1995 (2) TMI 461 - Board - Companies Law

Issues Involved:
1. Applicability of Section 111 of the Companies Act, 1956, to letters of allotment.
2. Time-barred nature of the petition under Section 111(3).
3. Forfeiture of letters of allotment.
4. Non-furnishing of details like contract note and broker's name.
5. Maintainability of the petition under Section 111(4).

Detailed Analysis:

1. Applicability of Section 111 to Letters of Allotment:
The respondents argued that Section 111 applies only to shares and debentures, not to letters of allotment. However, the judgment clarified that the subject matter of refusal under Section 111(1) includes "the right to any shares or interest of a member in or debentures of the company." The court noted that a share or debenture certificate is evidence of the entitlement to such shares or debentures, and a letter of allotment serves as alternative evidence. Therefore, the objection that letters of allotment do not fall under Section 111 was dismissed. The court emphasized that the evidence of shares/debentures is tangible, whereas the shares/debentures themselves are intangible, thus falling under the purview of Section 111.

2. Time-Barred Nature of the Petition:
The respondents contended that the petition was time-barred as it was filed more than four months after the lodgment of the transfer documents, contrary to Section 111(3). The petitioners argued that the petition was filed under Section 111(4), which does not prescribe a time limit. The court examined the legislative intent and judicial interpretations, noting that Section 111(4) is a reproduction of the erstwhile Section 155(1) with the addition of "including a refusal under Sub-section (1)." The court concluded that the remedies under sections 111(2) and 111(4) are alternate remedies, and the petition is maintainable under Section 111(4) without being time-barred.

3. Forfeiture of Letters of Allotment:
The respondents claimed that the letters of allotment were forfeited due to non-compliance with the terms of the allotment. The petitioners argued that the forfeiture was done retrospectively and after the transfer was effected. The court did not delve into the merits of the forfeiture issue in this order, as it required a detailed examination of facts, which would be addressed in subsequent hearings.

4. Non-Furnishing of Details:
The respondents argued that the petitioners did not furnish essential details like the contract note and broker's name. The court considered these objections as matters of merit rather than preliminary objections affecting the maintainability of the petition. Hence, these issues were not discussed in this order.

5. Maintainability under Section 111(4):
The primary contention was whether the petition could be entertained under Section 111(4). The respondents argued that Section 111(4) should not apply to transfer cases without first exhausting the remedies under Section 111(2) and (3). The court, however, observed that Section 111(4) includes the words "including a refusal under Sub-section (1)," indicating that transfer cases could be considered under this sub-section. The court emphasized that the intention of the Legislature was to provide alternate remedies under sections 111(2) and 111(4). Therefore, the petition was held to be maintainable under Section 111(4).

Conclusion:
The court concluded that the petition is maintainable under Section 111(4) of the Companies Act, 1956. The main petition was scheduled for hearing on April 10, 1995. The judgment clarified the applicability of Section 111 to letters of allotment, the alternate remedies available under sections 111(2) and 111(4), and deferred the examination of the merits of forfeiture and non-furnishing of details to subsequent hearings.

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