TaxTMI 
TaxTMI 
2018 (7) TMI 1965
X X X X Extracts X X X X
X X X X Extracts X X X X
.... share certificates to the petitioner. (ii) To stay holding of any Board Meetings of the Respondent No. 1 Company. (iii) To stay holding of any AGM and any Extraordinary General Meeting of the Respondent No. 1 company. (iv) To stay sale or transfer or create any lien/charge/mortgage on the fixed assets (movable and immovable) of R-1 company. (v) To direct the Respondents to maintain the shareholding pattern of the Respondent No. 1 company and also the composition of Board of Directors. (vi) To direct the Respondent No. 2 and Respondent No. 3 to allow inspection of all statutory documents, including bank statements, books of accounts, statutory registers and all other documents as per the legal rights of shareholders and director and also order to provide the authenticated copies of all the records. (vii) To direct that the affairs of the Respondent No. 1 company be managed in the ratio of shareholding pattern. (viii) To direct R-2 and R-3 not to use the R-1 Company's fund for their personal expenses and gains. (ix) To direct that the bank accounts of the Respondent No. 1 company be operated by the petitione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e subscribers subscribed 100 shares each constituting 50% of the entire subscribed and paid-up capital of Nulon India Limited. Subsequently, the company allotted further shares worth Rs. 84,00,000/- consisting of 8,40,000 equity shares of Rs. 10/- each. Petitioner No. 3 is holding 3,15,100 equity shares of Rs. 10/- each constituting 37.51% of the entire subscribed and paid-up capital of Nulon India Limited. Yash Golyan-petitioner No. 1 became one of the shareholders during the Financial Year 2011-12. He owned 466600 equity shares of Rs. 10/- each constituting 55.55% of entire subscribed and paid-up capital. This is the disputed shares in the present proceedings. The petitioners jointly hold more than 93% of the entire subscribed and paid-up capital of Nulon India Limited. In support of the aforesaid assertion, reliance has been placed by the petitioners on the Annual Return for the year 2013 and 2014. Respondent Nos. 2 & together hold 1.97% of the entire subscribed and paid-up capital of Nulon India Limited. It is claimed that being a blood relation, the petitioner allowed respondent No. 3, namely Krishan Kumar Golyan, to work as a director of the company who started indulging in i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llegation of the petitioner is that he namely Krishan Kumar Golyan in connivance with other respondents has helped Mrs. Smiti Golyan in getting shares of the petitioner illegally transferred in her name. Respondent Nos. 4 & 5 are the Chartered Accountants and Company Secretary, who are alleged to be party to the conspiracy and illegal transfer of shares. 8. The principal issue raised in the present proceeding is whether 466600 equity shares of Rs. 10/- each held by Yash Golyan have been illegally transferred at the instance of Respondent No. 3 & Others to Mrs. Smiti Golyan-respondent No. 2. The petitioner has shown the shareholding before the alleged illegal transfer as on 14.02.2014 and thereafter which reads as under: Sl. No. Name & Address No. of shares % of holding 1. M.P. Golyan (P-2) 34, Western Avenue, Sainik Farm (Earlier known as 171-A, Sainik Farm), New Delhi-110062. 100 0.012 2. K.K. Golyan (R-3) 34, Western Avenue, S ainik Farm (Earlier known as 171-A, Sainik Farm), New Delhi-110062. 15,100 1.79 3. S.D. Golyan (P-3) 34, Western Avenue, Sainik Farm (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssociation of respondent No. 1 have also been violated. All that has been done in connivance with one and another respondent Nos. 2, 3, 4 and 5. 11. The petitioner has also pleaded about strained relations which developed between the petitioners and respondent Nos. 2 and 3 in the month of August, 2014. On 02.02.2015, respondent Nos. 2 and 3 left the family house and started living separately at different place in Panchsheel Park. He took away all the original documents lying at one place including the personal file belonging to the petitioners. 12. The petitioner realized that the certificates representing his share capital in respondent No. 1 company were misplaced/lost and in that regard, an email was sent to respondent No. 1 company with a request to issue duplicate share certificates. The petitioner sent several communications through emails, letters and registered post thereby informing the respondents that he had misplaced/lost the original share certificates and requested them for issuance of duplicate share certificates. When no reply was received, the petitioner again sent a reminder mail on 23.02.2015. The company-respondent No. 1 through its official, Mr. Ajay Shar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the petitioner No. 1-Yash Golyan, about the meeting of the Board of Directors. Therefore, the so-called Board Meeting dated 14.02.2014 is non-existent and wholly illegal. 