2010 (2) TMI 584 - HC - Companies Law

Rectification of the register of members of the company by deleting the name of the second appellant herein as owner of 101 equity shares of the company and entering the respondent s name as the holder of the impugned shares - Held that - The case of the appellants is not one falling under the second proviso to section 108 of the Act, viz., transmission by operation of law. Section 108(1) of the Act does not speak of any execution by the company, the transfer has to be by a shareholder through an instrument of transfer duly stamped and executed by or on behalf of the transferor or the transferee and delivered to the company. In the absence of anything shown that there was a transfer in terms of section 108 of the Act, rightly, the Company Law Board allowed the petition. In these circumstances, no substantial question of law to interfere with the findings of the Company Law Board. In the light of the said fact that the respondent had the knowledge as to the transfer only in the year 2002 and the company petition thus preferred within a period of three years, the view of the Company Law Board that the action was well within the limitation, hence, merits to be accepted. In the circumstances, the order of the Company Law Board stands confirmed and this company appeal stands dismissed. No costs.

Issues Involved:
1. Limitation period applicability.
2. Knowledge of share transfer.
3. Jurisdiction of the Company Law Board under Section 111.
4. Presumption against appellants for non-production of documents.
5. Rectification of the register of members.
6. Issuance of duplicate share certificates.
7. Jurisdiction to grant unprayed reliefs.

Issue-wise Detailed Analysis:

1. Limitation Period Applicability:
The appellants questioned whether the Company Law Board (CLB) was correct in holding that the petition was not barred by limitation. The CLB determined that the respondent gained knowledge of the share transfer in 2002 and filed the petition within three years, thus not barred by limitation. The CLB followed the decision in *Jagjit Rai Maini v. Punjab Machinery Works P. Ltd.*, emphasizing that the limitation period starts from the date of knowledge of the transfer.

2. Knowledge of Share Transfer:
The appellants contended that the respondent should have known about the share transfer earlier as the records were available for inspection since 1997. The CLB found that the respondent only became aware of the transfer in 2002 upon inspecting the records. The court upheld this finding, noting that the respondent acted within the limitation period upon discovering the transfer.

3. Jurisdiction of the Company Law Board Under Section 111:
The appellants argued that the CLB overstepped its jurisdiction as the matter involved allegations of forgery and fraud, which should be addressed by a civil court. The court referred to the Supreme Court's decision in *Ammonia Supplies Corporation P. Ltd. v. Modern Plastic Containers P. Ltd.*, which clarified that rectification under Section 111 pertains to correcting errors in the register. The court found that the CLB had jurisdiction to address the rectification as the transfer did not comply with Section 108 of the Companies Act.

4. Presumption Against Appellants for Non-Production of Documents:
The CLB noted that the appellants failed to produce the original minutes of the board meeting, the register of members, and share transfer documents. The court agreed with the CLB's inference that the absence of these documents indicated non-compliance with the mandatory provisions of the Companies Act, supporting the respondent's claim of unauthorized transfer.

5. Rectification of the Register of Members:
The CLB directed the rectification of the register by re-entering the respondent's name as the holder of the shares. The court upheld this decision, noting that the appellants did not provide evidence of a valid transfer deed or compliance with Section 108. The court emphasized that the burden of proving a valid transfer was on the appellants, which they failed to meet.

6. Issuance of Duplicate Share Certificates:
The CLB ordered the issuance of duplicate share certificates to the respondent, concluding that the original certificates and transfer deeds were not in the company's custody. The court upheld this order, finding no error in the CLB's decision given the lack of evidence from the appellants.

7. Jurisdiction to Grant Unprayed Reliefs:
The appellants questioned the CLB's authority to grant reliefs not explicitly prayed for in the petition. The court found that the CLB acted within its jurisdiction to grant necessary reliefs connected to the rectification of the register, as the primary issue was the unauthorized transfer of shares.

Conclusion:
The court confirmed the CLB's order, dismissing the appeal and finding no substantial question of law to interfere with the CLB's findings. The court emphasized the mandatory compliance with Section 108 for share transfers and the CLB's jurisdiction to rectify errors in the register of members.

← Previous Next →