2010 (9) TMI 923 - Board - Companies Law

Issues Involved:
1. Jurisdiction of the Company Law Board.
2. Legality of the purchase of shares.
3. Delay and laches in filing the petition.
4. Non-joinder of necessary parties.
5. Proof of purchase and loss of shares.
6. Fabrication and concealment of facts by the petitioner.

Detailed Analysis:

1. Jurisdiction of the Company Law Board:
The petitioner initially filed the petition before the Company Law Board, Western Region Bench in 2003, which was returned due to jurisdictional issues, leading to its filing before the Northern Region Bench in 2004. The respondent-company raised objections regarding jurisdiction, asserting that only the Western Region Bench had authority since the registered office of the respondent-company is in Chattisgarh. Ultimately, the Northern Region Bench passed an order on February 8, 2008, acknowledging the jurisdictional issue and affirming that the Western Region Bench was the appropriate forum.

2. Legality of the Purchase of Shares:
The respondent-company argued that the purported purchase of shares by the petitioner was illegal as the transactions occurred before the shares were listed for trading on the Bombay Stock Exchange on October 20, 1993. The petitioner claimed to have purchased the shares on various dates in September and October 1993, which was prior to the listing. The Bench concluded that any transaction of shares prior to the trading permission is illegal, thus rendering the petitioner's purchase claims invalid.

3. Delay and Laches in Filing the Petition:
The respondent-company contended that the petitioner exhibited gross delay and laches, having addressed the first letter regarding the loss of share certificates on October 2, 1994, but filed the petition only in 2003, beyond the prescribed limit of two months as per section 111A(3) of the Companies Act, 1956. The Bench acknowledged this significant delay and found no satisfactory explanation from the petitioner, contributing to the dismissal of the petition.

4. Non-Joinder of Necessary Parties:
The respondent-company highlighted that the shares in question were already registered in the names of third parties, and any relief granted to the petitioner would adversely affect these third parties' rights. The petitioner failed to join these third parties as respondents, leading to the petition being dismissed on the grounds of non-joinder of necessary parties.

5. Proof of Purchase and Loss of Shares:
The petitioner did not provide adequate proof of the purchase of the shares, such as distinctive numbers or share certificates. The respondent-company pointed out that the petitioner's claims were based on general contract notes without specific details, casting doubt on the legitimacy of the purchase. Furthermore, the petitioner did not submit any proof of the loss of share certificates, such as an FIR. These deficiencies led the Bench to question the credibility of the petitioner's claims.

6. Fabrication and Concealment of Facts by the Petitioner:
The respondent-company accused the petitioner of fabricating documents and concealing crucial facts. The purported purchase bills showed transactions before the shares were listed, which was illegal. Additionally, the petitioner allegedly sold a substantial number of shares before the listing, further undermining their claims. The Bench found these allegations credible and concluded that the petitioner had not come with clean hands, leading to the dismissal of the petition.

Conclusion:
The petition was dismissed due to the illegality of the share purchase, significant delay in filing, non-joinder of necessary parties, lack of proof of purchase and loss, and fabrication and concealment of facts by the petitioner. The Bench did not find it necessary to address other objections raised by the respondents, given the fundamental issues with the petitioner's claims. No order as to costs was made.

← Previous Next →