14. The petitioner has also asserted that the auditors in their audited financial statements and in original Annual Return for the financial year 2014 had shown petitioner No. 1 as the majority shareholder (Annexure R-1). The audited Balance Sheet has been unanimously adopted by the Board of Directors of respondent No. 1 company consisting of petitioner No. 2- and respondent Nos. 2 and 3. However, subsequently revised Annual Return was filed (P-1), which is full of doubts as it contains pages which are not in sequence, some pages bear same numbers followed by unnumbered old page with stapler mark appeared to be taken out of some earlier Annual Return. There are allegations of tampering of signatures and request has been made that respondent be directed to produce the original so that truth of tampering maybe established before this Tribunal. Referring to the reply to the unamended petition, the petitioners have asserted that the written reply was a mockery of all the established principles which refers to all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roval of petitioner No. 2. Accordingly, a lease agreement was signed in August, 2012 and the restaurant was made operational in February, 2013. He was then sent to USA for training with M/s. SF Franchising LP which further involved huge spending. However, petitioner No. 1 did not take any serious interest in running the restaurant and did not visit it for days together. The restaurant suffered huge losses and was closed in March, 2014. 17. On account of huge money spent on his education, to set up restaurant business and other expenses, which were borne by respondent Nos. 2 & 3 and on account of feeling of guilt caused by huge losses suffered, petitioner No. 1 gifted the share held by him in two companies, i.e. Nulon India Ltd. and Nulon Global Limited to his mother-respondent No. 2 in January, 2014 on the occasion of silver anniversary celebration of his parents in February, 2014 in Koh Samui, Thailand. To that effect, he informed all the family members that the aforesaid shares were of no use for him as he was not interested in running the affairs of any of the companies. The gifted shares and transferred deed were handedover by petitioner No. 1 to his mother- Smiti Golyan in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egistrar of Companies along with revised Annual Return who had accepted and treated the same as final. A reference has been invited to a large number of emails between petitioner No. 2 and respondent No. 1 which clarified that petitioner No. 2 was fully in control of the management of respondent No. 1 company. The contents of the aforesaid emails are claimed to be self-explanatory which completely destroy the case of the petitioners filed with a mala fide intention. There are various averments made which would be necessary to deal with the issue raised. 20. Under the caption 'preliminary objection', it has been asserted that the petition is not maintainable and that there has been no oppression or mismanagement within the meaning of Sections 397 and 398. There are allegations that the petitioner has not come to the court with clean hands and has suppressed material facts. The allegation of fraud cannot be gone into by this Tribunal as it decides the cases by adopting summary procedure. Therefore, the matter required to be adjudicated by a regular Civil Court. Moreover, the matter is pending before the Joint Commissioner of Police, Economic Offences Wing, Mandir Marg, New....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eld by him in both the companies, namely Nulon India Ltd. and Nulon Global Limited to his mother-respondent No. 2 in January, 2014 on the upcoming occasion of his parents' silver anniversary celebration in February, 2014. It is reiterated that the shares belonging to petitioner No. 1 in respondent No. 1 company were illegally and fraudulently transferred by the respondents. The petitioner has also categorically denied that the gifted shares along with transferred deeds were handedover by him to his mother in January, 2014, which were transferred in her favour on 14.02.2014. The story of meeting of Board of Directors including respondent Nos. 2 and 3 by videoconferencing on 14.02.2014 where the transfer of shares took place in favour of respondent No. 2 is stated to be false and concocted. The recording of videoconferencing call is compulsory and respondents have been asked through the NCLT to produce evidence of holding the meeting by video conferencing. 24. The averments made in the petition with regard to approval of Annual Accounts for the Financial year 2013-14 of respondent No. 1 company held on 30.09.2014 have been reiterated and it has been stated that petitioner No. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso been filed. The principal objection taken by respondent No. 4 is that he is neither a necessary nor a proper party to the proceeding. It has then been submitted that respondent No. 3 was ever involved in illegal activities or ever acted against the interest of majority shareholders. He has also denied that entire shares of petitioner No. 1 were illegally transferred to respondent No. 2. Respondent No. 4 has also submitted audited report of respondent No. 1 for the financial year 2013-14. All other objections raised are identical to the one raised by respondent Nos. 1 to 3 and need not be repeated. 