2010 (5) TMI 692 - Board - Companies Law

Summary

Issues Involved:
1. Transmission of shares and ownership.
2. Alleged erroneous insertion of joint holders' names.
3. Limitation period for filing the petition.
4. Responsibility of the company in maintaining accurate records.

Summary:

1. Transmission of Shares and Ownership:
The petitioner, invoking provisions u/s 111(4) of the Companies Act, 1956, sought relief regarding 624 equity shares of Rs. 500 each in respondent No. 1 company, originally held by Mr. Manilal V. Shah, HUF. Upon his death, the shares were transmitted to his legal heirs and recorded in the register of members on July 26, 1990. The petitioner claimed to be the absolute owner of 384 shares and further acquired 260 shares, totaling 644 shares. She intended to sell these shares to form a trust for her dependent daughter but discovered the share certificates were lost/misplaced.

2. Alleged Erroneous Insertion of Joint Holders' Names:
The petitioner applied for duplicate share certificates on January 9, 2008. The respondent-company advised her to furnish an indemnity bond and FIR copy. The company later informed her that the shares were held jointly with Mr. Harish M. Shah and Mrs. Usha H. Shah, respondents Nos. 2 and 3. The petitioner contended that the names were erroneously inserted without her consent. Respondents Nos. 2 and 3 argued that the names were inserted in 1993 and 1994 and that the petitioner had consented to this addition.

3. Limitation Period for Filing the Petition:
The petitioner claimed she became aware of the erroneous insertion only on January 22, 2008, and filed the petition within eight months, thus within the limitation period of three years as per the Limitation Act, 1963. Respondents Nos. 2 and 3 argued that the petition should be dismissed due to unreasonable delay and unnecessary hardship, as more than 12 years had passed since the insertion of joint names.

4. Responsibility of the Company in Maintaining Accurate Records:
Respondent No. 1 company admitted the insertion of joint names during the tenure of an employee who is now untraceable. The company failed to produce any relevant documents or board resolutions justifying the insertion of respondents Nos. 2 and 3 as joint holders. The Company Law Board emphasized that mere entry in the register of members cannot entitle a person to shares without consideration. The burden of proof lay on respondent No. 1 company to explain the insertion of names, which it failed to do.

Judgment:
The Company Law Board found no justification for the insertion of respondents Nos. 2 and 3 as joint holders. Exercising powers u/s 111(5) of the Companies Act, the Board directed respondent No. 1 company to delete the names of respondents Nos. 2 and 3 from the register of members in respect of 644 shares within 30 days from the receipt of the order. The petition was disposed of with this direction.