TaxTMI 
TaxTMI 
2019 (12) TMI 567
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....ilar reliefs simultaneously before this Court and NCLT that would require adjudication on the identical core issue. In light of the same, this matter needs to be decided upon exchange of affidavits." In order to appreciate the finding it is necessary to consider the case made out by the appellants in their pleadings. The plaint states that the respondent no. 1, a company, owns an immovable property, popularly known as "Middleton Chambers". The respondent no. 1 is owned, directly or indirectly, by the respondent no. 2 and 3. It is stated that the respondent no. 2 and 3 obtained loans and advances from the appellants at various instances; and that, as on 31st March 2018, a sum of Rs. (approximately) 29,27,00,000 remained due and payable by the respondent no. 2 and 3 to the appellant no. 1 and 2. The plaint states that the respondent nos. 2 and 3 have acknowledged payments received by them from the plaintiffs. It is stated that towards the end of June 2018, the respondent no. 2 and 3 approached the appellants with the promise to make payment of a part of their dues within the next six months, and offered to secure such payment by depositing with the appellants the entire shareholdi....
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....us shares in favour of the respondent no. 2 to 5. It also came to the appellants' knowledge that a board resolution had been passed on 15th October 2018 authorizing the increase of authorized share capital of the company and issuance of bonus shares to the holders of equity shares of the company. An Extraordinary Board Meeting had also been held on 14th November 2018 to increase the authorized capital of the respondent no. 1 and a further meeting had been held on 1st December 2018 allotting bonus shares. This, the appellants allege, is in contravention of an agreement between the parties while getting the appellants to agree on part payment within six months during the end of June 2018 referred to hereinabove. The appellants contend that this amounted to a fraud played by the respondent no. 2 to 5 on the appellants; and the particulars of the fraud have been set out in paragraph 23 of the plaint. In these circumstances, the appellants approached this court, seeking the following reliefs - "(a) Declaration that the purported amendment of the Memorandum of Association of the defendant no. 1 company providing for enhancement of its authorized capital, the purported enhancement....
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.... also filed a petition before the National Company Law Tribunal (hereinafter referred to as "NCLT"). In the said petition, the appellants has prayed for similar reliefs as prayed for in the suit. The reliefs claimed are as follows - "a. An order directing the respondent to register the transfer the 81,633 shares transferred by Prabha in the name of the petitioner no.1 and, upon delivery of the balance 11,19,173 shares to it, to register the transfer of the same as well as in the name of the petitioners in the manner following and to direct consequent rectification of the share register of the respondent:- 500000 shares transferred by Prabha in the name of the Petitioner no.2 - 3000233 shares transferred by Prabha in the name of the Petitioner no.1 11600 shares transferred by Shanti in the name of the Petitioner no.1 100400 shares transferred by Moksh in the name of the Petitioner no.1 74200 shares transferred by Moksh in the name of the Petitioner no.1 29100 shares transferred by Moksh in the name of the Petitioner no.1 140 shares transferred by Moksh in the name of the Petitioner no.1 100 shares transferred by Pawan in the name of the Petitioner no.1; b. An order....
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....ion in the present suit is one of breach of agreement, of breach of negative covenant of the agreement, breach of trust, and fraud. The appellants' cause of action in the NCLT petition being Appeal No. 312/KB/2019 is simply the failure on the part of the respondent no. 1 company to register the shares in the appellants' names in its register of members. Mr. Saha submits that the plaint case is that the respondent no. 2, 3, 4 and 5 had made over the entire shareholding of the respondent no. 1 company to the appellants and despite doing so, they thereafter proceeded to enhance the authorized capital and paid up capital of the respondent no. 1 and issued and allotted to themselves bonus shares. The respondent has challenged the same as being contrary to the terms of the agreement entered into by the respondent no. 2 and 3 with the appellants, the express and/or implied negative covenant in the same, and on the ground of fraud. It is submitted that the only provision under the Companies Act 2013 under which an application could have been made was section 241 but the section is only available to a "member" of a company. This is clear from section 241(1) of the 2013 Act. Further....