29. We have heard learned Counsel for the parties at length and have perused the paper books with their able assistance. 30. Mr. Virender Ganda, learned Senior Counsel has vehemently argued that petitioner No. 1 has been illegally duped by the acts of the respondents inasmuch as his 4,66,600 shares have been illegally transferred to his mother-respondent No. 2. According to the learned Counsel, petitioner No. 1 came to know in February, 2015 that the original share certificates were lost or misplaced and consequently he requested R-1 Company to issue him duplicate share certific....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Hon'ble Supreme Court in the case of B. Venkatamuni v. C.J. Ayodhya Ram Singh [2006] 13 SCC 449. 34. Learned Counsel has then argued that once the respondents have not been able to prove the documents, then it must be regarded as a play of fraud. He has drawn our attention to the so-called gift deed which by no stretch of imagination could be regarded as a gift. In that regard, reliance has been placed on the Judgment of the Supreme Court in the case of S.P. Chengalvaraya Naidu v. Jagannath [1994] 1 SCC 1. Replying to the preliminary objection raised, learned Counsel has submitted that in case it is found that there is illegality in transfer of shares then it prima facie amounts to oppression. In that regard, he has placed reliance on the observations made in para 51 of the judgment in the case of Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 3 SCC 333, and has argued that this Tribunal must return the finding that there is oppression. 35. Mr. U.K Chaudhary learned senior counsel has vehemently opposed the submissions made on behalf of the petitioner. Learned counsel has argued that the petitioner No. 1 has no locus standi and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to clear the mist created by host of preliminary objections raised by the respondent. The first objection raised by the respondent is that the petition is not maintainable as there are no allegations of oppression and mismanagement. It is well settled that an act of transferring the share illegally would constitute an act of oppression. In the case of Needle Industries (India) Ltd. (supra), the question of transfer of share came up for consideration of Hon'ble Supreme Court and it proceeded to decide the issue. Moreover, in the present case serious allegations of fraud with regard to the transfer of shares have been levelled which are required to be gone into. Therefore, this objection does not commend itself to us and is hereby rejected. The other objection raised is that the transaction concerning transfer of shares rest between petitioner No. 1 and respondent No. 2 his mother and therefore, by virtue of law laid down by Hon'ble Supreme Court in the case of Chatterjee Petrochem (India) (P.) Ltd. (supra), a petition under Sections 397, 398 and 402 of the Companies Act would not be maintainable. The argument loose sight of that fact that the transfer of share in the present....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tors was held on 14.02.2014 by using the videoconferencing as some of the directors were not present at Koh Samui Thailand where the marriage anniversary of respondent No. 2 and 3 was celebrated. A meeting of the Board of Directors is stated to have been held on 14.02.2014 and notice of the meeting is stated to have been sent to all concerned and the meeting was held through videoconference with respondent Nos. 2 and 3 who were in Kou Samui Thailand. 41. A general Circular No. 28/2011 has been issued by the Ministry of Corporate Affairs on 20.05.2011 encouraging the use of information technology. In paras 4, 5 and 6, the following provision has been made:- "4. In the light of the above provisions and circumstances, it is hereby clarified that directors of a company may participate in a meeting of Board/Committee of directors under the provisions of Companies Act, 1956 through electronic mode. For this purpose, the company shall also comply with the following requirements and procedures, in addition to the normal procedures required under the Companies Act, 1956 for holding meetings of Board/Committee of directors:- (a) Electronic mode means videoconfer....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the directors in the meeting who are not physically present. After the roll call, the Chairman or Secretary may certify the existence of a quorum. It is clarified that a director participating in a meeting through use of videoconference shall be counted for the purpose of quorum. A roll call should also be made at the conclusion of the meeting or at recommencement of the meeting after every break to ensure presence of quorum throughout the meeting." 