TaxTMI 
TaxTMI 
2025 (1) TMI 489
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....3 of the Companies Act, 1956 ["The Act"]. These appeals come up for re-hearing for a decision on the issue of their maintainability in terms of directions of the Supreme Court Civil Appeal No. 8451of 2024 [Arising out of SLP (Civil) No. 16753 of 2024 titled Anup Jain v. CRB Capitals Limited and ors.] with Civil Appeal No. 89452-8454 of 2024 (Arising out of SLP (Civil) No. 17018-1710 of 2024] dated 05.08.2024. The appeals assail the impugned judgment dated 25.07.2023, passed by the learned Single Judge in four Company Applications No. 1232/2005 by Anup Jain; 782/2006 by Murari Lal Saraf; 783/2006 by Bihari Lal Saraf and 784/2006 by Banwari Lal Sarafin Company Petition No. 191/1997, moved separately by each of the respondents No. 1 to 4. FACTUAL BACKGROUND: 2. In a nutshell, the learned Single Judge in Company Petition No. 191/1997 on the aforementioned four company applications directed the Official Liquidator that the equity shares totalling about 7000 in their respective names be transferred and be registered in the name of the respective applicants, who would be entitled to all accretions earned on the said shares from 1997 onwards of RIL [Reliance Industries Limited]. 3....
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....0.04.1997, along with duly executed and stamped transfer deeds for the transfer of the respective shares in their names, they came to know for the first time about the RBI directions from the reply of the KARVY, which vide response dated 20.06.1997 expressed its inability to transfer such shares in the name of the applicants, citing an order dated 22.05.1997 passed by the Company Court in the present Company Petition No. 191/1997, whereby all assets of CCL were frozen, and a Provisional Liquidator had been appointed to manage the assets. 6. At the same time, it is an admitted position that on 14.06.1999, the DSE issued a Circular No. 58/1999 whereby it clarified about the status of any shares held by or on behalf of the CCL with the Share Transfer Agent prior to 21.05.1997, which reads as under: "If such securities have been lodged with the company prior to 21st May, 1997 then it do not require certification, if any one or both of the following conditions has/have been complied. (i) the securities have already been transferred to the name of a person as on 21.5.97. (ii) the securities have been lodged with the company for transfer prior to 21st May, 19....
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....e broker, on the reverse. There can, therefore, be no doubt, whatsoever, about the fact that the shares forming subject matter of the present controversy were RIL equity shares originally issued to CRBCML, and had been purchased, for consideration, by the applicant, from AGV, in the open market. The objections raised by the respondents in this regard are, in my considered opinion, completely bereft of substance. 28. Mr. Dayan Krishnan is correct in his submission that, so long as the subject 1500 shares were initially issued to CRBCML, and had been purchased in the open market by the applicant from a broker registered with the DSE, the applicant cannot be denied the right to have the shares transferred in its name. The Statement of account of AGV, which has been placed on record, indicates that the amount of Rs. 896,268/-, received against sale of the 3000 shares to the applicants, Bihari Lal Saraf and Banwari Lal Saraf, was indeed credited in the said account on 1 May 1997. As to why AGV paid Rs. 13,67,000 to CRB Corporation, is something for which the applicant can hardly be made to answer. 29. I am constrained to observe that, if anything, CRBCML has been less ....
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....tion No. 191/1997 or the subsequent letter of the Reserve Bank of India dated 6th June, 1997", therefore, applies to the present case, mutatis mutandis. 32. Though this Court, in its order dated 25 November 2010 in Co. App. 176/1998 in Vikram Commercial's application, entered a caveat that the right of Vikram Commercial to have the shares transferred in its name was "provided the said transfer and purchase is otherwise in accordance with law", I do not deem it appropriate to hedge in the present order with any such caveat, for two reasons. 33. Firstly, the applicant has placed, on record, ample material, to which this order already alludes hereinbefore, to vouchsafe the credibility of the purchase of the subject 1500 shares from AGV -including the Share Transfer Form which is signed by the Director of CRBCML, reflects the shares to be of RIL and shows the applicant as the transferee thereof. That these were indeed the shares originally held by CRBCML, besides being admitted by Mr. Batra, is also manifest by a comparison of the Distinctive Numbers of the shares in the Share Certificates issued by RIL to CRBCML with the Distinctive Numbers of the shares in the commu....