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....e 2013 Act; and therefore, what cannot be done directly cannot also be done indirectly. For the proposition that what cannot be done directly cannot be done indirectly, reliance is placed on State of Haryana v. M.P. Mohla [2007] 1 SCC 457 (paragraph 15) and Rashmi Rekha Thatoi v. State of Orissa [2012] 5 SCC 690 (paragraph 37). It is submitted that as a transfer of shares is completed with the execution of share transfer deeds and the delivery of shares, where they are in physical form, the transferee of shares, as such, always becomes a shareholder before he becomes a member - which, before his name is registered in the register of members, confers to him the beneficial interest in the shares transferred. A shareholder having such beneficial interest in shares has a right to protect his beneficial interest in such shares even before his name is entered in the register of members or pending the consideration of his application under section 58 or 59 for having his name entered in the register of members. It is settled law that a shareholder who is not a member cannot maintain an application under section 241 of the Companies Act 2013 and could not earlier have maintained an applica....
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....he beneficial owners of the entire shares of the respondent no. 1 company. As the transferor of the said shares, the respondent nos. 2 to 5 are in the position of trustees of the appellants and are obliged to act only as per the instructions of the appellants. They cannot in any event act in a manner detrimental to the beneficial interest of the appellants in the shares. In fact, even the voting rights in respect of the said shares, could, if at all, be exercised only in accordance with the wishes of the appellants. This is the right which the appellants, even as non-members, are entitled to assert and to protect and this is what they have sought to do by filling the instant suit. In this context, Mr. Saha has also referred to section 2(27) of the Companies Act 2013, which envisages, in the definition of "control", the right of persons other than shareholders to appoint majority directors of a company or to control the management of policy decisions, by virtue of a shareholder's agreement, voting agreements or in any other manner. It is submitted that owing to the appellants' beneficial interest in the 12,00,806 equity shares in the respondent no. 1 company, the appellants ....
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.... the shareholders of the respondent no.1 company, or have a beneficial interest in the said shares, thereby entitling them to participate in the management of the company as per the provisions of section 2(27) of the Companies Act, 2013. It is submitted that the respondents have acted in breach of trust by attempting to prejudicially alter the authorised share capital and shareholding pattern of the respondent no.1 company, despite being under an obligation to exercise the voting rights in respect of the 12,00,806 equity shares transferred to and held by the appellants, in consonance with the interests of the appellants and not otherwise. Under the circumstances, the appellants are entitled to the reliefs sought in G.A. No. 522 of 2019. It is submitted that subsequent to the institution of the said civil suit in this court, the appellants, discovered that in further derogation of the terms of the agreement between the appellants and the respondent nos.2 to 5, even after having transferred the entire shareholding of the respondent no.1 company to the appellants, the respondents nos. 2 and 3, in collusion and conspiracy with the respondent nos. 4 and 5 had thereafter caused the resp....
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....in which the matter in issue is also directly and substantially in issue in a previously instituted suit, the word 'trial' for the purposes of section 10 of the Code must be construed to mean a judicial examination and determination of the issue in civil or criminal court by competent tribunal. It is settled law that section 10 of the Code of Civil Procedure, 1908 is not a bar to the institution of the suit. Neither can it be construed to be a bar against passing of interlocutory orders such as orders for appointment of receiver, injunction or attachment before judgement. Reference in this regard is made to Indian Bank v. Maharashtra State Cooperative Marketing Federation Ltd. [1998] 5 SCC 69 (paragraphs 7 to 10), Sujanbai v. Motilal Gopal Saraf 1980 MHLJ 578 (paragraphs 10,11), and SennajiKapurchand v. PannajiDevichand AIR 1922 Bom 276. It is submitted that in light of the aforementioned decisions, there can be no doubt that similar prayers for interim relief sought by the appellants in two different proceedings emanating out of entirely different and distinct causes of action cannot not disentitle the appellant to the grant of the interim reliefs sought. The decision of t....
