2015 (5) TMI 523 - Board - Companies Law

Application under section 111A of the Companies Act, 1956 for register the shares - Shares pledge on account to avail bill re-discounting facility - Default in making payments in respect of the bills discounted - Shareholder signed the share transer forms in favour of the petitioner - Held that - It is an admitted fact that the respondent company availed rediscounting facility of ₹ 75 lakhs from the petitioner and at the time of sanctioning the petitioner vide its letter dated 08.07.1996 made it clear that the directors shall pledge 12,00,00 shares of the R1 Company and 40,000 shares of IVR Constructions. Accordingly the respondents entered into an agreement with the petitioner on 09.09.1996 and in the terms of the agreement the pledge of 12,00,000 equity shares and 40,000 equity shares have been mentioned. The petitioner and the respondent had signed the agreement and there is no dispute. Further the promoter of the respondent company i.e. Shri Sundar Iyer entered an unattested agreement dated 09.09.1996 with the respondent company. The above unattested agreement is not in dispute. As per the above agreement the shareholder of the respondent company has categorically stated that as per the sanctioned letter the shareholder pledged the above shares in favour of the petitioner for effecting the transfer of said shares to pay the said loans or any other dues of petitioner. The shareholder also signed the share transfer forms in favour of the petitioner. Further as per clause 5 the petitioner can call upon the shareholder of the respondent company to execute the transfers in favour of the petitioner. Thus the shareholder of the respondent company is bound by the said agreement. Failing to repay the loan amounts to the petitioner by the respondent the petitioner requested the respondent to effect the transfer of shares pledged by the shareholder in favour of the petitioner in accordance with the terms and conditions of the unattested agreement entered by the shareholder. From the documents it is crystal clear that the petitioner has taken various steps to recover the loan however the respondent failed to repay the amount borrowed by the respondent. The petitioner has bonafidely exercised its right to claim transfer of pledged shares in favour of the petitioner. The stand of the respondent with regard to the one lime settlement and not to effect the transfer of shares is unwarranted and is not a ground to deny the right of the petitioner. Accordingly and in exercise of power conferred under section 111A of the Companies Act, 1956, I hereby direct the respondent company to register the shares in the name of the petitioner and return the share certificates with duly endorsement of transfer within a period of six weeks. Further the petitioner is entitled to the benefits accrued on the shares including the bonus shares, dividend etc. - Decided in favour of appellant.

Issues Involved:
1. Whether the petitioner is entitled to the transfer of shares pledged by the respondent.
2. Whether the petition is maintainable considering the delay and ongoing litigation in other forums.
3. Whether the petitioner has suppressed facts or engaged in forum shopping.
4. Whether the respondent has defaulted on the financial obligations and the implications of such default.

Issue-wise Detailed Analysis:

1. Entitlement to Transfer of Shares:
The petitioner filed a petition under section 111A of the Companies Act, 1956, seeking the transfer of shares pledged by the respondent. The petitioner and respondent had entered into an agreement on 09.09.1996 for bill rediscounting, wherein the respondent pledged 12,40,000 equity shares held by the promoters and their associates. The respondent had consistently defaulted on payments, and despite several reminders, failed to repay the dues. The petitioner had requested the transfer of shares multiple times, with the respondent refusing to comply. The court found that the agreement and subsequent documents, including unattested agreements and powers of attorney, clearly indicated the pledge of shares in favor of the petitioner. The court directed the respondent to register the shares in the name of the petitioner and return the share certificates with due endorsement of transfer within six weeks.

2. Maintainability of the Petition:
The respondent argued that the petition was not maintainable due to laches, as it was filed more than ten years after the alleged cause of action arose. The court noted that the petitioner had taken various steps to recover the dues, including filing complaints with the Bombay Stock Exchange and the Investors Services Cell. The delay was attributed to ongoing litigation and attempts to resolve the issue through other forums. The court did not find the delay sufficient to dismiss the petition, given the continuous efforts by the petitioner to enforce its rights.

3. Allegations of Suppression of Facts and Forum Shopping:
The respondent accused the petitioner of forum shopping and suppressing facts, particularly regarding the ongoing civil suit in Ahmedabad and the winding-up petition in the High Court of Madras. The petitioner had previously argued before the High Court that the company court lacked jurisdiction over the shares, which were subject to the civil suit. The court acknowledged the respondent's concerns but focused on the specific relief sought under section 111A of the Companies Act. The court did not find sufficient grounds to dismiss the petition based on these allegations, emphasizing the petitioner's right to seek the transfer of pledged shares.

4. Default on Financial Obligations:
The court examined the financial transactions between the petitioner and respondent, noting that the respondent had availed a bill rediscounting facility of Rs. 75 lakhs and pledged shares as collateral. Despite partial repayments, the respondent had defaulted on the remaining dues. The court found that the petitioner had a legitimate claim to the pledged shares due to the respondent's failure to fulfill its financial obligations. The court rejected the respondent's argument regarding a one-time settlement offer and upheld the petitioner's right to enforce the pledge.

Conclusion:
The court directed the respondent to register the shares in the name of the petitioner and return the share certificates with due endorsement of transfer within six weeks. The petitioner was also entitled to benefits accrued on the shares, including bonus shares and dividends. The petition was disposed of with no orders as to costs.

Dated This The 10th Day of February, 2015

← Previous Next →