2009 (2) TMI 461 - HC - Companies Law

Transfer of shares - Rectification of register on transfer - respondent filed a civil suit claiming for a declaration that they were the lawful owners of the shares in question and the appellant should be perpetually restrained from registering those shares and/or recording any transfer in respect of those shares in favour of any person other than the respondent - Held that - Share is a movable commodity. It can be sold by the holder to any one and he in turn to another one. However, those intermediaries do not ultimately figure in the transaction and do not have any consequence. Once the transfer is registered with the company it is registered on the basis of the transfer deed duly executed by the registered shareholder featuring in the records of the company in favour of the ultimate transferee who is seeking rectification. In the instant case, R.K. Chamaria and Company might be an intermediary and sale by Chamaria was of no consequence unless it was proved that the original shareholder executed a transfer deed in favour of the respondent who sought rectification of the share register. We are afraid, nothing came out in the evidence on that score and it would not be wise to grant approval to the rectification as directed by the Court below. At the same time, we feel that the appellant should take an impartial stand in the matter as mandated by law specially under section 111A of the said Act of 1956. The judgment and decree passed by the Court below dated 23-7-2004, in T.S. No. 1997 of 1995 is set aside. The suit is remanded back to the Court below for a retrial with liberty to the plaintiff to adduce further evidence if they so chose.

Issues Involved:
1. Validity of evidence provided by Jugal Kishore Sadani.
2. Proof of ownership of the shares by the respondent.
3. Entitlement of the respondent to apply for duplicate shares.
4. Maintainability of the suit in light of non-joinder of necessary parties and jurisdiction.

Detailed Analysis:

1. Validity of Evidence Provided by Jugal Kishore Sadani:
The appellant contended that the evidence of Jugal Kishore Sadani was of no consequence as he did not have personal knowledge of the transaction between the respondent and M/s. R.K. Chamaria & Company, nor did he witness the loss of shares on 31-5-1995. The court observed that Sadani's evidence was relied upon by the learned Single Judge without appreciating its lack of personal knowledge. The court concluded that the evidence provided by Sadani was insufficient to support the claims made by the respondent.

2. Proof of Ownership of the Shares by the Respondent:
The appellant argued that ownership was not proved as sale notes and bought notes were not produced in evidence. The respondent claimed ownership through documentary evidence, which was exhibited and taken on record by order No. 57 dated 14-7-2004. The court noted that the respondent's ownership was not conclusively proven as there was no evidence that the shares belonged to R.K. Chamaria & Company. The court emphasized that proving ownership required showing that the original shareholder executed a transfer deed in favor of the respondent, which was not demonstrated in the evidence.

3. Entitlement of the Respondent to Apply for Duplicate Shares:
The appellant contended that even if the respondent was the lawful owner of the shares, they were not entitled to apply for duplicate shares as they were not the registered holder of those shares. The court agreed, stating that under section 84 of the Companies Act, 1956, only registered shareholders could apply for duplicate shares. Since the respondents were not registered holders, they could not seek duplicate shares from the appellant.

4. Maintainability of the Suit:
The appellant argued that the suit was bad for non-joinder of necessary parties and that the civil court lacked jurisdiction under the Companies Act, 1956. The court observed that the plea of maintainability was taken in the written statement but was not pressed during the trial. Referring to the decision in Premchand Manickchand, the court held that once a plea is abandoned in the trial court, it cannot be raised again at the appellate stage. Consequently, the court found the argument regarding maintainability to be untenable.

Conclusion and Directions:
The court set aside the judgment and decree passed by the learned Single Judge and remanded the suit back to the lower court for retrial. The respondent was granted liberty to adduce further evidence, and the appellant was directed to provide detailed particulars of the recorded holders to the respondent. The lower court was instructed to give both parties an opportunity to adduce further evidence and to consider the issues afresh. The court also restrained the appellant from recording any further transfer or rectifying its share register in respect of the disputed shares until the suit was disposed of. The court requested an early disposal of the matter, preferably within six months.

Separate Judgment:
Prasenjit Mandal, J. concurred with the judgment.

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