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.... Ltd. reported at 2018 SCC Online Del 11909, Viji Joseph v. P. Chander (decision by the Madras High Court in Original Side Appeal Nos. 29 and 30 of 2019 and C.M.P. Nos. 1884 and 1904 of 2019) (paragraphs 8.6, 8.14, 9, 13-17), and Chiranjeevi Rathnam v. Ramesh (decision by the Madras High Court, Madurai Bench, in C.R.P.(PD)(MD) No. 870 of 2017 and C.M.P.(PD)(MD) No. 3846 of 2017) (paragraphs 6, 9, 11, 16, 18, 19, 21, 24-28). In relation to treatment of a similar exclusion clause as section 430 of the 2013 Act in section 34 of the SARFAESI Act 2002, reliance is placed on a decision of our court in Delta International Ltd. v. Smt. Nupur Mitra AIR 2018 Cal 8 (paragraphs 18-22 and 31-32). On the aspect of the share scrips/certificates, it is submitted that the contention of the respondent no. 2 and 3 is that the shares scrips were only for "comfort" and the transfer forms were not to be used for the purpose of the transfer of shares. It is also submitted that the appellants have been inconsistent in their averments in relation to the alleged security created and there is no uniformity in the pleadings. It is the case of the respondent no. 2 and 3 that there was no sale of the shares as....
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....al is empowered to determine by or under this Act or any other law for the time being in force an no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal." Under the old regime, the High Court as the Company Court entertained matters in respect of the Companies Act. With the constitution of the present NCLT, and its predecessor the Company Law Board, the jurisdiction, powers and functions hitherto exercised by the CLB and the High Court as company court under various sections of the 1956 Act have now been conferred on the NCLT under 2013 Act. However, the jurisdiction or powers hitherto exercised by the High Court as a company court under section 10 of the 1956 Act or by the CLB under section 10E of the 1956 Act are now essentially exercised by NCLT constituted under section 408 of the 2013 Act only in respect of matters for which the jurisdiction is specifically conferred by The Companies Act 2013 or any other law in force. Section 9 of the CPC states that "the courts shall have juris....
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....ed, but that such exclusion must be either explicitly expressed or clearly implied. It is also well settled that even if the jurisdiction is so excluded, the civil courts have jurisdiction to examine into cases where provisions of the Act have not been complied with, or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure." The power exercised by a company court (now the Tribunal) is in respect of corporate rights and not individual rights of a citizen (See Poonamchand Kothari v. Rajasthan Tube Mfg. Co. Ltd. (1996) 87 Comp Cas 842 (Raj), Avanthi Explosives (P.) Ltd. v. Principal Subordiante Judge [1987] 62 Comp Cas 301 (AP), and Dr. T.M. Paul v. City Hospital (P.) Ltd. [1999] 97 Comp Cas 216 (Ker)(DB)). The principles regarding the exclusion of the jurisdiction of civil courts have been discussed by the Supreme Court in certain cases. In Dhulabhai v. State of M.P. AIR 1969 SC 78 and Union of India v. Tara Chand Gupta & Bros. AIR 1971 SC 1558. In Dhulabhai, (supra) the Supreme Court laid down the following guidelines - "Neither of the two cases of Firm of IlluriSubayya [1964] 1 S.C.R. 752 or Kamla Mills [1966] 1 S. C. R. 64 can....
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....ities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry. (7) An exclusion of the jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply." The principles laid down in Dhulabhai (supra) and followed in Tara Chand Gupta (supra) were used in a number of cases under the old Act to determine if a remedy lay in the civil courts. It is also appropriate to refer to the following observation made by the Supreme Court in Raja Ram Kumar Bhargava v. Union of India AIR 1988 SC 752: "......The question turns on the scope of the exclusionary clause in the statute. The effect of clauses excluding the civil courts' jurisdiction are considered in several pronouncements of the judicial committee and of this Court (See Secretary of State v. Mask & Co., AIR 1940 P.C. 105; K.S. Venkataraman & Co. v. State of Madras, [1966] 2 SCR 299: Dhulabhai & Ors. v. The State of Madhya Pradesh & Anr, [1968] 3 .SCR 662. The Premier Automobilies Ltd. v. KamlakarShantaramWadke & Ors., AIR 1975 SC 2238).Generally speaking. The broad g....
