TaxTMI 
TaxTMI 
2013 (7) TMI 1152
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....her company viz. MPS Technosoft Ltd. (MPS); (vi) that the defendant by virtue of being the Managing Director in VIL also started advising the plaintiff about the affairs of MPS and suggested various expansion plans / new business ventures for VIL as well as MPS; (vii) that in April, 2004, the defendant represented to the plaintiff that he was facing difficulties in convincing investors and clients that he was stable in MPS and VIL as the investors and clients wanted assurance that he was stably stationed with MPS and VIL; the defendant thus suggested that some of the shares of MPS be parked in his name and also represented that it was a common market practice to keep part of shareholding with senior officials of the company and that the same would make it easier for him to convince the clients / investors and impress them with his abilities and skills about his stability in MPS and VIL and help in bringing new business to MPS and VIL; (viii) that on such representations of the defendant, the plaintiff agreed to park / keep-in-trust shares of MPS with the defendant and on 27.04.2004 transferred part of his equity in MPS being 31,97,150 shares of MPS in the....
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....as agreed to by the plaintiff; (xvii) that all the transactions aforesaid were oral; (xviii) that VIL accordingly vide cheque dated 28.03.2007 paid a sum of Rs. 16,50,000/- to the defendant in full and final settlement of the loan given by the defendant; however on the asking of the defendant, the said cheque was issued in the name of Mr. Anil Chuttani from whom the defendant claimed to have arranged the loan; (xix) that several projects initiated by the defendant resulted in huge and continuous loss to the plaintiff and the relationship between the defendant and the plaintiff soured; VIL had to procure further loans so that the projects initiated by the defendant did not fail for want of funds; the defendant represented to the plaintiff that he could arrange loan against the security of shares of VIL from one Mr. Rajinder Singh Negi; (xx) that accordingly 30,00,000 shares were transferred to Mr. Rajinder Singh Negi or his companies and of which 10,00,000 shares were the shares out of the 23,97,863 lying in-trust with defendant; as such between July, 2007 and November, 2007, 30,00,000 shares were transferred to Mr. Rajinder Singh Negi or his companies inc....
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.... name of the defendant had not been impleaded as parties and the claim if any as made in the suit could be of Omkam and BGR only and not of the plaintiff and secondly on the ground that the suit claim was barred by limitation. It was pleaded that the shares were transferred to the defendant on 27.04.2004 and the declaration with respect thereto could be made within three years thereof only as provided under Article 58 of the Schedule to the Limitation Act. 5. Vide order dated 19.01.2011, on the oral request of the counsel for the plaintiff and in the light of the objection aforesaid of the defendant, Omkam and BGR were found to be appropriate parties to the suit and impleaded as defendants no.2 and 3 and an amended plaint filed. 6. Though with the aforesaid, the main ground on which the application under Order 7 Rule 11 CPC had been filed disappeared but the same remained pending and arguments thereon were addressed and heard on 19.02.2013. During the hearing, it prima facie appeared that the claim in suit was hit by the Benami Transactions (Prohibition) Act, 1988. However on the plea of the counsel for the plaintiff that the defendant had not sought rejection of the plaint o....
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....resent purpose, it is not necessary to advert to. 9. As far as the plea of the defendant seeking rejection of the plaint on the ground of claim in suit being barred by limitation is concerned, the case set up by the plaintiff in the plaint is of the cause of action having accrued to him within three years prior to the institution of the suit on the defendant on 24.07.2008 resigning from VIL and the plaintiff terminating the services of the defendant on 02.09.2009 and whereupon the defendant was under obligation to return the shares. The counsel for the defendant has been unable to demonstrate as to how the suit would be barred by time. Even otherwise no merit is found in the aforesaid plea. 10. As far as the bar to the maintainability of the suit on the basis of Benami Act is concerned, the counsel for the plaintiff has argued: (i) that for a transaction to be benami, requires three parties i.e. a transferor, an ostensible transferee and a real transferee from whom the consideration flows to the transferor; (ii) that the transaction of transfer of shares in the present case is bilateral and not tripartite, with the transfer being from Omkam and BGR to the de....
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.... of the Rules and Regulations made thereunder. The plea appears to have been taken on the basis of Section 153B and 187C of The Companies Act, 1956 but provisions whereof do not apply after the commencement of Companies (Amendment) Act, 2000 and would thus have no application to the transaction in question. 13. The MoM which forms the fulcrum of the case of the plaintiff, on page one thereof records receipt of share transfer request from various persons and which were placed before the Board for transfer of shares and contains the resolution of the consent of the Board for such transfers; in the list of transfers mentioned on the said page is included, the transfer of 9,97,150 shares by Omkam and 22,00,000 shares by BGR, both on 27.04.2004 in favour of the defendant. It may be recorded that the said list includes transfer of other shares also by Omkam in favour of others and no consideration for any of the transfers is indicated. However, the second page of the MoM, which according to the defendant has been fabricated and subsequently added to the first page is as under: "TRANSFER OF SHARES IN TRUST The Board was informed by Mr. Peeyush Aggarwal, Chairman of the company....
