TaxTMI 
TaxTMI 
2026 (8) TMI 1615
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....rior to the delisting of the Company's equity shares on 30 March 2023 pursuant to the capital reduction process undertaken under the approved Resolution Plan. The Appellant stated that upon discovering that his entire shareholding had been cancelled, he immediately addressed an email dated 10 April 2023 to SIL seeking clarification regarding the cancellation of his shares, to which SIL responded on 11 April 2023 confirming that the said shares stood cancelled. The Appellant further contended that he lodged a complaint before his Depository Participant, Geojit, on 31 March 2023, and eventually received a reply on 11 June 2024 stating that the cancellation of his 1,35,000 shares was a consequence of the capital reduction process. 3. The Appellant submitted that, with a view to protecting his legal rights, he approached several statutory and regulatory authorities including NSDL, NSE and RBI. The Appellant stated that NSDL, by its communication dated 9 August 2024, advised him to approach SIL and its Registrar and Transfer Agent for further clarification. The Appellant contended that NSE, by its reply dated 3 April 2023, advised him to approach the Tribunal, whereas RBI, by its....
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.... that the approved Resolution Plan shall be binding upon the Corporate Debtor, its employees, members, creditors, guarantors and other stakeholders. The Appellant contended that since he admittedly falls within the category of a Member, the Resolution Plan was required to be implemented in a manner that protected and recognised his rights. The Appellant further submitted that the Resolution Order nowhere provides that the liquidation value of all Members of SIL stood reduced to NIL. Rather, only the promoter group shareholders/members were assigned NIL liquidation value. The Appellant therefore contended that the Resolution Plan can never extinguish the rights of public Members such as the Appellant. The Appellant further stated that although payments under the Resolution Plan were made to employees, creditors, guarantors and other stakeholders, no payment whatsoever was made to the Members/ Shareholders of SIL, despite Members being specifically recognised under Paragraph 4(iv) of the approved Resolution Plan. 7. The Appellant submitted that the list of equity shareholders as on 31.03.2023 does not conform to the approved Resolution Plan and is consequently invalid and liable t....
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....voked Sections 2(55)(ii) & (iii), 59, 88(1)(a), 88(2), 88(3), 378B(1)(d), (e), (i), (j) & (k), 378ZB(2) and Rule 5(3) of the Companies (Management and Administration) Rules, 2014, all of which collectively establish the statutory rights of a Member, the obligation of the Company to maintain a proper Register of Members, and the legal consequences flowing from wrongful omission of a Member's name. The Appellant contended that the Tribunal failed to examine these statutory provisions especially Section 59 of the Companies Act, 2013 specifically provides a remedy where the name of a person has been wrongfully omitted from the Register of Members or where there has been a failure to record the fact that a person has become a Member. The Appellant contended that his case squarely falls within the ambit of Section 59 of the Companies Act, 2013 since the Company either failed to properly enter his name in the Register of Members or subsequently omitted it without sufficient cause. 12. The Appellant further submitted that Section 2(55)(iii) of the Companies Act, 2013 recognises as a Member every person holding shares whose name appears as a beneficial owner in the records of the dep....
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....uently, the Appellant contended that the dismissal of Company Appeal No. 31 (AHM) of 2025 as not maintainable and the rejection of all reliefs sought by him are arbitrary, unreasonable and contrary to the material placed on record. 16. Concluding the arguments, the Appellant requested this Appellate Tribunal to allow his appeal and dismiss the Impugned order. 17. Per contra, the Respondent denied all the averments made by the Appellant as misleading and baseless. The Respondent submitted that the Appeal is entirely misconceived, as it is premised on the erroneous belief that the Appellant continues to enjoy enforceable rights as a shareholder and member of SIL despite the complete extinguishment of the pre-resolution equity share capital under the approved Resolution Plan. The Respondent contended that the entire equity share capital comprising 59,92,49,762 equity shares stood lawfully cancelled in accordance with the Resolution Plan approved by the Adjudicating Authority on 10 February 2023, and consequently no legal right, title or interest survived in favour of the Appellant. It was further submitted that the Appellant's contention is contrary to the statutory framewor....
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....aim of approximately Rs. 82.3 crores (claimed as approximately Rs. 110 crores with interest) are wholly foreign to proceedings under Section 59 of the Companies Act, 2013, which neither contemplates adjudication of damages nor confers jurisdiction to award compensation. 21. The Respondent further submitted that the distinction sought to be drawn by the Appellant between a "member" and a "shareholder" has no legal basis, as both expressions are interchangeably as by virtue of Section 2(55) of the Companies Act, 2013, membership is inseparably linked to ownership of shares, while Section 88 of the Companies Act, 2013 requires maintenance of only one Register of Members and does not envisage any independent register of shareholders. The Respondent therefore contended that once the Appellant's shares stood extinguished pursuant to the Resolution Plan, his status as a member simultaneously came to an end, leaving no independent membership rights capable of enforcement. 22. The Respondent further submitted that the present proceedings are nothing but an indirect attempt to challenge the Resolution Plan and the Approval Order dated 10 February 2023 after both have attained final....