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..... In Vithalrao Narayanrao Patil v. Maharashtra State Seeds Corpn. Ltd. [1990] 68 Comp Cas 608 (Bom), the Bombay High Court followed a decision of the Calcutta High Court in Hirendra Bhadra v. Triton Engg. Co. (P.) Ltd. [1975-76] 80 CWN 242 and held that except where jurisdiction has been specifically conferred on the district courts by the central government, the High Court is the proper court to entertain any dispute in respect of the affairs of a company. However, in Santosh Poddar v. Kamal Kumar Poddar [1992] 3 BomCR 310 (Bom)(DB) wherein the Division Bench overruled Vithalrao (supra) and disagreed with Hirendra Bhadra (supra) and held that there is no ouster of the jurisdiction of a Civil Court in all cases where the provisions of the Companies Act may be attracted. It held that it is only in respect of those proceedings which are expressly contemplated under the Companied Act under any specific provision that the Court which is referred to in that section would be the special court. In all other cases ordinarily the Civil Courts would continue to have jurisdiction. It has been held that the ouster of the civil court is not to be readily inferred as a provision seeking to bar....
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....to subsection (1) of Section 58, securities or other interest of any member in a public company shall be freely transferable; provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract. Subsection (3) of Section 58 provides that transferee may appeal to Tribunal against refusal within a period of thirty days from the date of receipt of notice or in case no notice has been sent by company, within a period of sixty days from the date on which instrument of transfer or intimation of transmission, as the case may be, was delivered to company. Sub-section (4) of Section 58 says that if a public company without sufficient cause refuses to register transfer of securities within a period of thirty days from the date on which instrument of transfer or intimation of transmission, as the case may be, is delivered to company, transferee may, within a period of sixty days of such refusal or where no intimation has been received from company, within ninety days of delivery of instrument of transfer or intimation of transmission, appeal to the Tribunal. Subsection (5) of Section 58 provides that the Tribunal, while....
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.... the Securities and Exchange Board of India Act, 1992 (15 of 1992) or Act of 2013 or any other law for the time being in force, the Tribunal may, on an application made by depository, company, depository participant, holder of securities or Securities and Exchange Board, direct any company or a depository to set right the contravention and rectify its register or records concerned. Subsection (5) of Section 59 of Act of 2015 instructs that if any default is made in complying with the order of the Tribunal under section 59, company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both. Section 61 of Act of 2013 stipulates that a limited company having a share capital may, if so authorised by its articles, alter its memorandum in its general meeting to: increase its authorised share capital by such amount as it thinks expedient; consolidate and divide all or any of its share capital ....
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....e of the Division Bench of the Delhi High Court in Ammonia Supplies Corpn. (P.) Ltd. v. Modern Plastic Containers [1993] 52 DLT 252 that the Tribunal cannot adjudicate on difficult or complex questions is no longer relevant or applicable. The basis for the Division Bench to have said so was that at the time when that case had come to be filed, the powers of the Tribunals were summary in nature. Under the 2013 Act, as enunciated hereinabove, the NCLT has been given very wide powers akin to that of a civil court and can also punish for contempt. Therefore, in view of the wide powers given to the NCLT and these powers not being merely summary in nature, the basis of the Division Bench's judgment in Ammonia Supplies (Delhi High Court) (supra) withers away and thus its rationale, that the Tribunal cannot decide difficult or complex questions, has no legs to stand on. In Ammonia Supplies (supra), the Supreme Court in paragraph 27 observed that so far as exercise of power of rectification within its field there could be no doubt the Court as referred under Section 155 read with Section 2(11) and Section 10, it is the Company Court alone which has exclusive jurisdiction. Further in pa....
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....order of the CLB on a question of law is available to any person aggrieved thereby under the provisions of Section 10F." In paragraph 31 it is observed as follows:- 31. Now, under Section 111 of the Companies Act as amended with effect from 31st May, 1991, the CLB performs the functions that were therefore performed by courts of civil judicature under Section 155. It is empowered to make orders directing rectification of the company register, as to damages, costs and incidental and consequential orders. It may decide any question relating to the title of any person who is a party before it to have his name entered upon the company's register; and any question which it is necessary or expedient to decide. It may make interim orders. Failure to comply with any order visits the company with a fine. In regard to all these matters it has exclusive jurisdiction (except under the provisions of the Special Court Act, which is the issue before us). In exercising its function under Section 111 the CLR must, and does, act judicially. Its orders are appealable. The CLR, further, is a permanent body constituted under a statute. It is difficult to see how it can be said to be anything oth....
