2015 (6) TMI 685 - Board - Companies Law

Rectification in the Register of Members - Section 111 (4) of the Companies Act, 1956 - Shares transferred fraudulently - Doctrine of estoppel - Period of limitation - Held that - In this case, the only controversy involved is as to whether the Petitioner has signed the documents placed on record by the Respondents in support of their claim. I may make it clear that in the course of submissions, the Ld. Sr. Counsel appearing on behalf of the Petitioner, did not seriously challenge the signatures of the Petitioner on the questioned documents. In other words, the Ld. Counsel impliedly accepted the signatures of the Petitioner on the documents referred to and relied upon by the contesting respondents. The Ld. Sr. Counsel appearing for the Respondents confined his arguments by saying that the Petitioner was having no knowledge of having signed these documents. According to him, the Petitioner might have signed these documents inadvertently in routine course and/or her signatures might have been obtained by mis-representation of without knowing the real nature of the transactions under challenge in this petition, and therefore, these documents are not binding on her. Doctrine of estoppel - Having analyzed the facts and circumstances of the case, I am not inclined to accept that the doctrine of estoppel , waiver and/or acquiescence would apply to the facts of the case in hand. By virtue of Section 108 of the Act, it is mandatory for a valid transfer of shares that the transferor and transferee must sign the form as provided in Section 108 and submit the same to the Company before making any entry on the reverse of the share certificate. It is also mandatory for the company to ensure and check as to the validity of the transfer form executed under Section 108 of the Act. Further, the transfer must be approved by the Board of Directors by an appropriate resolution to be passed in this regard, and thereafter, only the entries on the reverse of the share certificates need to be made. It is a well settled proposition of law as held in the decisions in the cases of (i) Shirish Finance Investment (P) Ltd. Vs. M. Sreenlvasulu Reddy 2001 (9) TMI 1055 - HIGH COURT OF BOMBAY (ii) Manna/al Khethan Vs. Kedarnath Khetan 1976 (11) TMI 135 - SUPREME COURT OF INDIA that execution of Transfer Deeds under Section 108 of the Act, is a mandatory requirement in law and, therefore, there can be no estoppel, waiver and/or acquiescence against the statutory provisions of law despite the fact that the Petitioner has executed the aforesaid documents. The Petitioner is a co-trustee, her name exists on the Register of Members of the Company, along with DGK and SNI. Thus, she is a joint shareholder in respect of the shares held by N.S. Trust. It is a settled proposition of law that by virtue of Section 153 of the Companies Act, 1956, the Company cannot take cognizance of the Trust and it is obliged in laws to only look at and treat the Petitioner, the Respondent No.2, DGK and SNI as its members and/or joint holders qua the impugned shares. She has categorically pleaded and made an attempt to demonstrate that she did not execute any transfer forms transferring the impugned shares as required under Section 108 of the Companies Act. In my opinion, these allegations are sufficient to hold that the Petitioner is a person aggrieved within the meaning of Section 111(4) of the Act, whose name, according to the Petitioner, has been removed without sufficient cause by the Company. It is a well settled proposition of law that a necessary party is one without whom no order can be made effectually, a proper party is one in whose absence an effective order can be made whose presence is necessary for a complete and final decision on the question involved in the proceedings. Rule 10(2) of Order 1 of the C.P.C. also indicates as to who is to be termed as a necessary or proper party. These provisions, inter alia, empower the Court to add the name of any person, namely (1) who ought to have been joined and (2) whose presence before the court may be necessary in order to enable the court to effectually and completely adjudicate upon and settle all the issues involved in the matter . The object of Order 1 Rule 10 is to bring before the Court, at the same time, all persons who have an interest in the subject matter of the disputes so that separate trials may be avoided. - Decided in favour of appellant. Rights of Co-trustee / joint shareholders - It is a settled proposition that a party cannot be left without remedy under law. It is also fundamental law that no party can be compelled to invite evidence against himself/ herself. It is also pertinent to mention here that the parties, who, according to the Respondents, are the necessary and proper parties have not approached this Board till date for their impleadment as a party in this petition despite having knowledge of the instant proceedings. Therefore, in my view, the Contesting Respondents are not entitled to contend that the petition suffers from non-joinder of necessary and proper parties. I have also considered the plea taken by the Respondents that keeping in view the complicated question of facts and law, the CLB is not competent to adjudicate this petition in the summary jurisdiction, and the proper recourse for the Petitioners is to file a civil suit for declaration with respect to the title of the shares, as held in M/s Ammonia Supplies Corporation (P) Ltd. V/s M/s Modern Plastic Containers Pvt. Ltd. 1998 (9) TMI 427 - SUPREME COURT OF INDIA . Having gone through the said decision, it is to be noted that the Hon bie Apex Court has held in the said decision that the primary jurisdiction for rectification of register of members is with the CLB and on examination of the material available on record, if it comes to the conclusion that the serious questions of facts and law are involved, in that eventuality, the CLB may relegate parties to the civil court for adjudication of their claims by way of filing a civil suit. On overall discussion of the preliminary objections raised by the Respondents challenging the maintainability of the Company Petition, I have come to the conclusion that the petitioner has not approached the CLB with clean hands and, therefore, she is not entitled to the reliefs sought for and the petition deserves to be dismissed. Further, I have come to the conclusion that the petition is barred by limitation and on this ground also the petition deserves to be dismissed. In the present case, as stated above, there is no compliance as required under Section 108 of the Act. - The Ld. Sr. Counsel for the Respondents has failed to convince me that without the said compliance the transfer of shares is valid in law. I, therefore, hold that in so far as the transfer of the impugned shares is concerned, the same is not in accordance with the law. However, since I have held that the petition is not maintainable for the reasons stated hereinabove, I, therefore, have no option but to dismiss the petition.

