9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (10) TMI 1404 - Tri - Companies LawRectification of register of members of the applicant/petitioner-company in particular reference to the cancellation of equity shares - violations of the FEMA Regulations - whether the company is justified in filing the present petition under section 59 of the Companies Act, 2013, that too, without complying with conditions prescribed under the RBI letter dated March 1, 2017? - Held that - Default in question is not intentional or deliberate. As pointed out by the RBI the company, in the first instance, has to comply the objections raised by it, duly following the relevant articles of association of the company, then it can apply for compounding of contravention in question. While admitting violation of the FEMA Regulations, the company has not taken action in consonance with the memorandum and articles of association of the company and the Companies Act, 2013 except obtaining a letter dated March 3, 2000 from Dr. Raju Reddy stating that he has no objection for rectification of register of members. Ultimately, it is law that should prevail on the issue in question. The petitioner-company has failed to follow its memorandum and articles of association of the company, the relevant provisions of the Companies Act, 2013 and FEMA Regulations, 2000 so as to make good violations of the FEMA Regulations as mentioned supra. Therefore, the present petition filed under section 59 of the Companies Act is not maintainable, and it is reliable to be rejected for the grounds mentioned supra. In fact, the concerned authorities have to initiate appropriate action by this time against the company, for violation of FERA Regulations. In view of the above facts and circumstances of the case, the company petition is hereby dismissed
Issues involved:
1. Rectification of register of members concerning the cancellation of excess equity shares allotted. 2. Compliance with the conditions prescribed by the Reserve Bank of India (RBI). 3. Adherence to the Foreign Exchange Management Act (FEMA) Regulations. 4. Validity and applicability of Section 59 of the Companies Act, 2013. 5. Procedural adherence to the company's memorandum and articles of association. Issue-wise detailed analysis: 1. Rectification of register of members concerning the cancellation of excess equity shares allotted: The petitioner-company sought rectification of its register of members to cancel 2,19,658 equity shares of ?10 each, which were allegedly excess allotted to Dr. Raju Reddy on August 6, 2013. The company contended that this allotment violated the FEMA Regulations and sought to rectify the register by canceling the excess shares. Dr. Raju Reddy had provided a no-objection letter for this rectification. 2. Compliance with the conditions prescribed by the Reserve Bank of India (RBI): The RBI, in its letter dated March 1, 2017, advised the company to either unwind the excess shares allotted or bring in additional funds equivalent to the shares allotted and then apply for compounding of the contraventions. The company had not complied with these conditions before filing the petition, which was a significant point of contention. 3. Adherence to the Foreign Exchange Management Act (FEMA) Regulations: The company issued 1,92,441 compulsory convertible debentures (CCDs) to Dr. Raju Reddy at a price lower than the fair value, which contravened the provisions of the FEMA Regulations. The RBI identified this violation and advised the company on the steps to rectify it. The company admitted the violation but had not taken the necessary actions to comply with the FEMA Regulations before approaching the Tribunal. 4. Validity and applicability of Section 59 of the Companies Act, 2013: Section 59 of the Companies Act, 2013, allows for rectification of the register of members if a person’s name is entered or omitted without sufficient cause. The Tribunal examined whether the company could invoke this section without complying with the RBI's conditions and FEMA Regulations. It was determined that the company could not be considered an aggrieved party under Section 59, as the primary issue was the violation of FEMA Regulations, not the wrongful entry or omission of a member's name. 5. Procedural adherence to the company's memorandum and articles of association: The company failed to follow its memorandum and articles of association and the relevant provisions of the Companies Act, 2013, in addressing the issue of excess share allotment. The Tribunal emphasized the need for the company to adhere to its internal regulations and the law before seeking rectification. The Registrar of Companies also highlighted that rectification would lead to a reduction of paid-up capital, which requires a prescribed procedure. Conclusion: The Tribunal dismissed the petition, stating that the company had not complied with the necessary legal and procedural requirements. The dismissal was without prejudice to the company's right to file a fresh petition after duly following the extant provisions of law. The Tribunal underscored the importance of adhering to FEMA Regulations, the Companies Act, and the company's internal regulations before seeking rectification of the register of members.
|
