2011 (10) TMI 717 - HC - Companies Law

Summary

Issues Involved:
1. Confirmation/recognition of transfer of shares.
2. Validity and legality of the transfer of shares.
3. Applicability of Section 536(2) of the Companies Act, 1956.
4. Allegations of fraud and misrepresentation.
5. Limitation and delay in filing the application.
6. Dispute regarding directorship and shareholding.
7. Procedural compliance and validity of board meetings.
8. Public interest and interest of the company under liquidation.

Detailed Analysis:

1. Confirmation/Recognition of Transfer of Shares:
The applicant sought confirmation/recognition of the transfer of 3,498 equity shares of Rs. 100 each in Elmot Engineering Co. P. Ltd. (in liquidation). The applicant claimed that these shares were transferred to him before the winding-up order dated March 22, 1990, but after the filing of the winding-up petition. The applicant argued that the transfer should be validated under Section 536(2) of the Companies Act, 1956.

2. Validity and Legality of the Transfer of Shares:
The applicant claimed that the transfer was valid, supported by share certificates and minutes of a board meeting held on March 3, 1990. However, the respondent contested the validity, alleging that the transfer was without consideration, lacked valid transfer documents, and was not approved by the board of directors. The respondent also pointed out discrepancies in the minutes and the absence of proper procedural compliance.

3. Applicability of Section 536(2) of the Companies Act, 1956:
The court examined Section 536(2), which states that any disposition of property or transfer of shares after the commencement of winding-up proceedings is void unless the court orders otherwise. The applicant argued that the transfer was not void but voidable and should be validated by the court. The court noted that the official liquidator did not challenge the transaction, and the issue was primarily raised by the respondent.

4. Allegations of Fraud and Misrepresentation:
The respondent alleged that the applicant's claim was fraudulent, pointing to an affidavit dated July 29, 1996, where the applicant acknowledged that the respondent was the sole beneficiary of the trusts holding the shares. The respondent also argued that the minutes of the board meeting were fabricated, as they were recorded on loose leaf paper with a seven-digit telephone number, which was not in use until 1997.

5. Limitation and Delay in Filing the Application:
The respondent argued that the application was time-barred, filed 19 years after the winding-up order. The court noted that there was no specific period of limitation provided by the Companies Act for such applications, but the delay was significant and unexplained. The court found that the applicant's claim was belated and raised after a substantial period without satisfactory explanation.

6. Dispute Regarding Directorship and Shareholding:
The respondent contested the applicant's claim of directorship and shareholding in the company under liquidation. The court noted that the applicant had not produced evidence of filing Form No. 32 with the Registrar of Companies regarding his appointment as director. The court also observed that the official liquidator did not recognize the applicant as a director, as he was not called upon to file the statement of affairs.

7. Procedural Compliance and Validity of Board Meetings:
The court examined the procedural compliance related to the board meeting held on March 3, 1990. The applicant admitted that the minutes were recorded on loose leaf paper, and the original minutes book was handed over to Mr. C.V K. Rao for updating. The court found discrepancies in the minutes and questioned the validity of the meeting and the transfer of shares.

8. Public Interest and Interest of the Company Under Liquidation:
The respondent argued that the applicant's primary motive was to acquire valuable properties and assets of the company under liquidation, whereas the respondent was making efforts to revive the company. The court considered the public interest and the interest of the company under liquidation, noting that the applicant's claim was not in the best interest of the company or its creditors.

Conclusion:
The court dismissed the application, finding that the applicant's claim was belated, highly disputed, and lacked satisfactory explanation for the delay. The court also noted discrepancies in the procedural compliance and the validity of the board meeting. The court emphasized that the applicant's claim was not in the best interest of the company under liquidation or its creditors. The application was dismissed without any order as to costs.