42. A perusal of the aforesaid notification makes it clear that their record of meeting shall be maintained by holding roll call. In the record the name of the participants, location, certificate that he can completely and clearly see and communicate with the other participants is required to be maintained. Despite various attempts made for securing the contents of videoconference nothing has been produced. The factum that videoconference for Kou Samui Thailand was booked and the payment for the conference was made has not been brought on record by the respondent which led to an inference that as a matter of fact the meeting of 14.02.2014 has never been held. On facts if there is no meeting then how can transfer of shares c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may register the transfer on such terms as to indemnity as the Board may think fit: Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law. (1A) every instrument of transfer of shares shall be in such form as maybe prescribed, and- (a) every such form shall, before it is signed by or on behalf of the transferor and before any entry is made therein, be presented to the prescribed authority, being a person already in the service of the Government, who shall stamp or otherwise endorse thereon the date on which it is so presented, and (b) every instrument of transfer in the prescribed form with the date of such presentation stamped or otherwise endorsed thereon shall, after it is executed by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsferee. The deed executed by the transferor alone does not pass the title in the shares to the transferee. 49. Section 108(1) further postulates that transfer form as prescribed must be signed by the transferor or on his behalf as well as by the transferee or on his behalf. There is a statutory form No.7B which is prescribed form required to be filed by transferor and transferee. The signature of both transferor and transferee are required to be attested by witnesses. The aforesaid share transfer form as prescribed by Section 108(1 A) is set out below:- 50. In exercise of power conferred by sub-section (1) of section 621 of the Act, the Central Government has framed the rules known as the Companies (Central Government's) General Rules and Forms, 1956 (for brevity '1956 Rules'). Rule 5 engrafted under section 108 is as under:- "5A. Section 108 - (1) for purposes of clause (a) of sub-section (1A) of section 108, the prescribed authority shall be the Registrar, or such other authority as the Central Government may from time to time appoint in that behalf by notification in the Official Gazette. (2) An instrument of transfer shall be in Form 7-B set....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecution of the transfer deed. 53. It is extremely significant to remember the first principle without any graphic details. In order to prove loss of a document it must first be established that such a document existed. The petitioners' case is that no transfer deed was ever executed which means such a document has not ever come into existence. The First and foremost duty of respondent No.2 was to meet the assertion made by the petitioner and put forward the affidavit of attesting witnesses to prove the existence of the documents. There is no attempt made by respondent No.2 to bring on record anything which may show that original was executed. The best evidence in that regard could have been the attesting witnesses who authenticated the signature of transferee as well as transferor. The self-serving statements made by respondent No. 2 fail to satisfy the test of a reasonable prudent man. Furthermore, the stamp duty is required to be affixed. It has not been pointed out who amongst transferee and transferor purchased stamp duty and the amount paid for the stamp duty. Even the affidavit of stamp vendor or his register have not been produced. 54. The requirements of proviso a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 466600 shares to respondent No. 1 company reflected through 19 share certificates and the same is vitiated in the eyes of law. Accordingly, we allow the petition and issue the following directions :- (i) The member register of respondent No. 1 company shall be rectified by restoring the name of petitioner No. 1 as the owner of 466600 shares. It should be shown in the register of the company that he is a member of company and own 466600 shares in Nulon India Limited (respondent No. 1 company). (ii) The 19 share certificate shall be handedover to the petitioner No. 1 by respondent No. 2 which are in the possession of the court master. It is directed that court master shall hand over the document to petitioner No. 1 or his counsel today itself. (iii) The respondent Nos. 2 and 3 are saddled with cost of Rs. 5,00,000/- which shall be paid to petitioner No. 1 within two weeks from today. (iv) The Registrar of Companies is directed to reflect the name of petitioner No. 1 as a shareholder to the extent of holding 466600 shares of respondent No. 1 company and the needful shall be done within one week. 57. This order shall not cause any prejudice to t....