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.... the plaintiffs are entitled to rectification of the share register. This exercise by reason of Section 430 of the Companies Act read with Section 59 and Rule 70 sub-Rule 5(a) of the NCLT Rules 2016 are matters which the tribunal is exclusively empowered to decide under the Companies Act, 2013. It is possible as held in Cheran Properties Ltd. (supra) (paragraphs5, 10, 27, 28 and 35) relied upon by Mr. Ratnanko Banerjee, learned Senior Counsel appearing on behalf of the respondent that a combined application under sections 58, 59, 241 and 242 can be made before the NCLT. Once the tribunal comes to a finding in favour of the appellants that rectification is necessary, the appellants may seek further reliefs that are available to the appellants under Section 241 and 242 of the Companies Act with or without a prayer for exemption under Section 244 of the companies Act, 2013 if occasions so arise. In course of hearing if the Tribunal is satisfied that the petitioners/appellants have met the three-fold criteria, their rights and interests under section 58 and 59 and consequential interests under section 241 and 242 could have adequately been protected by the Tribunal under the powers giv....
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....thin the next six months, to transfer the entire shareholding of the respondent no. 2 to 5 in the respondent no. 1 company to the appellants at their face value, which would serve to set off a portion of their debt to the appellants. The plaint states that the appellants agree to accept the terms aforementioned; and consequently, on 25th July 2018, the respondent no. 2 to 5 made over to the appellants the original share scrips and certificates of all 12,00,806 shares of the respondent no. 1 company. The receipt was acknowledged by the appellant. In late December 2018, the six month period envisaged under the aforementioned oral agreement expired but the dues were not paid. Therefore, the appellants proceeded to get the share scrips/certificates registered with the company and get the shares formally transferred in their name. For this, they wrote to the company on 27th December 2018. The details of this is stated in paragraph 11 of the plaint, as herein below - "11. In view of the transfer of the said 12,00,806 equity shares of the defendant no. 2 to 5 to the plaintiffs at their face value of Rs. 10/- per share, the total debt owed by the defendant no. 2 and 3 to the plaintiffs ....
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.... who had handed over the purported share scrips/certificates to the appellants. The plaint states that in the letter dated 10th January 2019, the appellants wrote to the respondent no. 2 and 3 "as the person in control of the defendant no. 1 company to forthwith instruct the said defendant and its directors to immediately act on the application already received for the transfer of the said 81633 shares in the favour of the plaintiffs". This is stated in paragraph 13 of the plaint, as herein below - "13. In the circumstances as aforesaid, on 10th January 2019, the plaintiffs wrote to the defendant no. 2 and 3 asserting their ownership of shares representing the entire issued and paid-up capital of the defendant no. 1 and calling upon the defendant no. 2 and 3, as the person in control of the defendant no. 1 company to forthwith instruct the said defendant and its directors to immediately act on the application already received for the transfer of the said 81633 shares in the favour of the plaintiffs and also to signify their willingness to accept similar other applications in respect of the remaining shares, whereupon the plaintiffs would once again forward to the defendant no. 1 ....
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.... below - "15. As the said letter dated 16th January 2019 written by the defendant no. 2 and 3, inter alia, as the persons in control of the defendant no. 1 company amounted to a refusal to register the transfer of the said 1200806 shares in the plaintiffs' favour notwithstanding delivery of the original share scrips/certificates and the duly executed and stamped transfer deeds in respect thereof, the plaintiffs became entitled to and as such were advised to take appropriate steps against the defendant no. 1 in accordance with the provisions of sections 58 and 59 of the Companies Act 2013, for which they were advised to once again visit the website of the Registrar of Companies, West Bengal to ascertain, inter alia, as to whether the defendant no. 1 had complied with its statutory obligations including filing of balance sheets and annual returns. ......" (Emphasis Supplied) In paragraph 15 of the plaint, the appellants have asserted that the reply letter dated 16th January 2019 "amounted to a refusal to register the transfer of the said 1200806 shares in the plaintiffs' favour". The plaint states that as a result of this act of "refusal to register the transfer of the .......