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....tion No. 784/2006 by Banwari Lal Saraf were allowed and so also that of applicant Anoop Jain bearing Company Application No. 1232/2005. However, it would be expedient to indicate that in so far as the applicant Anoop Jain is concerned, his matter is on a different footing since he evidently purchased 28900 equity shares of RIL through Ravi Kapur & Co., a share broker registered with the DSE in the open market and although the KARVY (Share Transfer Agent) transferred 24900 shares, it backtracked and refused to transfer remaining 4000 shares on similar grounds as have been delineated in the other three Company Applications. It was observed by the learned Single Judge that the applicant Anup Jain had placed on record the blank Share Transfer Forms relating to the subject 4000 shares, in which the applicant has been shown as transferee and which are signed by the Director of CRBCML as well as the Share Certificates whereunder the said shares of RIL were subscribed by CRBCML. EARLIER JUDGMENT DATED 28.05.2024 BY THE DIVISON BENCH: 10. The aforesaid order dated 25.07.2023 passed by the learned Single Judge came to be assailed by the Ex-Management of CRBCML and CCL by way of appeals....
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....t is an admitted position that the original share certificates of 3000 RIL shares (60 in number) along with transfer deeds are in possession of three Saraf Brothers. 39. Incidentally, Delhi Stock Exchange Registered Broker i.e. A. G. Vidyasagar & Co. had filed an application, though was dismissed for non prosecution, in which he had stated on oath that he had purchased 10000 shares of RIL (including 3000 shares, which were sold by it to Saraf brothers) from CRB Corporation Limited and paid consideration to CRB Corporation Limited between 16.04.1997 and 30.04.1997. 40. Appellant No. 1 has already made a statement which has been accepted by the learned Company Court that it had not sold any shares of Reliance Industries Limited after issue of the order dated 09.04.1997 passed by RBI. It is also admitted position that the original share scrips and original blank transfer deeds are/were in possession of each of the respondent No. 1. Thus, in effect the appellants' sole objection is that there is discrepancy in the timeline when the shares were sold by the appellant No. 1, and thereafter sold by broker to the respondent No. 1 in each appeal and that in Mr. Anoop Ja....
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....approached the Supreme Court, which, vide order dated 05.08.2024 has passed the following directions: "CIVIL APPEAL NOS.8452-8454 OF 2094 (Arising out of S.L.P.(Civil) Nos.17008-17010 of 2024) O R D E R Leave granted. 2. The first and second respondents were the appellants before the Division Bench of the High Court. Hence, service of notice to other respondents is not necessary. The first and second respondents are represented by the learned counsel who waives formal notice. 3. The-impugned judgment of the High Court notes that an objection was raised by the present appellants in both the appeals that the appeals preferred by the first and second respondents were not maintainable. The High Court has specifically recorded a finding that it is not deciding the issue of maintainability. Nevertheless, the appeals have been partly allowed and an order of remand has been passed. The appeals could not have been decided on merits without deciding the issue of maintainability raised by the appellants. 4. Hence, the impugned judgment is quashed and set aside only on that ground. Company Appeal Nos. 19, 20, 21 and 22 of 2023 are restored to the fi....
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....rom AGV to CRB Corporation on 22, 23 and 24 April 1997 vide Cheques No. 158099 and 158100 and 158080 for Rs. 3,52,300/-. 20. Ms. Sindhwani has also raised the plea of limitation relying, for the purpose, on Section 446(2)(b)^1 of the Companies Act, 1956, which requires a claim to be lodged within 3 years, failing which it is no longer legally enforceable. She has also placed reliance, in this context, on the judgment of the Supreme Court in State of Gujarat v. Kothari & Associates (2016) 14 SCC 761 and of this Court in P.T. Gajwani v. A.R. Chadha & Co 1973 ILR (2) Delhi 752. Ms. Sindhwani also places reliance on Section 531A of the Companies Act. 21. Arguing in rejoinder, Mr. Dayan Krishnan submits that the applicant cannot be concerned with whether AGV had purchased the shares from CRB Corporation or from anyone else. There is no dispute about the fact that the shares were initially held by CRBCML. The sole ground on which Karvy had refused to transfer the shares to the applicant was the embargo placed by this Court and by the RBI on transfer of shares by CRBCML. The matter, he submits, stands squarely covered by the order passed in Co. App. 176/1998 supra which ....
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....ections with regard to non-registration of shares in the applicants' names, which were purchased from the open market. At this juncture, it would be relevant to refer to Section 531 of the Act which is sought to be invoked to support the maintainability of the instant appeals, which provides as under: "531. FRAUDULENT PREFERENCE (1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly : Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months. (2) For the purposes of sub-sect....