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.... or constructive on the Register of Members of a company required to be maintained under Section 150. What the said Section means is that a company shall not record in its Register of Members anything to show that as between the member whose name is entered in the Register and any other person, there is any kind of relationship as trustee and beneficiary and the Register is not to show and the company is not to take notice of any such relationship. The object of this Section is to relieve the company from any obligation to take notice of equitable interest in its shares, that is to say, to take notice of rights of third parties in respect of shares registered in the names of any members and to preclude any person claiming a equitable interest in shares from treating the company as a trustee in respect thereof. The effect of Section 153 is that a beneficiary who is not entered as a holder of shares, has no connection with or rights in the company in which any shares are held in-trust by him (Reference 17th Edition 2010 of Ramaiya's Guide to the Companies Act). 15. Unfortunately neither counsel during the hearing adverted to the aforesaid aspect. 16. I have wondered, whethe....
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.... 187C, till they existed on the Statute Book, more or less made the provisions of Section 153 redundant and the Company Law Board in Bharat Petroleum Corporation Ltd. Vs. Stock Holding Corporation of India Ltd. [1995] 82 CompCas 539 went to the extent of observing that Section 153 deserved to be removed from the statute book. 18. However, the legislature instead of removing Section 153 from the statute book has made Section 153B and 187C not applicable with effect from 13.12.2000 as aforesaid. The legislative intent clearly is in favor of prohibiting the company from taking notice of any trust. 19. The prohibition contained in Section 153, if limited merely to entry on the Register of Members would cease to be any prohibition at all. If it were to be held that the prohibition is limited to taking cognizance of the trust only in the Register of Members and does not extend to taking cognizance on / in records other than the Register of Members, also statutorily required to be maintained by the company, would allow the company to take cognizance of such trusts in the resolution of Board of Directors on the basis of which entries are made in the Register of Members and would make....
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....f any nature. It is the plea of the plaintiff that the consideration for transfer of the said shares held in the names of Omkam and BGR to the defendant was the new business ventures and clients to be brought by the defendant to VIL of which the plaintiff was holding the majority stake and thus a beneficiary. The same in my view would satisfy the requirement of "consideration‟. 25. Even otherwise I am unable to see as to how the case built by the plaintiff does not fall in the trap of benami. The case in nutshell of the plaintiff is of the shares (which are property within the meaning of Section 2(c) of the Benami Act) though in the name of the defendant, being owned by the plaintiff and the present suit has been filed by the plaintiff to enforce rights in the said shares held benami by the defendant and which is clearly within the bar of Section 4 of the Benami Act. 26. The plaintiff even otherwise has been unable to plead a case of "trust‟. The defendant did not stand in the position of a trustee with the plaintiff and merely because the word "trust‟ is used does not allow a transaction to be taken out of Benami Act. Section 4(3)(b) of the Benami Act while....
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....ee of the mother. However, it was held; i) that the repeal of Sections 81 and 82 of the Trusts Act by the Benami Act itself establishes that the intention of the legislature was not to allow the concept of trustee or fiduciary capacity of the pre-1988 period to continue to remain as an available defence as otherwise the repeal of Sections 81 and 82 would have no meaning and permit avoidance of the prohibition contained in the Benami Act and render the provisions thereof irrelevant; ii) it is only the purchase of property in the name of wife or unmarried daughter which is exempted from the prohibition and even purchase in the name of son or married daughter has not been given that status; iii) once the legislature has expressly conferred exemption in the name of the wife or unmarried daughter, it is to be deemed that such restricted exclusion cannot be extended or made applicable to others; iv) that in view of the repealed Sections 81and 82, there cannot be the same concept of trusteeship or fiduciary capacity as was the position prior to 1988; and v) that after the repeal of Sections 81 and 82, it is only those instances of fiduciary capacity, such as property of a partnership firm....
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.... of Babita Pal Vs. Jagdish Bansal 196 (2013) DLT 792 (DB) where a plea for summary dismissal of the suit for the reason of the claim therein being barred by the Benami Act was rejected for the reason that the real import of the transaction and the relationship between the parties could be determined only after trial. However, that case fell in the category as discussed in Anil Bhasin supra of Y purchasing property in his own name contrary to the instruction of X who had provided the sale consideration to purchase the properties in the name of X. Thus, the said dicta of the Division Bench also does not come in the way of holding the claim in the present case to be barred by the Benami Act. 34. Similarly, the facts of the recent judgment of the Supreme Court in Marcel Martins Vs. M. Printer (2012) 5 SCC 342 were entirely different. There in the facts, the relationship of trust was found to exist. Such is not the case here. Moreover, the Supreme Court in the said judgment held that in determining whether a relationship is based on trust or confidence relevant to determining whether they stand in a fiduciary capacity, the court shall have to take into consideration the factual conte....