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....efendant and its directors to immediately act on the application already received for the transfer of the said 81633 shares in the favour of the plaintiffs". Firstly, this letter dated 10th January 2019 cannot be construed as an application made to the company under section 58(1) of the Act since it is a letter to the shareholders of the company. Secondly, this letter dated 10th January 2019 was only to instruct the respondent no. 1 company to act on the application that the respondent no. 1 had already received under section 58(1) of the Act. The 30 day period envisaged under section 58(1) of the Act came and went. The procedure under section 58(1) of the Act was not complied with. The company, as per the documents on record, did not reply to the letter dated 27th December 2018. This meant that on the date after the 30 day period ended, the procedure envisaged under section 59(1) of the Act kicked in. Since 58(1) of the Act envisages a positive act on the part of the company, that is, the company must ordinarily register the shares on the application being made before it; and only if it has a reason to refuse the same, it must communicate the decision to the applicant. Since it ....
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....rollary would be that it would then be deemed to be a 'member' within the meaning of section 2(55) of the 2013 Act. In that eventuality, the other reliefs that it is seeking, under sections 241 and 242 of the 2013 Act, could then be granted. Therefore, there would be no bar on a combined application being filed, as is the prevailing norm. The concept of "member", "shareholder" and "holder of a share" as appeared in the Companies Act, 1913 and 1956 came up for consideration in Howrah Trading Co. (supra) where it is stated: 'The words "member", "shareholder" and "holder of a share" have been used interchangeably in the Companies Act. The words "holder of a share" are equal to the word "shareholder", and the expression "holder of a share" denotes, in so far as the company is concerned, only a person who, as a shareholder, has his name entered on the register of members. The right of a transferee of a share is only to call upon the company to register his name and no more. No rights arise till such registration takes place. The completion of the transaction by having the name entered in the register of members relates it back to the time when the transfer was first mad....
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....ere given as a security for the loan or is applied towards reduction of the liability of the respondent nos. 2 and 3 towards the appellants is a vexed question. However, the fact remains that the appellants alleged that the said shares were part of the consideration amount in which case once there was a refusal to register the said shares the parties had to follow the procedure contemplated under the Companies Act, 2013 for redressal of such grievance. The Companies Act, 2013 is a complete code. Section 59 of the Companies Act, 2013 read with Rule 70 of the NCLT Rules empowers the tribunal to decide this issue raised in the plaint. However, there may be exceptional situations where, notwithstanding Section 430 of the companies Act, a civil suit may be maintainable. The exercise required to be undertaken in all such cases would be to analyse the plaint to find out if the matters in issue in the suit could be a matter which the NCLT is empowered to decide. The court is required to find the real cause of action. A dispute between a member and non-member of a company or a dispute between a director and the company relating to his status could be matters which may not fall foul with Se....
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....s non-members, are entitled to assert and to protect and this is what they have sought to do by filling the instant suit. Mr. Saha's submission is that the reliefs claimed are essentially due to acts that have occurred in breach of this trust since before the appellants could be registered as members of the company, the company had gone on to take certain acts that would have ordinarily been classic cases where petitions for oppression and mismanagement could have been filed by the appellant. Mr. Saha contends that since the respondents, however, wrongfully and unlawfully proceeded to reject the appellants' application for registration of the transfer of the shares of the respondent No.1 company in their names or to enter the names of the appellants in the register of members of the company, the appellants were prevented from approaching the Tribunal with an application under section 241 and 242 of the Companies Act, 2013 complaining of acts as acts of oppression by the respondents. The respondents have thus taken and are continuing to take advantage of their own wrong to deprive the appellants of their rights remedy before the NCLT and have left them without a remedy, ther....
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.... Killick Nixon (supra) where a Division Bench of the Bombay High Court "read down" the term "member" for the purposes of section 397 and 393 of the Companies Act 1956 "in order to exclude from its ambit "bare" members whose names continue on the Register of Members although they have sold their shares". In Killick Nixon (supra), the transferee had preferred a separate application under section 111 and 155 of the 1956 Act for registration of their shares but had filed the company petition that was in appeal in the case through the transferor under sections 397 and 398 of the 1956 Act. In Killick Nixon (supra), arguments were made to the effect that the transferee could not compel the transferor to file a petition under section 397 and 398 of the 1956 Act but that issue was not conclusively answered since the transferor in that case, and unlike the present case, had agreed to exercise all its rights at the behest of the transferee. Unlike Killick Nixon (supra) where the transferor accepted it was filing the petition under 397 and 398 of the 1956 Act at the behest of the transferee and was willingly acting at the transferee's behest, in the present case, the transferee, being the ....
