2010 (5) TMI 693 - Board - Companies Law

Issues Involved:
1. Legitimacy of the petition under Section 111A of the Companies Act, 1956.
2. Validity of the transfer deed.
3. Delay in filing the petition and the issue of limitation.
4. Issuance of bonus shares and dividends.
5. Responsibility of the registrar and transfer agent.
6. Steps taken by the petitioner to rectify the transfer issue.

Detailed Analysis:

1. Legitimacy of the Petition under Section 111A of the Companies Act, 1956:
The petitioner invoked Section 111A of the Companies Act, 1956, seeking reliefs as prayed in the petition. The respondent argued that the petitioner could avail of the benefit under this provision only if the company refused to register the transfer of shares without sufficient cause within two months from the date of delivery of the transfer instrument. The respondent highlighted that the petition was filed after 14 years, thus barred by limitation.

2. Validity of the Transfer Deed:
The petitioner purchased 100 shares of Kotak Mahindra Finance Ltd. and lodged the transfer deed along with the share certificate with the registrar. However, the registrar (respondent No. 2) could not register the transfer as the signature of the transferor differed from the specimen signature recorded with the company. Despite repeated attempts, the petitioner failed to obtain a fresh transfer deed from the transferor (respondent No. 4).

3. Delay in Filing the Petition and the Issue of Limitation:
The respondents argued that the petition was barred by the limitation, as it was filed 14 years after the shares were purchased and the transfer was rejected. The petitioner did not take any steps to address the issue promptly, displaying a lethargic attitude. The bench noted that the petitioner had not explained the delay in approaching the bench after such a long period, emphasizing the principle that "delay defeats equity."

4. Issuance of Bonus Shares and Dividends:
The respondent-company issued bonus shares on three occasions, and the number of shares held by the petitioner, after considering the bonus shares, should have been 333 equity shares. However, the respondent No. 4, being the registered shareholder, received the bonus shares and dividends, which were later dematerialized and sold. The petitioner claimed entitlement to these shares and dividends, but the respondents denied this claim due to the shares still being in the name of respondent No. 4.

5. Responsibility of the Registrar and Transfer Agent:
Respondent No. 2, the registrar and transfer agent, stated that they could not register the transfer due to the discrepancy in the transferor's signature. They argued that the petitioner's negligence and delay in pursuing the matter diligently contributed to the prolonged issue. The registrar emphasized that they could only act based on proper documentation or an order from the Company Law Board.

6. Steps Taken by the Petitioner to Rectify the Transfer Issue:
The petitioner approached the broker and the registrar for rectification but failed to obtain a fresh transfer deed from the transferor. The petitioner wrote to the registrar requesting the transferor's address and subsequently contacted the transferor, but received no response. The bench noted that the petitioner did not take sufficient steps to resolve the issue, such as filing a suit or obtaining a court order to restrain the company from transferring the shares to third parties.

Conclusion:
The bench concluded that the petitioner did not act diligently in addressing the transfer issue and failed to provide sufficient evidence of efforts taken to obtain a fresh transfer deed. The delay of 14 years in filing the petition was deemed inordinate and unjustifiable. The bench directed the respondent-company to issue notice to the transferor before taking any action on the transfer of shares and to act in accordance with the law if the petitioner proves his bona fides and provides the required documents. The petition was disposed of with these directions.

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