2010 (9) TMI 911 - Board - Companies Law

Summary

Issues Involved:
1. Transfer of shares
2. Allegations of fraud and breach of trust
3. Limitation period
4. Jurisdiction of Company Law Board

Summary:

1. Transfer of Shares:
The petitioner purchased 800 equity shares of respondent No. 1 company and sent the transfer deeds along with share certificates for transfer on May 30, 1998. Respondent No. 1 company acknowledged receipt but transferred only 50 shares. The petitioner sought directions u/s 111A of the Companies Act, 1956, for the transfer of the remaining 750 shares. The petitioner also filed a suit (O.S. No. 36 of 1999) and obtained an ex parte decree declaring him the lawful owner of the 750 shares.

2. Allegations of Fraud and Breach of Trust:
The petitioner alleged that respondent No. 1 company colluded with respondent No. 2 and fraudulently transferred the shares to respondent No. 2. The petitioner claimed that the transfer deeds were misused, and the shares were transferred illegally. Respondent No. 1 denied receiving the transfer application for the 750 shares and stated that the shares were transferred to respondent No. 2 based on valid transfer deeds.

3. Limitation Period:
Respondent No. 1 argued that the petition was barred by limitation as it was filed more than 10 years after the alleged cause of action. The Board held that since the petitioner approached the civil court and the matter was pending, there was a continuous cause of action. The petitioner's actions were deemed diligent and bona fide, and the petition could not be dismissed on the ground of limitation.

4. Jurisdiction of Company Law Board:
The petitioner invoked section 111A of the Companies Act, 1956, which allows the Company Law Board to direct a company to register the transfer of shares if refused without sufficient cause. The Board found that respondent No. 1 had full knowledge of the petitioner's purchase of shares and failed to take appropriate action. The Board rejected respondent No. 1's objections regarding complicated questions of law and facts and held that the case did not fall under such a category.

Order:
The Company Law Board directed respondent No. 1 to rectify the register of members by substituting the petitioner's name for respondent No. 2 in respect of the 750 shares and to issue share certificates within 30 days. Respondent No. 1 was also directed to pay all dividends and benefits accrued to the petitioner and to pay Rs. 25,000 as costs. The petitioner was instructed to send photocopies of the share transfer deeds and share certificates to respondent No. 1 company. The petition was allowed with these directions.