1998 (11) TMI 679 - Board - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Law Board under Section 111 and Section 111A of the Companies Act, 1956.
2. Rectification of the register of members, cancellation of duplicate share certificates, and issuance of fresh shares.
3. Entitlement to bonus shares and compliance with Section 113(2) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

Issue No. 1: Jurisdiction of the Company Law Board
The Company Law Board (CLB) examined whether it had jurisdiction to entertain the petition under Section 111 for rectification of the register of members regarding public limited companies. The CLB referred to the case of *Shashi Prakash Khemka v. NEPC Micon Ltd.* [1997] 90 Comp Cas 228, which held that with the coming into force of Sub-section (14) of Section 111 on September 20, 1995, Section 111 was no longer applicable to public companies. Although the petition was not maintainable under Section 111(4), the CLB considered it on merits under Section 111A to meet the ends of justice. The CLB rejected the company's contention that the petitioner failed to approach within two months of the transfer, citing *Shashi Prakash Khemka v. JVEPC Micon Ltd.* [1999] 95 Comp Cas 583 (CLB) and *NEPC Agro Foods Ltd. v. Hindustan Thompson Associates Ltd.* [1999] 95 Comp Cas 532 (Mad). Thus, the petition was maintainable under Section 111A.

Issue No. 2: Rectification, Cancellation, and Issuance of Shares
The petitioner alleged irregularities in issuing duplicate certificates and registering the transfer of shares, citing non-compliance with Section 108 of the Act. The CLB noted that the petitioner had not taken steps to trace the original share certificates, whereas the company had lodged a police complaint about the missing certificates. The petitioner did not initially question the issuance of duplicate certificates but later reconciled with the company's actions. The CLB found no convincing evidence that the shares were missing from the petitioner's custody. The duplicate certificates were issued under the authority of the transfer committee, and the petitioner had consented to the transfer of shares, as evidenced by his letters and withdrawal of the civil suit. The CLB concluded that the transfer was effected with the petitioner's consent and no violation of Section 108 was established.

Issue No. 3: Entitlement to Bonus Shares
The petitioner claimed entitlement to 200 bonus shares and alleged non-compliance with Section 113(2) of the Act by the company. The company argued that under Section 206A, it was obliged to keep the issue of bonus shares in abeyance while the transfer of original shares was pending. The CLB agreed with the company, noting that the petitioner had executed transfer instruments for the bonus shares, and the company acted in accordance with the law. The CLB found no merit in the petitioner's claim regarding the bonus shares.

Conclusion:
The CLB dismissed the petition, finding no grounds for rectification of the register, cancellation of duplicate certificates, or issuance of fresh shares. The petitioner had consented to the transfer, and the company had acted within legal bounds. The petitioner's claims of coercion and non-compliance were not substantiated, and the company had taken adequate precautions to protect the petitioner's interests. The petition was dismissed without any order as to costs.