltd.'s case [1988] 64 Comp Cas 775 when demand for impounding was raised "we do not find any substance in the contention . . . This is not the case in the present appeal. The question in this appeal, as we have already noted is whether the company is bound by law to accept any instrument not duly stamped within the meaning of Section 108 of the Act or Section 12 of the Indian Stamp Act and to make registration of transfer and rectify the share register". 78. The Company Law Board, Western Region Bench, went a step further to say that even if the instruments are impounded and sent to the Collector for adjudication, the certificate given by him under Section 40(2) even though conclu....
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....per in this regard, accord­ing to us, has a lot of weight and merits very careful consideration. It should be said in all fairness to Shri Cooper that even though he stressed the point that non-cancellation is only a procedural defect yet he fairly admitted that in case the transfer had not been registered, he perhaps could not approach the Company Law Board for a direction for registration, as such direction may be considered to be a direction to do an unlawful act. But once the registration has taken place and considerable time has lapsed, then different equities arise between the parties and even an unlawful and void transaction becomes irregular and voidable, he argued. 81. He stressed that the conduct of the company should be taken into account in deciding the matter finally. He argued that two lots of transfer instruments were lodged with the company in June, 1991, and June, 1992, and it is for the company to have examined the correctness of these instruments, returning those in which deficiencies were detected or other­wise they should have rejected the transfers under Section 22A of the Securities Contracts (Regulation) Act. Not only did the company not do so, bu....
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....spondents had prompted the board to look for some excuse to prevent allotment of such rights. The company has, on its part, justified these petitions on the plea that the respondents had hidden the fact of their belonging to the Reliance group and if this fact had been known to the company, it could have rejected the request for registration under the relevant provisions of Section 22A of the Securities Contracts (Regulation) Act which opportunity, the company claims, has been denied due to non-disclosure of this vital information by the respondents. To sustain their claim about the Reliance connection, the petitioner has relied on the Supreme Court observation in N. Parthasarathy's case [1991] 72 Comp Cas 651 in which four of the 11 respondents were observed to have been a part of the Reliance group. Even though the petitioner tried to assert this position by pointing out the commonality of various actions by all these 11 respondents like lodg­ment of transfer forms in lots on the same dates, filing of identical replies to the petitions, similarity in the preliminary objections, remittance of money for rights PCDs from the same bank through consecutive serially numbered st....
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....e, the first lot of shares were lodged by five respondents on June 29, 1991, and were approved for regist­ration on July 1, 1991, a day before book closure on July 2, 1991. Likewise, ten respondents lodged the second lot on June 11, 1992, and were approved for registration on June 15, 1992, a day before book closure on June 16, 1992. The act of ultra quick registration can be termed both as signify­ing the bona fides of the company as well as its acquiescence while lodg­ment by the respondents at the last minute as tactical as well as surrepti­tious. Whatever it may be, we feel that the arguments of Shri Cooper about the equity being in favour of the respondents cannot be easily brushed aside. 86. However, we are unable to go any further beyond this because of the grounds on which the rectification has been sought, i.e., infringement of mandatory provisions of law wherein it has been held that equity does not apply. In Public Passenger Service Ltd.'s case [1966] 36 Comp Cas 1, 6 (SC), Bachawat J. observed : "counsel relied upon the well known maxim of equity that 'he who comes into equity must come with clean hands' and contended that the courts below....
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....us, the respondents have been held out to be members and they also acted as such. Therefore, Shri Cooper is justified in asserting that there is clear estoppel operating against the company in this regard. 88. The only argument of the company on this is that there is no estoppel against the statute, inasmuch as they have sought for rectification of the register of members only on the ground that the mandatory provisions of Section 108 of the Act were not fulfilled when the transfer instruments were delivered to the company. To support this contention, a large number of court decisions have been cited as indicated earlier. Unfortunately, the respondents were not able to rebut this argument to our satisfaction. Various judgments on the issue of estoppel that we have come across, have also supported the same view that there is no estoppel against the statute. In Firestone Tyre and Rubber Co.'s case [1971] 41 Comp Cas 377 (Bom) the court observed: "No estoppel against statute nor can a person waive any right or benefit conferred by a statute unless it is a private or personal nature". In the case of Lady Dinbai, Mr. Chagla J. observed : "The learned judge has dealt with this ple....
