1998 (6) TMI 577 - Board - Companies Law

Issues Involved:
1. Collusion and fraudulent manipulation of duplicate share certificates.
2. Falsification and fabrication of transfer instruments.
3. Non-compliance with mandatory provisions of Section 108 of the Companies Act, 1956.
4. Non-cancellation of adhesive stamps as per Section 2(14) of the Indian Stamp Act, 1899.
5. Non-compliance with the Articles of Association regarding share transfer.
6. Validity of the agreement dated November 16, 1995.

Issue-Wise Detailed Analysis:

1. Collusion and Fraudulent Manipulation of Duplicate Share Certificates:
The petitioners alleged that the company, in collusion with its managing director and the transferees, fraudulently manipulated the issue of duplicate share certificates. The Company Law Board (CLB) noted that the petitioners had issued a notice asking for duplicate shares on October 27, 1995, followed by an agreement for sale on November 16, 1995, and a letter to the company on November 18, 1995, requesting the transfer of shares. The petitioners also handed over blank transfer forms and received the sale consideration. Given these facts, the CLB found no substantial evidence of fraudulent manipulation and considered the company's actions reasonable within the context of a closely held private company.

2. Falsification and Fabrication of Transfer Instruments:
The petitioners contended that the instruments of transfer were falsified and fabricated. The CLB examined the instruments of transfer, which bore the endorsement of the competent authority as of November 28, 1995, and were executed on January 10, 1996. The transfer deeds were duly signed by the petitioners and the transferees, with adhesive stamps properly canceled. The CLB found the transfer deeds to be prima facie duly executed and compliant with legal requirements, dismissing the petitioners' claims of falsification and fabrication.

3. Non-Compliance with Mandatory Provisions of Section 108 of the Companies Act, 1956:
The petitioners argued that the mandatory provisions of Section 108 were not complied with. The CLB referred to various legal precedents and concluded that the instruments of transfer were duly executed, stamped, and canceled in accordance with the provisions of the Act and the Indian Stamp Act, 1899. The CLB found that the company had complied with the mandatory provisions of Section 108, thus rejecting the petitioners' claims.

4. Non-Cancellation of Adhesive Stamps as per Section 2(14) of the Indian Stamp Act, 1899:
The petitioners claimed that the adhesive stamps on the instruments of transfer were not canceled in accordance with Section 2(14) of the Indian Stamp Act, 1899. The CLB examined the instruments of transfer and found that the adhesive stamps were duly canceled. The CLB noted that the transfer deeds were properly executed and the adhesive stamps were appropriately canceled, thereby dismissing the petitioners' claims.

5. Non-Compliance with the Articles of Association Regarding Share Transfer:
The petitioners argued that the company failed to comply with the formalities specified in the Articles of Association before effecting the transfer of shares. The CLB examined Articles 5 to 8 of the company's Articles of Association, which outline the procedure for share transfer. The CLB found that Article 5 allows a member to transfer shares to another member at a fair value, as agreed upon by the transferor. The petitioners had entered into an agreement with the respondent for the transfer of shares at a mutually agreed price, which constituted the fair value. The CLB concluded that the company had complied with the relevant Articles of Association, dismissing the petitioners' claims of non-compliance.

6. Validity of the Agreement Dated November 16, 1995:
The petitioners claimed that the agreement dated November 16, 1995, had become infructuous due to a breach of its terms and lapse of time. The CLB noted that the petitioners had received the sale consideration and handed over the blank transfer forms, indicating their intent to sell the shares. The CLB found that the agreement had been duly performed by the parties involved, and any disputes regarding the agreement's validity should be resolved in a civil suit, not in summary proceedings by the CLB.

Conclusion:
The CLB concluded that the petitioners had not made out a case for rectification of the register of members in relation to the impugned shares. The petitions were dismissed, and the CLB held that the transfer of shares was valid, legal, and duly supported by consideration. The contentious issues raised by the petitioners regarding fraudulent manipulation, fabrication, and non-compliance with legal provisions were not substantiated, leading to the dismissal of the petitions.

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