Summary

Issues Involved:
1. Locus standi of the Petitioner.
2. Doctrine of estoppel, waiver, and acquiescence.
3. Non-joinder of necessary parties.
4. Adjudication under summary jurisdiction.
5. Suppression of material facts and documents.
6. Applicability of the Limitation Act.

Detailed Analysis:

1. Locus Standi of the Petitioner:
The Petitioner filed a petition under Section 111(4) of the Companies Act, 1956, seeking rectification of the Register of Members. The Respondents contended that the Petitioner lacked locus standi as she had resigned as a trustee and relinquished her rights in the trust. The Petitioner argued that she remained a joint shareholder and her name was wrongly deleted from the Register of Members. The judgment concluded that the Petitioner had locus standi as her name was on the Register of Members, making her a person aggrieved under Section 111(4).

2. Doctrine of Estoppel, Waiver, and Acquiescence:
The Respondents argued that the Petitioner was estopped from challenging the transfer of shares as she had signed the relevant documents. The Petitioner contended that her signatures were obtained without her knowledge. The judgment held that the mandatory requirements under Section 108 of the Act were not met, and thus, the doctrine of estoppel, waiver, and acquiescence did not apply.

3. Non-Joinder of Necessary Parties:
The Respondents claimed the petition was bad for non-joinder of necessary parties, specifically another trustee. The Petitioner argued that she filed the petition in her capacity as a joint shareholder, not as a trustee. The judgment concluded that the non-joinder of other trustees did not affect the maintainability of the petition, as the Petitioner was seeking to establish her rights as a member of the company.

4. Adjudication Under Summary Jurisdiction:
The Respondents argued that the case involved complicated questions of fact and law, which could not be adjudicated under the summary jurisdiction of the CLB. The Petitioner contended that the non-compliance with Section 108 was undisputed and did not involve complicated questions. The judgment held that the CLB had the jurisdiction to adjudicate the matter as no complicated questions were involved.

5. Suppression of Material Facts and Documents:
The Respondents alleged that the Petitioner suppressed material facts and documents, which were relevant to determine her locus standi. The Petitioner denied these allegations, arguing that she was unaware of the documents until they were produced by the Respondents. The judgment found that the Petitioner had not approached the CLB with clean hands and had suppressed material facts and documents, which affected her entitlement to relief.

6. Applicability of the Limitation Act:
The Respondents contended that the petition was barred by the law of limitation. The Petitioner argued that the Limitation Act did not apply to the CLB and that there was no prescribed period of limitation for an application under Section 111(4). The judgment held that the CLB is a court for the purpose of the Limitation Act and that the petition was barred by limitation as it was filed after the expiry of the prescribed period.

Conclusion:
The petition was dismissed on the grounds of suppression of material facts and being barred by limitation. The judgment emphasized the mandatory requirements under Section 108 for the transfer of shares and the necessity for the Petitioner to approach the CLB with clean hands.