TaxTMI 
TaxTMI 
2021 (4) TMI 1061
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....tioner No. 1 and 10 shares of the Petitioner No. 2 to the Respondent No. 5 reflected to have been made in the period of 21.09.2007 and 11.09.2008 etc. Subsequently, the case was transferred to this Tribunal and thus it is re-numbered as T.P. No. 39 of 2016. 2. Brief facts of the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows: (1) S.M. Kannappa Automobiles Private Limited (hereinafter referred as "Respondent No. 1/Company") was incorporated in the year 1975 as a Private Limited Company having registered office at No. 2, New Mental Hospital Road, Bangalore - 560 027. The authorised share capital of the Company is Rs. 10,00,000/- (Rupees Ten Lakhs only) divided into 10,000 equity shares of Rs. 100/- each and the issued, subscribed and paid-up capital initially was Rs. 2,00,100/- (Rupees Two Lakh one hundred only) divided into 2001 equity shares of Rs. 100/- each and is disputed. The main objects of the company inter alia to carry on the business of manufacture, export, import, purchase and sale of motor vehicles and automobile parts, tools and accessories and to carry on all kinds of body building works and to undertake all k....
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....a way that was detrimental to his interest. Further, the Petitioner No. 1 did not realise that all this while, the R5 was plotting against his interest and subsequently, the 3000 shares standing in the name of the Petitioner No. 1 were allegedly transferred to the R5's wife Mrs. Chitra Narang, who further transferred 100 shares each in the names of her children Mr. Vaibhav Narang and Ms. Sheetal Narang. (6) The Petitioner No. 1 states that he does not remember executing any share transfer form in connection with the R1 Company. However, due to the prevailing trust that existed between him and the R5, he used to sign numerous documents without perusing their contents and is not aware of whether a share transfer form happened to be camouflaged along with these other documents. The Petitioner No. 1 further contends even that even if unknowingly, he has signed any documents relating to the alleged transfer, he never intended to transfer any shares to the R5. Moreover, the Petitioner does not recall receiving any consideration for the alleged transfer. While their numerous transactions were happening between his family and R5 family around the alleged transfer of 3000 shares, cons....
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.... these transfers; they have been permanently excluded from the affairs of the R1 Company. Hence the petition. 3. The R1 has also filed C.A. No. 01 of 2013 on 28.08.2013 by raising preliminary plea about maintainability of main Petition by inter-alia stating as follows: (1) That the issues that fall for consideration in these proceedings go far beyond the summary jurisdiction that may be exercised by this Hon'ble Board under the Companies Act; That the Petitioners do not have the requisite standing in law to approach this Hon'ble Board under Sections 397 to 402 of the Companies Act, in view of their failure to meet the mandatory eligibility conditions set out in Section 399 of the Act. (2) That the Petition is hopelessly time-barred, i.e., that the claims sought to be made in the Petition, insofar as reliefs under Section 111 are concerned, cannot be considered several years after the transfers sought to be impugned in the Petition have admittedly been concluded and given effect to by the Company, simply by making reference to Section 397 to 399 of the Act as a ploy to circumvent the applicable law of limitation; (3) That in any event, the Petition is also barred by l....
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....on complained in any petition. An ordinary Member of a company cannot seek to invoke such powers of the Company Law Board if he does not satisfy the requirements of Sec. 399 of the Act in such event an ordinary having claims against the Company may only approach a regular civil court and ask for reliefs confined on his own claim without otherwise affecting the functioning of the company or prejudicing its working. (4) Further, none of the Petitioners is a member of the 1st Respondent Company as on the date of the Petition, and none of them holds any shares in the Company and it is the admitted position of all concerned that the names of these Petitioners have not been included in the Members Register for more than 3 years prior to the filing of the Petition. The fact of the matter is that the company has duly given effect to all transactions between the Petitioners and the Respondent No. 5 in accordance with law, and that all requisite procedures were concluded more than 4 years prior to the filing of the instant Petition, the Petitioners have accordingly ceased to hold any shares in the Company, as far back as in the year 2008 itself, and their names have accordingly been remove....
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....unts therein. (3) In the course of litigation, some issues remained unresolved such as, a controversy pertaining to the title to one solitary share in the 1st Respondent Company, which was claimed by both Mr. Bhupinder Rai and also by Mr. Sudershan Manchanda (as purported transferees under the legal heirs of the last lawful owner of the said share, Shri S.M. Kannappa), as also another petition filed by Mr. Vijay Narang and Mr. Bhupinder Rai before the Southern Regional Bench of this Hon'ble Board, to question an entry made in the Members' Register of the 1st Respondent Company pursuant to an allotment of 3000 shares effected by the Company (which was done by converting shareholder loans advanced by the Petitioner No. 1 and by this Respondent to the Company, into equity). (4) The question of the Petitioner No. 1 being entirely unaware of any happenings in the privately held companies he has been a shareholder simply does not arise. From the material sought to be placed on record, it will be abundantly clear to even a stranger to this family just by looking at the history of litigations that they have been engaged in the claim of innocent ignorance now sought to be made b....
