1998 (2) TMI 599 - Board - Companies Law

Summary

Issues Involved:
1. Whether the Bank of Baroda had the authority to transfer the shares.
2. Validity of the transfer deed and its compliance with Section 108 of the Companies Act, 1956.
3. Whether the petitioners are entitled to rectification of the register of members and consequential reliefs.

Issue-wise Detailed Analysis:

1. Authority of the Bank of Baroda to Transfer the Shares:
The petitioners argued that the shares were in the possession of the Bank of Baroda but were not pledged or subject to any lien. They claimed that the bank had no authority to transfer the shares, as there was no pledge letter signed by the joint shareholders and no lien was given to the bank. The bank allegedly transferred the shares to unknown persons without the petitioners' consent, which the petitioners claimed was unlawful. The petitioners wrote to the respondent company to halt the transfer, but the transfer was still effected. The respondent company argued that the shares were under lien with the bank for an advance granted and were released on 31-12-1993. The company received duly executed transfer deeds and acted in the normal course of business. The Board noted that the petitioners did not explain why the shares with blank transfer deeds were given to the bank and held that the question of lien or security could not be verified without the presence of the Bank of Baroda, who were not made a party to the proceedings.

2. Validity of the Transfer Deed and Compliance with Section 108:
The petitioners contended that the transfer deed was defective and incomplete, lacking the stamp of the prescribed authority as required under Section 108(1) of the Companies Act. They argued that the transfer deed was not a "Blank transfer deed" as per the Supreme Court's ruling in Howrah Trading Co. Ltd. v. CIT AIR 1959 SC 775. The petitioners also pointed out that the transfer deed did not clearly identify the transferee and was not duly stamped as per the Maharashtra State Stamp Rules. The respondent company countered that the transfer deeds were duly executed, certified, and lodged within the prescribed time. The Board noted that the validity of the transfer deed could not be determined without resolving the issue of the bank's claim of pledge or lien on the shares, which required factual verification.

3. Entitlement to Rectification of the Register of Members and Consequential Reliefs:
The petitioners sought rectification of the register of members and consequential reliefs, including rights and dividends accrued on the shares. The respondent company argued that the transfer was effected in the normal course of business and that the petitioners failed to obtain a court injunction. The Board observed that the shares had been duly transferred, and third-party interests had been created. Granting relief would require deleting the transferee's name from the register of members, but the transferee was not made a party to the proceedings. The Board held that resolving the dispute required determining the bank's authority to sell the shares and appropriate the proceeds, which could not be adjudicated without the bank's presence. Therefore, the Board decided to relegate the matter to a Civil Court, as the issues involved complicated questions of fact that could only be tested by a Civil Court.

Conclusion:
The petition for rectification of the register of members and consequential reliefs was disposed of, with the Board relegating the matter to a Civil Court due to the complexity of the factual issues involved and the absence of the Bank of Baroda as a party to the proceedings. No orders were made as to costs.