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....ent cause have to be removed therefrom and the prayer of the petitioner for rectification in relation to shares covered in Lists A and C be granted. We order accord­ingly. 92. In this connection, we would like to make the following observa­tions. As we have indicated earlier, in respect of listed securities, a large number of transfers take place with blank transfer forms, it is very difficult to identify the intermediaries between the first transferor and the last transferor. The intent of the Legislature is to ensure free transfer ability of shares and even the new Companies (Amendment) Bill makes abun­dantly clear only the circumstances under which transfers could be refused by companies. Even though it has been held by many courts that non-cancellation of adhesive stamps as per Section 12 of the Stamp Act would violate the mandatory provisions of Section 108 of the Act, it has to be remembered that these decisions have been given on the basis of the definition of "duly stamped" as given in Section 2(11) of the Stamp Act. In a number of cases in various proceedings before us this plea of non-cancellation has been taken to defeat the rights of the transferees. It i....
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....ime of transfer, it is taken care of in the consideration paid, thus completely relieving him of any interest/liability in respect of the shares. The property, in the shares passes on to the transferee. However, by legal fiction because his name continues on the register of members, till the ultimate transferee's name is put on the register, he is treated to be a member of the company and all the rights as member accrue to him. While the need for continuing him on the register of members is neces­sary till someone fills up the blank transfer form and presents it for registration, yet once the instruments are lodged with the company and the company has notice of the transfer, different legal provisions should apply, but in the absence of suitable legal provision in this regard, the original shareholders, even though they have divested their entire interest in the shares are treated as trustees of the transferees, even though there may not be any privity of contract between them and one may not even know the other. How far the liability of the trustees can be enforced is a matter of concern and we feel that it is unequitable that a person who has paid full consideration, has ....
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....ondents. In addition to the above three alternatives, we have, before us, the provisions of Section 206A of the Act which we have already dealt with in an earlier paragraph. 95. We have given careful thought to all the above alternatives. Even though we have already held that in respect of shares in Lists A and C, the register of members should be rectified, we are of the view that the plea of equity advocated by Shri Cooper becomes very relevant in the case of rights PCDs. With the handing over of blank transfer forms and on receipt of consideration, the original transferors have no beneficial inter­est in the shares. Even Section 206A of the Act recognises this aspect and provides for keeping in abeyance the rights allotment in case of transfers which are pending for registration. This section being a non-obstante provi­sion, is applicable notwithstanding any other provisions of the Act in the circumstances as specified in that section. Even though as per Section 81 of the Act, all holders of equity shares of the company are entitled to the rights offer, in the case before us, even though the transferors' names are put back in the register of members on account ....
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....m the date on which the dividend became due, such dividend can be paid to him. Registration of a transfer is not the criteria to claim such dividend. In the present case, the dividends were paid after registration only. While coming to this decision, we have also taken into consideration the deci­sion of the Supreme Court in Chunilal Khushaldas Patel v. Adhyaru (H.K.) [1956] 26 Comp Cas 168 (SC) in which it was held (at page 190): ". . . the liquidators, even though they received the dividend from the company by virtue of their having been shown as shareholders in the register of shareholders of the company, would be bound, once the contract of sale had been entered into between them and Chunilal, to hand over the said dividend to Chunilal." In the result, the petitions are partly allowed with the following directions: (a) The register of members shall be rectified by removing the names of the respondents in respect of the shares covered in Lists A and C of annexure I within 10 days of receipt of this order. (b) The rights PCDs in respect of shares covered in Lists A and C of annexure I which have been kept in abeyance shall be allotted to the resp....
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.... (P.) Ltd 3.598 7,202 3,598 5,219 8.817 4 Oscar Chemicals (P.) Ltd. 1,876 3,754 1.876 2.722 4.598 5 Prolab Synthetics and Detergents (P.) Ltd. 1,283 2,567 1,283 1,862 3.145 6 Mikantra Trading (P.) Ltd. 1,530 7.19 3.59 5,208 8.798 7 Alkelite Intermediates (P.) Ltd. 2.386 4,764 2,386 3,461 5,847 8 Navketan Commercials Ltd 2,395 4,787 2,395 3.473 5,868 9 Shruti Traders Ltd. 2.493 5,017 2,493 3.616 6,109 10 Saki Agencies (P.) Ltd. 1.572 3,178 1,572 2,279 3,851 11 Skylab Detergents (P.) Ltd. 2.176 4,374 2,176 3.157 5.333 Total 27,672 5S.470 27,672 40.141 67.813 As renouncee the following companies applied rights sl. No. Name Applied Additional applied Total applied Allotment kept in abeyance Amount refunded Rs. 1 Maxwell Dyes and Chemicals (P.) Ltd. 58 116 174 58 46.400 2 Mikantra Trading (P.) Ltd. 115 230 345 115 92000 3 Lazor Detergents (P.) Ltd. 86 172 258 86 68,800 ....