2014 (7) TMI 100 - Board - Companies Law

Rectification of register of shareholders - atonement of shares in lieu of payment against sale proceeds of land - Held that - Petitioner company under the guise of rectification is seeking to enforce a specific performance and in the circumstances detailed aforesaid invoking the jurisdiction of this Bench under sections 111(4) and 111A of the Companies Act, 1956 is completely misplaced and in my view an abuse of process of Law. The petition is considered an exercise in futility and liable to be dismissed - Decided against Petitioner.

Summary

Issues Involved:
Rectification of register of shareholders under sections 111A and 111(4) of the Companies Act, 1956 based on agreements for share issuance and specific performance.

Detailed Analysis:

1. Nature of Petition and Preliminary Objection:
The petition sought rectification of the register of shareholders by entering equity shares based on agreements for a villa project development and share issuance. The respondent raised a preliminary objection, arguing that the petition was not maintainable as it sought specific performance of contractual rights, not covered under sections 111(4) and 111A of the Companies Act, 1956.

2. Agreements and Claim Basis:
The agreements dated 02.08.2005 and 24.03.2006 between the parties outlined the terms for share issuance against land sale proceeds. The petitioner claimed entitlement to shares based on the 24.03.2006 agreement, seeking rectification of the register. However, the petitioner was not a shareholder of the respondent company, and no non-compliance with section 108 of the Companies Act, 1956 was alleged.

3. Jurisdiction and Applicability of Sections 111(4) and 111A:
The judgment clarified that the petition's relief was akin to specific performance, not falling under the purview of sections 111(4) and 111A. Section 111 deals with share transfer appeals and register rectification, with the Company Law Board exercising discretionary power based on case specifics. Section 111A applies to existing share transfers, excluding cases like share allotment disputes or agreement enforcement.

4. Case Law and Legal Interpretation:
The petitioner cited a judgment for support, but the judgment was deemed inapplicable to the present case. Conversely, the respondent referenced a judgment emphasizing that rectification should address errors or non-compliance under the Companies Act, 1956. The judgment stressed that rectification implies correcting omissions or errors by the company, not enforcing specific performance through shareholder register adjustments.

5. Conclusion and Dismissal:
Ultimately, the Bench dismissed the petition, considering it an abuse of process of law and an exercise in futility. No costs were awarded, emphasizing that seeking specific performance through register rectification was misplaced under sections 111(4) and 111A. The judgment highlighted the distinction between rectification and specific performance, underscoring the need for compliance with statutory provisions for rectification claims.

This detailed analysis of the judgment elucidates the legal nuances surrounding the petition for rectification of the register of shareholders and the Bench's decision based on the applicability of relevant sections of the Companies Act, 1956 and established legal principles.