2012 (12) TMI 587 - HC - Companies Law

Loss of shares - request for stop transfer is received by the company/STA from the previous registered holder - Rectify the register of members by substituting the name of respondent No. 1 in place of respondent No.3 qua 100 shares - Held that - The appellant company was duty bound not to transfer these shares once it was brought to its notice that the shares had been lost and a proper NCR had been lodged with the police. It was incumbent upon the company to give notice to the last holder i.e. respondent No. 3 to surrender his share certificates within 21 days mentioning the details of the claim made by the previous registered holder. These guidelines/ Instructions which were binding upon the company have not been adhered to. Submission of the appellant that respondent No. 1 had slept over his right for this intervening period of two years i.e. 13.11.2006 up to February, 2008 appears to be a mis-directed submission as appellant company had itself on 27.02.2008 notified respondent No.1 that the transfer deeds for the said shares had been produced by one Lalit Kumar Goyal for which the objections had been sought from respondent No. 1 which were duly replied on 11.03.2008 and at the cost of repetition, a second set of documents including the NCR complaint was again filed along with this letter. The letter of 27.02.2008 had asked for a copy of the FIR regarding the loss of shares/injunction order for stop transfer, the SEBI Regulations postulate that either the FIR/copy or an acknowledged police complaint or a copy of the injunction order for stop payment had to be furnished. The requisite document i.e. copy of the acknowledged police complaint of 11.05.2006 was already with the company but it was again sent on 11.03.2008 with a request to stop the transfer up to 30.04.2008 (which was even otherwise not an unreasonably long period) to obtain the other necessary documents to establish the claim of the petitioner. Ths in this background, the impugned order holding that the appellant company is at fault and guilty of a wrong transfer suffers from no infirmity. Appeal is without any merit.

Summary

Issues:
1. Appeal against the order of the Company Law Board (CLB) under Section 10-F of the Companies Act.
2. Rectification of the register of members by substituting names and issuing duplicate shares.
3. Compliance with statutory provisions and guidelines in share transfer process.
4. Allegation of wrongful transfer of shares.
5. Interpretation of SEBI guidelines and instructions.
6. Failure to adhere to caution notes and notice requirements.
7. Delay in responding to transfer process and submission of necessary documents.
8. Duty of the company to verify and act upon loss of shares complaints.
9. Dispute over transfer of shares between respondent No. 1 and respondent No. 3.
10. Lack of response and ex-parte proceedings by respondent No. 1.
11. Legal timeline for filing appeals under Section 111-A (3) of the Companies Act.

Detailed Analysis:
1. The appeal was filed against the CLB's order directing rectification of the register of members by substituting names and issuing duplicate shares. The appellant was instructed to comply with the order or buy shares from the market for the respondent.
2. The case involved a petition under Section 111-A (3) of the Companies Act regarding ownership of shares and the loss of share certificates, leading to a dispute over transfer and issuance of duplicate shares.
3. The judgment emphasized compliance with statutory provisions and guidelines in the share transfer process, highlighting the importance of following SEBI guidelines and instructions.
4. Allegations of wrongful transfer of shares were raised, with the CLB finding the appellant at fault for not following the prescribed procedures.
5. The interpretation of SEBI guidelines and instructions played a crucial role in determining the correctness of the share transfer process and the actions of the company.
6. The failure to adhere to caution notes and notice requirements was noted, indicating a lack of proper verification and communication in the share transfer process.
7. Delays in responding to the transfer process and submitting necessary documents were highlighted, impacting the outcome of the case.
8. The duty of the company to verify and act upon complaints of lost shares was discussed, emphasizing the need for proper procedures in such situations.
9. Disputes over the transfer of shares between the involved parties, respondent No. 1 and respondent No. 3, added complexity to the case.
10. The lack of response and ex-parte proceedings by respondent No. 1 influenced the decision-making process and the final judgment.
11. The legal timeline for filing appeals under Section 111-A (3) of the Companies Act was considered, underscoring the importance of timely actions in such legal matters.