TaxTMI 
TaxTMI 
2020 (2) TMI 918
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....old the entire shareholding of NPL; (iv) Sandeep and his associates hold the entire shareholding of JFL; (v) JFL had subscribed to the shareholding of ATPL at the behest of the plaintiff, so as to discharge the payment obligations of its erstwhile shareholder Samta Khinda to the plaintiff; (vi) that JFL acquired its shareholding in ATPL from the funds of the plaintiff and the plaintiff is the real beneficiary of the shareholding of JFL in ATPL; (vii) thus the plaintiff is the real owner of the entire subject farmhouse and which position has been undisputed for the last six years; (viii) the plaintiff was 50% shareholder of HRLIPL and the remaining 50% shares of HRLIPL were held by one Jaswant Singh Chawla and the plaintiff and said Jaswant Singh Chawla were the only Directors of HRLIPL; (ix) the plaintiff had a close relationship with Sandeep and his wife Samta Khinda and Sandeep was also inducted as a Director on the Board of HRLIPL; (x) JFL, in the year 2005, owned land at Sohna Road; (xi) the plaintiff, to acquire the said land of JFL, made HRLIPL acquire 96.82% shareholding of JFL; the plaintiff and his fam....
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....pointed as Director of HRLIPL; (xix) sale consideration of the land of JFL at Sohna Road was received by JFL in the first half of the year 2012; however no amount was distributed amongst any of the shareholders of JFL; (xx) on 17th December, 2012, the plaintiff and his family members sold their 1.93% shareholding in JFL to Sandeep; (xxi) though after December, 2012, the plaintiff had exited from shareholding as well as Directorship of HRLIPL as well as JFL but retained vital commercial interests in both, as HRLIPL/Samta Khinda owed Rs. 25,16,05,000/- to the plaintiff towards balance sale consideration of shares of HRLIPL transferred by plaintiff to Samta Khinda and owing whereto the plaintiff continued to hold beneficial interest in the shares of HRLIPL held by Samta Khinda; (xxii) the amount of Rs. 25,16,05,000/- so owed to the plaintiff was required to be paid by the wholly owned subsidiary of HRLIPL, namely JFL, inasmuch as the basis of valuation of the shares of HRLIPL was the value of the land held by JFL; (xxiii) sometime around 2013, the plaintiff identified the subject farmhouse owned by ATPL and requested Samta Khinda to make pa....
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....f the plaintiff of the subject farmhouse and the plaintiff has been meeting all outgoings towards electricity, water maintenance, property tax etc. thereof; (xxxiii) Sandeep, by his conduct has conceded to the sole and exclusive possession of the plaintiff of the subject farmhouse; (xxxiv) the plaintiff started residing in the subject farmhouse from September, 2017 and Sandeep was aware of the same; (xxxv) Sandeep, in or around January, 2018, acquired complete control of the assets of his wife Samta Khinda including ownership and control of JFL and HRLIPL where Samta Khinda held 1.24% and 9.09% shares respectively and Samta Khanna also ceased to be Director of JFL and HRLIPL; (xxxvi) disputes arose between Sandeep and Samta Khinda but were settled vide Settlement Agreement dated 23rd August, 2018 whereunder Samta Khinda give up her entire shareholding and Directorship, in both JFL and HRLIPL in favour of Sandeep; (xxxvii) Sandeep has filed various frivolous and vexatious complaints against the plaintiff including an application under Sections 241 and 242 of the 2013 Act before the National Company Law Tribunal (NCLT) and a complaint unde....
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.... on which court fees of Rs. 2,10,000/- has been affixed. 6. The suit is listed today for consideration/admission, subject to office objections as to valuation and court fees. 7. I have at the outset enquired from the senior counsel for the plaintiff, how initiation of a complaint under Section 452 of the 2013 Act can furnish a cause of action for another legal proceeding i.e. this suit, as is pleaded in paragraph 54 of the plaint reproduced above. As far as the averments therein of the plaintiff, from the legal proceedings initiated by Sandeep having become aware that Sandeep was challenging the possession of the plaintiff of the subject farmhouse, are concerned, even if the legal proceedings initiated by Sandeep challenge the possession of the plaintiff of the subject farmhouse, the remedy of the plaintiff is to contest the said legal proceedings initiated by Sandeep and not by way of commencing another legal proceeding, as has been done by instituting this suit. From the averments in paragraph 54 reproduced above, it is clear that the present suit has been instituted to scuttle the proceedings in the complaint initiated against the plaintiff under Section 452 of the 2013 Ac....
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.... of the plaintiff, shorn of all verbosity and complexity, in a nutshell is, that (i) though the plaintiff as far back as on 28th September, 2011 transferred his 50% shareholding in HRLIPL to Samta Khinda, wife of Sandeep but was not paid the entire consideration thereof by Samta Khinda and in lieu of the balance sale consideration, remained the beneficial owner of the shares in HRLIPL transferred by him to Samta Khinda; (ii) the balance sale consideration of Rs. 25,16,05,000/- was agreed to be paid by the wholly owned subsidiary of HRLIPL, namely JFL, inasmuch the basis of valuation of the shares held by the shareholders of HRLIPL was the land at Sohna Road held by JFL; thus, the plaintiff retained an interest in JFL as well; (iii) Samta Khinda, in whose 50% shareholding in HRLIPL the plaintiff had beneficial interest, in discharge of the balance sale consideration payable to the plaintiff, called upon JFL to subscribe to 50% of the shareholding of ATPL; (iv) JFL agreed that the 50% shares held by it in ATPL would be held by it in trust for the plaintiff who shall be the beneficial holder thereof; and, (v) thus plaintiff is the beneficial owner of the 50% shares held by JFL in ATPL....