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....Services Limited. 26. We note that SIL underwent CIRP under the Code and the Resolution Plan submitted by the Successful Resolution Applicant was approved by the NCLT, Ahmedabad, by order dated 10.02.2023 in IA 275 of 2022 in CP (IB) No. 848/NCLT/AHM/2019, under Section 31 of the Code ("Approval Order"). Clause 6.1 of the Resolution Plan records that the existing equity shareholders would not be paid any amount, the liquidation value of the Corporate Debtor being inadequate to make any payment to such persons. Paragraph 4(iv) of the Approval Order makes the Plan binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders; paragraph 4(viii) of the approved order extinguishes, from the date of the order, all claims against the Corporate Debtor except those provided for in the Plan. 27. We are conscious of the fact that on implementation of the Resolution Plan, the entire pre-existing issued equity share capital of SIL i.e 59,92,49,762 equity shares of Re. 1/- each - stood cancelled and extinguished without payment of any consideration, and the shares were delisted from the BSE and the NSE in March 2023, vide BSE Notice No. 20230303-4....
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....alue "NIL" only for shareholders forming part of the promoter group, and that the Appellant, being a non-promoter Member, stands outside that extinguishment. Reliance is placed by the Appellant on the shareholding figures disclosed in SIL's Annual Returns for FY 2022-23 and FY 2024-25 - showing 31+1 and 25+1 "Public Shareholders"/"Members" respectively, including 25 secured financial creditors to contend that certain persons were preferentially retained as members/shareholders while the Appellant's rights were treated as extinguished, and that the terms "Shareholder" and "Member" have been used inconsistently to SIL's advantage. 32. The Appellant also contended that the Section 59 is not confined to clerical correction and that Section 88 of the Companies Act, 2013 casts a continuing statutory duty on SIL to maintain an accurate Register of Members and the proposition of the Appellant is that membership, once acquired, is not lightly divested. Sections 378B(1)(d), (e), (i), (j), (k) and 378ZB (2) of the of the Companies Act, 2013, and Rule 5(3) of the Companies (Management and Administration) Rules, 2014, are invoked in support of the reliefs claimed by the Appellant....
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...., 88, 378B and 378ZB of the Companies Act 2013, Rule 5(3) of the Companies (Management and Administration) Rules, 2014, assist the Appellant? (iv) Whether the reliefs of compensation, interest, issuance of fresh equity shares and damages for mental suffering are grantable in proceedings under Section 59 of the Companies Act 2013? (v) Whether there is any violation of natural justice or other infirmity vitiating the Impugned Order? 37. Now we will deal all issues hereinafter: Issue No (I) Whether the omission of the Appellant's name from the Register of Members of SIL was "without sufficient cause" within the meaning of Section 59(1) of the Companies Act 2013. 38. We note that Section 59 of the Companies Act, 2013 is a narrow, summary and rectificatory provision, intended solely to correct clerical or procedural errors, wrongful entries or omissions in the Register of Members. It is not a substitute for a suit and cannot be invoked to adjudicate seriously disputed questions, to revive or restore extinguished equity share capital, to compel issuance of fresh shares pursuant to a concluded insolvency resolution, or to award monetary compensation, interes....
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....olution Plan, including the Appellant and do not carve out a residual class of "Members" whose shareholding survives extinguishment while only "promoter-group Shareholders" are affected. Therefore, we find that the appeal proceeds on a premise that is not borne out by the record. 41. We also note that the figures relied upon by the Appellant from SIL's Annual Returns for FY 2022-23 and FY 2024-25, do not assist the Appellant. Those returns, as argued by the Appellant record the shareholding pattern after implementation of the Plan, reflecting the restructured capital issued under it, including equity allotted to erstwhile secured financial creditors as part of the approved restructuring and not a continuation of the pre-CIRP shareholder base of over four lakh members that stood extinguished. The Appellant has placed no material to show that he was allotted, or was entitled to be allotted, any shares under the approved Plan; the numerical coincidence in a return filed for a period ending 31.03.2023 (contemporaneous with implementation) is not, without more, evidence of continuity of his own, extinguished, pre-CIRP holding. No case of discriminatory retention of the Appellant&....
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....hether the reliefs of compensation, interest, issuance of fresh equity shares and damages for mental suffering are grantable in proceedings under Section 59 of the Companies Act 2013? 45. We note that Section 59(2) of the Companies Act 2013 confines the power of the Tribunal, on an appeal for rectification, to dismissing the appeal, directing registration of a transfer or transmission, or directing rectification together with damages "sustained by the party aggrieved" that is, damages flowing from the wrongful entry or omission itself, such as loss occasioned by delay in recording a valid transfer. It does not contemplate a free-standing claim for compensation computed as a proportion of funds infused by a resolution applicant into the corporate debtor, nor a direction for issuance of fresh equity share capital, nor damages for mental suffering. The jurisdiction under Section 59 of the Companies Act 2013, though it may extend to questions incidental and peripheral to rectification, remains anchored to rectification and does not become a vehicle for adjudicating substantive monetary claims of the magnitude sought here. 46. Independently, and more fundamentally, the reliefs cla....