2005 (3) TMI 463 - HC - Companies Law

Summary

Issues Involved:

1. Conflict between statutory records maintained by the Company and returns filed before the Registrar of Companies.
2. Validity of a gift of shares without the actual handing over of share certificates.
3. Transfer of joint shares without the consent of the second joint shareholder.

Issue-wise Detailed Analysis:

1. Conflict between Statutory Records and Returns Filed:

The appellant questioned whether the statutory registers maintained by the Company would prevail over conflicting returns filed with the Registrar of Companies. The Company Law Board relied on the return of allotment filed with the Registrar of Companies, which indicated Kamla Shah as the sole holder of the shares. The court noted several discrepancies in the company's records, such as the lack of share certificates issuance and the absence of contemporaneous board meeting minutes. The court held that the Company Law Board was justified in relying on the return of allotment rather than the Register of Members, which appeared to be unreliable and possibly manipulated. The court affirmed that it is permissible for the Company Law Board to consider all relevant evidence, including returns filed with the Registrar of Companies, to resolve conflicts in statutory records.

2. Validity of Gift Without Actual Handing Over of Share Certificates:

The appellant contended that a valid gift of shares could not occur without the actual delivery of share certificates. The court rejected this argument, noting that the share certificates were in the custody of the company and not issued to the shareholders. The court referenced the judgment in *Vasudev Ramchandra Shelat v. Pranlal Jayanand Thaker*, which established that a gift does not become invalid for non-compliance with formalities if the donor's intention to gift is clear and the necessary documents are executed. The court concluded that Kamla Shah's execution of the transfer deed and communication of the gift to the company constituted a valid gift, despite the lack of physical delivery of the share certificates.

3. Transfer of Joint Shares Without Consent of Second Joint Shareholder:

The appellant argued that Kamla Shah could not transfer joint shares without the consent of Ramesh Shah, the second joint shareholder. The court upheld the Company Law Board's finding that Kamla Shah was the sole holder of the shares in question, based on the return of allotment and other evidence. Consequently, the issue of transferring joint shares without consent did not arise. The court declined to answer this question, affirming that Kamla Shah held the shares singly and had the right to transfer them without needing consent from any joint shareholder.

Conclusion:

The court dismissed the appeal, affirming the Company Law Board's decision to rectify the Register of Members to reflect the transfer of 1,290 shares to the respondent. The court found no merit in the appellant's contentions, emphasizing the need for substantial justice over hyper-technical objections. The appeal was disposed of with no order as to costs.