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....(6) Accordingly, the 1st Petitioner procured duly executed share transfer forms from his wife (for herself, and also as power of attorney holder for person), and he himself also executed appropriate share transfer forms in relation the impugned shares. Upon conclusion of the transaction in the above fashion, the original share transfer forms were thereafter duly lodged by R5 with the R1 Company, with a request to reflect his name as the transferee of the shares in question, and the Company has acted on the said request and transfer forms in accordance with law. The original share certificates have been retained since that date by R5. The originals are available with R5, and they afford the best evidence of the fact that the transaction has been concluded. Therefore, the R5 has furnished to the Petitioners good and valuable consideration for the impugned transfers. Therefore, there is absolutely no infirmity, illegality or irregularity in the impugned transaction. (7) Further stated that, in 1990-91, the Petitioner No. 1 had claimed to the R1 Company that he had validly acquired the only share that had been issued to Shri S.M. Kannappa by the Company in 1975. The Petitioner No. 1 ....
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.... this time, the disputes between the Petitioner No. 1 and R5 had already surfaced, as the Petitioner No. 1 kept insisting that some further amounts be paid to him by R5 in consideration for the transfer of his family's shareholding in the Respondent No. 1 Company, as he was aware that R5 had already discharged all the third-party liabilities in relation to Prakash Leasing Ltd., as previously agreed between them. (8) The 1st Petitioner thereafter filed a special leave petition to the Hon'ble Supreme Court of India, but after filing the same, he made it clear to R5 that he would withdraw the same and thus concede the title of the single share of late S.M. Kannappa to Mr. Bhupinder Rai, without contest, if his demands for additional amounts were not met. The R5 refused to re-negotiate the terms of the concluded transaction, as was being sought for by the Petitioner No. 1. Therefore, with a view to prejudice to position of R5 in the Company, the Petitioner No. 1 withdrew the Special Leave Petition filed by him (sometime in July 2012), despite having promised to clear his title to the said share and thereafter to transfer the same to the Respondent No. 6. The act of withdrawin....
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....at even if the shareholding is reduced below 10% on account of an illegal/unfair transfer of shares and/or an illegal/unfair allotment of shares, the Petition is still maintainable. In this regard, they have relied upon the judgment rendered in the cases of Margaret T. Desor v. Worldwide Agencies P. Ltd. (1989) 66 Com Cases 5 (Del) affirmed by Division bench in Worldwide Agencies P. Ltd. v. Margaret T. Desor (1990) 67 Com Cases 589 (Del) and by the Supreme court sub nom (1990) 67 Com Cases 607 (SC)]. The present case is a composite Petition, U/s. 111, 397 & 398 of the Act. Even assuming though not admitting that the Limitation Act, does not apply, the period of limitation kicks off from the date on which the Petitioners obtained knowledge of the impugned illegal and unfair transfer, i.e. on 01.03.2012 as set out in the Petition, when the 5th Respondent produced the original share certificates before the Hon'ble Karnataka High Court in OSA 51 of 2006. 7. The Respondent No. 1 Company, through its Director has filed an affidavit on 30.08.2019 by inter alia stating as follows: (1) The share transfer forms were duly placed before the Board of Directors of the Company at the meeti....
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....(1) In the instant case, in view of primary evidence i.e., share transfer forms not being available or produced by the Respondents, then secondary evidence has to be considered. However, the Respondents have not even laid foundation for consideration of secondary/circumstantial evidence. The 1st Respondent Company who admittedly was in possession of the share transfer certificates, vide its affidavit dated 30.08.2019 for the first time claimed that the said share transfer certificates may have been destroyed in fire accidents that took place in the years 2009 and 2018. (2) The Hon'ble High Court of Andhra Pradesh, in the case of Manoj Kumar Kanuga Vs. Marudhar Power Pvt. Ltd., reported in (2013) Comp Cas 504, at paragraph 39 has held that the initial burden in a petition invoking Section 111 of the Companies Act, 1956 to prove that his name was in the register of members of the company lies on the person invoking the said provision, and thereafter, on proving that the person's name was in the register of members, the onus then shifts to the Respondent to prove that the deletion of the name was done with sufficient cause, and that if the said shares were transferred, they ....
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....ded by the National Company Law Appellate Tribunal v. Worldwide Agencies Vs. Margaret T. Desor reported in 1989 SCR Supl (2) 545, passed by the Hon'ble Supreme Court; vi. Sulochana Neelakanth Vs. Takle Investments Company and others, reported in 2006 (4) Bom C.R. 272, decided by the Hon'ble Bombay High Court 10. Shri Dyan Chinnappa, the Learned Senior Counsel for the Respondents No. 1, 2, 4 & 6, after arguing the case at length, has also filed Written submissions dated 26.02.2021 by inter alia contending as follows: (1) The Petitioners admittedly do not hold any more shares in the R1 Company as on date of filing this petition. They are admittedly not involved with the management and operation of the R1 Company. Therefore, it is a settled principle that an outsider to the affairs of a company cannot be permitted to file a petition u/s. 397 and 398. The Petitioners are not involved and concerned about the day-to-day management and affairs of the Company. In any event, the Petitioners have not alleged any singular act of oppression and mismanagement as against them, or any activity undertaken by the Company which is prejudicial to the interests of the Members of the Com....
