2002 (10) TMI 420 - HC - Companies Law

Issues Involved:
1. Whether the present appeal and the original proceedings under section 111 of the Companies Act should be dismissed.
2. The legal standing of Canfina to prosecute the original proceedings before the Company Law Board (CLB) as the assignee of Citi Bank.
3. Applicability of section 111 of the Companies Act to the case.
4. Timeliness of the petition under section 111(3) of the Companies Act.
5. Impact of the forfeiture of bonds by Powergrid on the proceedings.
6. Whether the assignment of rights from Citi Bank to Canfina was legally valid.

Detailed Analysis:

1. Dismissal of Appeal and Original Proceedings:
The court considered the oral submission by Mr. Mukul Rohatgi, who argued that the appeal and the original proceedings should be dismissed since Citi Bank had retransferred the bonds to Canfina and ceased to have any further interest. The court noted that Citi Bank had not made any representation since April 1999 and had transferred its rights to Canfina via an agreement dated January 10, 1995. The court found that the plea to dismiss the proceedings should be addressed to the CLB.

2. Legal Standing of Canfina:
Canfina contended that it should be heard in the appeal as it now represented Citi Bank as its assignee. The court examined the agreement between Citi Bank and Canfina, which stated that Canfina had purchased the rights to the bonds and was responsible for pursuing legal remedies. However, Canfina had not applied for transposition as a co-petitioner in the original proceedings, which was essential. The court found no justification for granting leave to Canfina to apply for transposition after a significant delay of over six years and eight months.

3. Applicability of Section 111 of the Companies Act:
The court noted that section 111 applies to the refusal of transfer of shares and debentures, but the impugned letters of allotment were neither shares nor debentures. The court emphasized that the letters of allotment could not be equated with shares, bonds, or debentures, which are inherently negotiable. Therefore, section 111 was not applicable to the case.

4. Timeliness of the Petition:
The petition under section 111(3) was filed after a period of one year from the date of lodgement, making it time-barred. The court noted that the delay could not be condoned, and the petition was therefore belated.

5. Impact of Forfeiture by Powergrid:
Powergrid issued a notice of forfeiture to Canfina on January 20, 1994, and took action on February 11, 1994. Neither Citi Bank nor Canfina challenged this forfeiture. The court found that the forfeiture rendered the letters of allotment legally ineffective, and the original petition had become infructuous.

6. Validity of Assignment from Citi Bank to Canfina:
The court examined whether a valid assignment had taken place under the agreement dated January 10, 1995. It found that Canfina had failed to take necessary legal actions to perfect its title to the bonds and had not obtained the leave of the court to continue proceedings in place of Citi Bank. The court concluded that Citi Bank had no conveyable interest, and Canfina could not assume its role under section 146 or any other provision of the CPC.

Conclusion:
The court accepted the submission by the Additional Solicitor General and dismissed the Company Petition under section 111 of the Companies Act pending before the CLB. The parties were directed to bear their respective costs. The court emphasized that deciding the appeal in the absence of Citi Bank, which had no subsisting interest, would be a futile formality.

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