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....for the benefit of the company". We also find that in another matter titled Reserve Bank of India v. Crystal Credit Corporation Ltd [2006] 132 Comp Cas 363 (Delhi), the following principles for exercise of the powers under Section 536 (2) were laid down: "(i) Transactions bona fide entered into and completed in the ordinary course of trade must be protected. (ii) If the disposition is made for the purpose of preserving the business as a going concern, then also the discretion of the court must be exercised. (iii) A disposition must not be validated merely because the party bona fide entered into the transaction. (iv) Knowledge of the presentation of the winding up is immaterial." 17. That being the legal position, in order to show its locus standi and bring the matter within the jurisdiction of the Company Court, learned Senior Counsel for the appellants referred to the decision in the case of Rishabh Agro Industries Limited v. PNB Capital Services Limited (2000) 5 SCC 515 and attention was invited to paragraph (10) of the judgment, which goes as under: "10. It has been further suggested on behalf of the respondent Bank that the actio....
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....risdiction to move BIFR [Board of Industrial and Financial Reconstruction], since the passing of the winding up order is the commencement and not the culmination of the proceedings before the Company Judge. 20. To the same effect was the position in law in the cited judgment in the case of Foremost Industries (India) Limited v. AAIFR [2000 (55) DRJ 439 (DB)] of the Division Bench of this Court, wherein it was held that appointment of a Liquidator on account of default under Section 456 and 457 of the Act does not debar proceedings against the assets of the sick companies before any decision is taken by the BIFR. In other words, it was held that mere appointment of a Liquidator in the winding-up proceedings does not oust the jurisdiction of the BIFR. 21. Learned Senior Counsel also cited the decision in the case of Nitin Alloys Private Limited v. Rajendra Jain 2016 SCC OnLine Raj 10232, where and in the context of Section 483^7 of the Act it, was held that there is no residuary power in the hands of the Directors after an order to wind up the company has been passed. The Court observed that Directors hold office only for the purpose of filing the Statement of Affairs in aid of....
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....that the passing of an order of winding up or the appointment of a Provisional Liquidator results in discharge of the erstwhile management who are then left merely with the statutory liability of submitting a Statement of Affairs and aid and assist the Official Liquidator in the winding up proceedings. 24. In light of the above discussion, it follows that it is not within the jurisdiction of the Company Court to investigate, at the behest of the appellants, the sale of shares by CRBCML, including the recipients or the consideration involved. Undoubtedly, the transfer of equity shares occurred during a period when such transfers were typically executed through the exchange of share certificates along with signed or blank transfer deeds. The sole requirements were a Contract Note in favour of the transferee, substantiated by the payment of the share amount to the Stock Broker. 25. The said aspect is exemplified from the concession made by the learned Senior Counsel for the appellants during arguments before the learned Single Judge, as reflected in the impugned order dated 25.07.2023, that the shares were held in trust by CRB Trustee Limited. However, the Company Court in the p....
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.... not taken any action under Sections 521 or 531-A of the Act for the last 18 years. Furthermore, no creditor of the company (in liquidation) has come forward to challenge the sale of shares in question to the applicants. 28. In view of the foregoing discussion, we find that the instant appeals preferred by the appellants are clearly not maintainable. Resultantly, the impugned order passed by the learned Single Judge dated 25.07.2023 in respect of the instant applications moved by the respective applicants/transferees has to be given effect to forthwith in accordance with law. 29. Resultantly, the instant appeals filed by the ex-management are held to be not maintainable and the same are hereby dismissed. -------------------- Notes:- 1. 446. Suits stayed on winding up order. - (2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of - ***** whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the wind....
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.... proved to the satisfaction of the [Tribunal] that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the 3 [Tribunal] shall take into account the contingent and prospective liabilities of the company. (2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm. 4. 441. COMMENCEMENT OF WINDING UP BY TRIBUNAL (1) Where, before the presentation of a petition for the winding up of a company by the Tribunal, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Tribunal, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken. (2) In any other case, the winding up of a company by the Tribunal shall be deemed to commence at the time of ....
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...., 1956 (1 of 1956) or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law- (a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company; (b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the Board. (3) [Where an inquiry under section 16 is pending or any scheme referred to in section 17 is under preparation or during the period] [ Substituted by Act 12 of 1994, Section 12, for certain words (w.e.f. 1.2.1994).] of consideration of any scheme under section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of....