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....SCC 204 passed by the Hon'ble Supreme Court of India v. Jagjit Rai Maini v. Punjab Machinery Works (P) Ltd., passed by the Hon'ble Punjab and Haryana High Court. vi. Dilboo v. Dhanraji & Ors., (2000) 7 SCC 702 passed by the Hon'ble Supreme Court 11. Shri Srinivasa Raghavan Learned Senior Counsel for the R5, after arguing the case, has also filed his written submissions dated 26.02.2021 by inter alia contending as follows: (1) In the present case, there is a civil suit pending before the Hon'ble Additional City Civil Judge, Bengaluru (in O.S. No. 5053 of 1990), filed by the brother of the Petitioner No. 1, in respect of a part of the same disputed shares and in that suit also the share transfer transaction of 2008 has been made an issue for trial, at the instance of the Petitioners and the R5 has been impleaded as a Defendant. Therefore, there is no justification to have parallel proceedings before this Tribunal also on the same question. The present petition ought to also be dismissed on the preliminary ground of limitation, delay and laches, as the petition was filed four years after the transfer of shares was given effect to in all company records and also ....
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....he Petitioner No. 1 fell sick, whereas the share certificates were admittedly only called for by the High Court of Karnataka for inspection in 2012. (6) In civil suit being O.S. No. 5053 of 1990, the Petitioner has contended that the Petitioner No. 1 and his family Members 'used to sign numerous documents without perusing their contents and is not aware of whether a share transfer form was camouflaged along with these documents'. Thus, inconsistent pleas have been taken by the Petitioners to cover for all possibilities - i.e., in case the share transfer forms are traced in the company records, and also in case they are not. (7) Further, the Company has placed on record its efforts to trace the original share transfer forms, and has pointed out the incidents of fire at their office from an undisputed time prior to filing of the petition in which many records were lost. As such, not much importance can be placed on the fact that the forms are not immediately traceable. The records had been inspected by the Board of Directors and minutes approving the transfer were prepared accordingly. No reasons have been cited to disbelieve or discredit the Directors, most of whom are n....
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....in transfer of shares of a Company are, there should be consideration, execution of valid transfer of shares in prescribed form, surrender of original share certificates of transfer. In the instant case, as per the contentions made by the Parties, it should be deemed that valid consideration has been paid, executed valid transfer deed and surrendered original share certificates to the Transferee. However, the Petitioner No. 1 alleges that he does not remember executing any share transfer form in connection to the R1 Company and even if executed, it would not bind on him as it is un-intentional. Similarly, while accepting to surrendering the impugned shares to the Respondents, he has further contended that they were given in different context and similarly about the consideration. Having signed Form for share transfer, surrendering original share certificates etc, the Petitioner is estopped from disputing them, that too, after lapse of considerable time. Moreover, the Petitioners are not strangers to the Company and pretending ignorance about the impugned transaction are baseless and untenable, and same are liable to be rejected and thus, those allegations/contentions are hereby rej....
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....ed U/s. Section 111 of the Companies Act, 1956, it is relevant to extract the relevant provisions, which reads as under: 111. Power to Refuse Registration and Appeal against Refusal (1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or debentures of the company, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. (2) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the [Tribunal] against any refusal of the company to register the transfer or transmission, or against any failure on its part within the period referred to in sub-section (1), either to register the transfer or transmission or to send notice of its refusal to re....
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....58 and 59 of the Companies Act, 2013, the relevant provision reads as under: 58. Refusal of registration and appeal against refusal (1) If a private company limited by shares refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to them company, send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. (2) Without prejudice to sub-section (1), the 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. (3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days from the date of receipt of the notice or in cas....
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....on shall not restrict the right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled to voting rights unless the voting rights have been suspended by an order of the Tribunal. 16. The Petitioners are admittedly aggrieved by the deletion of their names as Members in the Company, as early as on 21.02.2008, however, the Petitioners chose to file the present petition only on 03.08.2012 before the then Company Law Board (CLB), Chennai Bench, after lapse of more than four years on the pretext that they are aware of it only in the year 2012, and the grounds raised on behalf Petitioners are un-tenable and baseless. Therefore, the contention of the Petitioners that the petition is within limitation is not at all tenable and liable to be rejected. As stated supra, the present Petition is a joint Petition consisting of father, wife and son and all of them cannot plead ignorance of the issue in question. Therefore, the Petition is barred by laches and limitation, as rightly contended by the Respondents. The Petitioners admittedly have not filed any Application seeking to condone the delay. On the other hand, the Respondent No. 1 has....