1997 (6) TMI 360 - Board - Companies Law

Summary

Issues Involved:
1. Whether the petitioners' names should be entered in the register of members of the company.
2. Compliance with the provisions of Section 108 of the Companies Act, 1956.
3. Validity of the board resolution and other documents relied upon by the petitioners.
4. Whether the matter should be adjudicated by the Company Law Board or relegated to a civil court.

Issue-wise Detailed Analysis:

1. Whether the petitioners' names should be entered in the register of members of the company:
The petitioners sought an order under Section 111 of the Companies Act, 1956, to rectify the register of members to show their names as holders of specific shares. They claimed to have acquired these shares from the shareholders of the company for a consideration of Rs. 10 each, despite the face value being Rs. 100 per share. The petitioners asserted that the company had recognized their membership by sending them annual reports and accounts. However, when they called for an extraordinary general meeting, the company contended that their names were not in the register of members, thus denying their locus standi.

2. Compliance with the provisions of Section 108 of the Companies Act, 1956:
The petitioners lodged the shares with the company for registering the transfers, and the transfers were noted in the memorandum of transfer on the share certificates. However, the company argued that the instruments of transfer were not "duly stamped" as required by Section 108. The transfer instruments were affixed with a Rs. 2 stamp, which was insufficient given the value of the shares. The Supreme Court in Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp Cas 185 declared the provisions of Section 108 mandatory. Therefore, the instruments of transfer, not being fully stamped, could not be taken cognizance of by the company for registering transfers.

3. Validity of the board resolution and other documents relied upon by the petitioners:
The petitioners relied on a board resolution dated February 20, 1992, which purportedly approved the transfer of shares. The company contended that this resolution was fabricated and that no such board meeting took place. The company also claimed that the receipt for the consideration amount was forged, prepared on blank papers signed by the shareholders for availing financial assistance. The cheque for the consideration was issued by BCL (a financial entity), not directly by the petitioners, although the petitioners claimed to have later paid this amount to BCL.

4. Whether the matter should be adjudicated by the Company Law Board or relegated to a civil court:
The Company Law Board noted that if the company had never entered the petitioners' names in the register of members, they could not order such entry due to non-compliance with Section 108. If the names were entered and later removed without sufficient cause, the conflicting claims about the documents' genuineness raised complicated questions of fact. The Board held that such issues could not be adjudicated in a summary manner and required a trial based on evidence. Therefore, the matter was deemed appropriate for a civil court.

Conclusion:
The Company Law Board dismissed all three petitions, suggesting that the petitioners might move the civil court for adjudication if so advised. The decision emphasized the mandatory nature of compliance with Section 108 and the necessity of a detailed trial to resolve the factual disputes regarding the documents relied upon by the petitioners.