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....ansferee can compel the transferor to hand over to him dividends received in respect of such shares. He can also compel the transferor to hand over any benefits received in respect of these shares because these are rights of property which are attached to the shares. It was submitted that the transferee cannot compel the transferor to do anything more or to perform on his behalf or to exercise at his behest his other rights which are the rights arising from the membership of the company. More specifically, a transferee cannot compel a transferor to file a petition under ss. 397 and 398. It is not necessary to go into this aspect because in the present case the transferor has not resisted any demand made by the transfer to file a petition under ss. 397 and 398 of the Companies Act. In the present case, the transferor has agreed to exercise all his rights as a holder of shares in question at the behest if the transferee and has in fact given power of attorney for this purpose to the transferee. We may, however, point out that basically a constructive trustee is required to carry out all just and reasonable requests of the beneficiary. In so far as the rights pertaining to the propert....
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....dern Company Law (Tenth Edition) Chap 27-8 (pg. 902)). It follows from this that the mere transfer of the share certificate (or share scrip) without the registration of the transferee in the register of members does not make the transferee a member of the company. If the company rejects or refuses to register a person who seeks to be registered, an appeal mechanism is provided for under limited grounds in section 59 of the Companies Act 2013. For the instant proceeding, however, it may be important to determine the precise legal position of the transferor and transferee pending registration of the transfer which, for a number of reasons (like, the internal policies of the company on restrictions and transferability), may never occur. As noted hereinabove, only if and when the transfer is registered will the transferor cease to be a member and the transferee will become a member and a shareholder. However, notwithstanding that registration has not occurred, the beneficial interest in the shares may have passed from the transferor to the transferee. The English courts have held that if an agreement is followed by the delivery of the signed transfer forms, a beneficial interest would ....
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....addition to the above, it appears that in the present case, the reliefs claimed are being sought directly against the company/respondent no. 1. In Mathalone (supra) as well as in Killick Nixon (supra), the transferee or the cestui que trust was seeking directions against the company through the transferor/constructive trustee. In Mathalone (supra), Sir Padampat sought reliefs against Mr. Reddy to act on his behalf with respect to the company. In Killick Nixon (supra), the transferee, Dhanraj Mills Pvt. Ltd., was acting through the transferor, Bank of India, and the transferor had stated that it was acting at the behest of the transferee. It can be garnered from these two cases cited by Mr. Saha that the reliefs as sought in this suit could not be granted against the respondent no. 1 at the behest of the appellant, since, to use the phrase from paragraph 14 of Killick Nixon (supra) which is extracted herein above, "the company... recognises only the person who is its member as a share-holder. In other words, the rights that may exist between the Company and its members or shareholders can be exercised only by members." Therefore, for the transferee to have maintained an action again....
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....igible and qualify for any reliefs claimed in the petition, the appellant must pass muster the test of establishing a strong prima facie finding that the appellant has now become a beneficial owner of the shares, which finding can be arrived at necessarily by the NCLT for granting any interim relief to the appellant as prayed for in the said proceeding. It was possible for the appellant to claim relief of oppression and mismanagement under sections 241 and 242, with a prayer for exemption under section 244 by way of amendment of the existing pleadings to demonstrate that the transferor is holding the shares in trust for the appellant and any dilution of the present shareholding at present would adversely affect the rights of the appellant as shareholders of the company. It is on demonstration of such an unimpeachable right to the shares that the NCLT may read down sections 241, 242 and 244 of the 2013 Act for the limited purposes of granting interim reliefs as claimed in the company petition. In fact, all the reliefs claimed in the present proceeding can be considered and allowed in the proceeding pending before the NCLT. The NCLT proceeding is a prior proceeding. In Mathalone (sup....