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....deemed expedient to set out hereinbelow Section 187C in entirety: "187C. Declaration by persons not holding beneficial interest in any share. - (1) Notwithstanding anything contained in section 150, section 153B or section 187B, a person, whose name is entered, at the commencement of the Companies (Amendment) Act, 1974 (41 of 1974), or at any time thereafter, in the register of members of a company as the holder of a share in that company but who does not hold the beneficial interest in such share, shall, within such time and in such form as may be prescribed, make a declaration to the company specifying the name and other particulars of the person who holds the beneficial interest in such share. (2) Notwithstanding anything contained elsewhere in this Act, a person who holds a beneficial interest in a share or a class of shares of a company shall, within thirty days from the commencement of the Companies (Amendment) Act, 1974 (41 of 1974) or within thirty days after his becoming such beneficial owner, whichever is later, make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in ....
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....ame to have come into effect on 1st April, 2014.) 18. It is deemed expedient to reproduce hereinbelow Section 89 of the Companies Act, 2013 in entirety. The same is as under: "89. Declaration in respect of beneficial interest in any share.-(1) Where the name of a person is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares, such person shall make a declaration within such time and in such form as may be prescribed to the company specifying the name and other particulars of the person who holds the beneficial interest in such shares. (2) Every person who holds or acquires a beneficial interest in share of a company shall make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed. (3) Where any change occurs in the beneficial interest in such shares, the person referred to in sub-section (1) and the beneficial owner specified in sub-section (2) shall, within a period of thirty days from the date of such....
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.... distribution in respect of such share." 19. The senior counsel for the plaintiff has contended that the plaintiff made the requisite declaration under Section 187C(2) of the 1956 Act to HRLIPL and the declaration under Section 89(2) of the 2013 Act with respect to his beneficial interest in shares held by JFL in ATPL. 20. I have enquired from the senior counsel for the plaintiff, what is the proof with the plaintiff of having made such a declaration. 21. The senior counsel for the plaintiff states that though the plaintiff has no proof but the plaintiff, in paragraph 20 of the plaint has pleaded having made declaration with respect to the beneficial interest held in the shares of HRLIPL and in paragraph 33 of the plaint has pleaded having made declaration under Section 89 of the 2013 Act with respect to the beneficial interest held in the shares of ATPL. 22. I have next enquired from the senior counsel for the plaintiff, whether HRLIPL, in accordance with Section 187C(4) filed the return in the prescribed form with the ROC with regard to the declaration claimed to have been made by the plaintiff. 23. The senior counsel for the plaintiff states that the plaintiff has....
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....n 187C(4) by the company. 28. Section 187C was incorporated in the 1956 Act vide Amendment Act, 1974, with effect from 1st February, 1975, with a view to expose benami transactions. However thereafter, the Parliament in the year 1988 promulgated the Benami Transactions (Prohibition) Act, 1988 renamed as the Prohibition of Benami Property Transactions Act, 1988 (Benami Act). The Benami Act as promulgated in 1988, prohibited any person from entering into any benami transaction and made entering into a benami transaction punishable with imprisonment. The Benami Act also barred a suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property was held, by a person claiming to be the real owner of such property. It also barred any defence based on any right in respect of any property held benami against the person in whose name the property was held. Though the Benami Act did not make any exception with respect to benami holding of shares but notwithstanding the promulgation of the Benami Act in the year 1988, Section 187C, providing a procedure for declaration of shares in a company held benami, continued on the statute....
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....is case ATPL, to file return under Section 89(6) and on the plea of the plaintiff of having made a declaration, the plaintiff is entitled to maintain the suit, but am unable to hold so. As on 7th August, 2013, Section 187C was still in force. As aforesaid, the provision permitting benami transaction in relation to shares, has to be strictly construed and is a complete code. Unless the beneficial owner ensures public declaration of his beneficial ownership in shares, by filing of return with the ROC, no such beneficial ownership can be enforced in Court. The benami transaction in shares is permitted by providing for public declaration thereof in ROC and if kept hidden, cannot be enforced. The plaintiff has not pleaded having exercised any right or got any benefit or having been treated as beneficial owner of shares in HRLIPL, since 28th September, 2011 or as beneficial owner of shares in ATPL since 7th August, 2013. The records required to be maintained by a company qua beneficial interest in shares, are public records, open to inspection by all and the conduct of the plaintiff, of inspite of such declaration being not made, keeping quite till now, speaks volumes of natural course o....
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....lso without referring to the Articles of Association of HRLIPL and JFL and without pleading that HRLIPL and / or JFL were entitled under their Articles of Association to do so. A company otherwise is not concerned with relationship inter se its shareholders. There is also no explanation why the plaintiff, inspite of being not paid the substantial sale consideration due for transfer of shares of HRLIPL to Samta Khinda, on 17th December, 2012 also transferred his and his family‟s shareholding in JFL to Sandeep, being the husband of Samta Khinda. 32. Interestingly, Samta Khinda has not even been impleaded as a party to the suit though on the same being put, the senior counsel for the plaintiff states that she can always be added. However the question is not of who can be added and who cannot be added but of the frame of the suit by the plaintiff. According to the averments in the plaint, it is Samta Khinda who owed monies to the plaintiff and it is at the insistence of Samta Khinda that HRLIPL, as shareholder of JFL, made JFL acquire 50% shares of ATPL to be held by JFL with plaintiff having beneficial interest therein. Samta Khinda was thus the most important link whom the p....