1995 (5) TMI 287 - Board - Companies Law

Issues Involved:
1. Maintainability of the petition.
2. Unnecessary delay in registering the transfer of shares.
3. Authority of the liquidator to initiate proceedings.
4. Applicability of the Limitation Act.
5. Vesting of shares in Bank of Baroda.
6. Alleged illegality of the transaction.
7. Entitlement to relief claimed.

Issue-wise Detailed Analysis:

1. Maintainability of the petition:
The respondent-company challenged the maintainability on several grounds, including that BoB Fiscal is not the petitioner, the liquidator lacks authority, rights and obligations are vested in Bank of Baroda, and the petition is barred by limitation. The petitioner, A.V. Sampat, filed the petition as the voluntary liquidator of BoB Fiscal. The liquidator is empowered to initiate this action based on a resolution under Section 490(1) of the Companies Act, which includes taking necessary steps for beneficial winding up. The Company Law Board concluded that the petition is maintainable and does not suffer from any infirmity on account of limitation.

2. Unnecessary delay in registering the transfer of shares:
The shares were lodged from September 22, 1988, to October 4, 1988, but Dunlop delayed the registration by seeking various clarifications over nearly two years. Dunlop's piecemeal queries and the nature of these queries indicated unnecessary delay. The Company Law Board emphasized that under Section 22A of the Securities Contracts (Regulation) Act (SCRA), Dunlop should have decided within two months of lodgment. The delay was deemed unnecessary, and Dunlop was found to have violated the law by retaining the securities beyond the prescribed time-limits.

3. Authority of the liquidator to initiate proceedings:
The liquidator, A.V. Sampat, was found to be duly empowered to initiate this action based on the resolution passed at the extraordinary general meeting of BoB Fiscal. The resolution authorized the liquidator to take necessary steps for beneficial winding up, including registering the impugned shares. The objection regarding the lack of a resolution under Section 512 was considered an irregularity rather than an illegality.

4. Applicability of the Limitation Act:
The Company Law Board concluded that the Limitation Act does not apply to its proceedings, as it is not a court. The Supreme Court's decisions in Nitymmitd M. Joshi v. LIC and Town Municipal Council, Athani v. Presiding Officer, Labour Court, Hubtt, confirmed that Article 137 of the Limitation Act applies only to courts. Consequently, the petition was found to be maintainable without any limitation restrictions.

5. Vesting of shares in Bank of Baroda:
The vesting of shares in Bank of Baroda did not render the rectification illegal or impossible. The petitioners were not seeking registration in the name of Bank of Baroda but in the name of BoB Fiscal. The registration was to be done in the name of the transferee mentioned in the transfer deed, which was BoB Fiscal. The Company Law Board concluded that there was no doubt about the bona fides of BoB Fiscal regarding the transactions.

6. Alleged illegality of the transaction:
Dunlop's argument that the transaction might be illegal due to a Supreme Court decision was found to be untenable. The burden of proof lies on the party alleging that the transaction is surreptitious. In the absence of any proof, the transaction could not be branded as contrary to public policy. The Company Law Board concluded that the rectification would not be rendered illegal.

7. Entitlement to relief claimed:
The petitioner sought registration of shares in his name, but it was conceded that registration could only be made in the name of the transferee mentioned in the transfer deed, which was BoB Fiscal. The Company Law Board directed Dunlop to register the transfer of 7,42,400 equity shares in the name of BoB Fiscal within 30 days and to pay all dividends on these shares for the years 1988-89 and thereafter. The prayer for an enquiry by the Department of Company Affairs was deemed unnecessary.

Conclusion:
The petition was found to be maintainable, and Dunlop was directed to register the transfer of shares in the name of BoB Fiscal and pay the due dividends. The objections raised by Dunlop were overruled, and the Company Law Board emphasized the need for compliance with the statutory provisions regarding the transfer of securities.

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