2019 (3) TMI 1748 - Tri - Companies Law

Oppression and mismanagement - Transfer of shares - True and lawful owner of the schedule shares - re-issue of schedule shares to the petitioner in dematerialized format - whether rejection of respondents Nos. 1 and 2 for transmission of shares in favour of petitioner and issuing those shares to imposter (third respondent) is justified or not? - HELD THAT - There is prescribed procedure for transfer/transmission of shares in every articles of association of a company and company law. Transfer/ transmission of shares can be effected by the board of directors of a company only if they are satisfied that there is bona fide claim made by parties with supporting documents. In the instant case, shareholder is NRI and respondents Nos. 1 and 2 should be more careful while dealing with those shares unlike shares held by resident Indians. Merely following technical procedure like issuing public notification, taking certificate issued by Police, etc., is not enough. When original shareholder dies, only legal heir of original share holder can transact with respondents Nos. 1 and 3. In the instant case, unfortunately, the original shareholder prematurely died on September 12, 2003. Therefore, they could not approach the authorities for transmission of shares immediately on the death. It is also admitted position that there are several shares purchased by the deceased, and in order to settle the issue with legal documents, the petitioner has rightly approached the hon'ble High Court of Bombay by seeking to grant succession certificate in respect of schedule property, which includes the impugned shares in the instant company petition. Therefore, the certificate issued by the hon'ble High Court of Bombay is binding on all the parties. The contention that there is a discrepancy between the names of the father of the petitioner with that of the other claimant is not at all tenable in way of the evidence - Admittedly, respondent No. 3 has not filed any substantial evidence to show that he is original shareholder of the impugned shares. Respondents Nos. 1 and 2 utterly failed to examine the bona fides of claim of respondent No. 3 and, on the contrary, contributed to the fraud and misrepresentation perpetuated by respondent No. 3. Time limitation - HELD THAT - Admittedly, the father of the petitioner prematurely died intestate, at an young age in the year 2003, without settling the properties including the shares. Therefore, ultimately, the petitioner has taken appropriate legal action by filing succession certificate before the hon'ble High Court of Bombay and thereafter he filed a suit on rejection of plaint for lack of jurisdiction, the present petition is filed. Therefore, laches and limitation will not come in the way of claiming the estate of the deceased father of the petitioner basing on the succession certificate issued by a competent court as detailed supra. Once the petitioner established that shares were initially issued to the father of the petitioner, and he is the legal heir of Rajesh H. Shah to claim the shares in question, he is entitled to transmission of those shares - basing on the succession certificate several companies have accepted the request of the petitioner for transmission of shares in favour of the petitioner. Therefore, the grounds raised by the respondent is not at all tenable and are liable to be rejected. There are no iota of doubt that the father of the petitioner is original shareholder of shares in question and the petitioner is legal heir of original shareholder and he is entitled to transmission of shares in question in his favour. The original share certificate issued by the company bears the name of father of the petitioner and his father is not there and even the correspondence addressed to father of the petitioner did not mention his father's name. Therefore, the respondents have their defence in order to protect themselves to perpetuate fraud committed in collusion. Since the petitioner proved his case basing on documentary evidence, there cannot be claim or interest accrues to the third respondent and moreover, as stated, he has promptly dematerialised the shares in question, after getting hold of impugned shares - the action of respondents Nos. 1 and 2 in refusing to allow transmission of shares in favour of the petitioners is ex facie illegal, and it is liable to be rejected and thus we are hereby rejected. The petitioner is entitled to the schedule shares to be transferred in his name. However, the petitioner is not entitled to full consequential benefits out of transmissions of shares, since there is an abnormal delay in approaching this Tribunal, after death of his father on September 12, 2003 - Petition disposed off.

Summary

Issues Involved:
1. Whether the impugned shares are issued in favor of the father of the petitioner (Rajesh Himmatlal Shah) by respondent No. 1-company.
2. Whether the petitioner furnished requisite documents for transmission of the schedule shares of the deceased father.
3. What is the effect of the succession certificate.
4. Whether the respondent followed the prescribed procedure in issuing duplicate shares to respondent No. 3.
5. Whether the respondents are justified in refusing the transfer of the shares of the father of the petitioner.
6. What relief the petitioner is entitled to.

Issue-wise Detailed Analysis:

1. Whether the impugned shares are issued in favor of the father of the petitioner (Rajesh Himmatlal Shah) by respondent No. 1-company:
The Tribunal found that the shares were indeed issued to the petitioner's father, Rajesh Himmatlal Shah. The petitioner provided substantial evidence, including PAN card, identity cards issued by Belgium authorities, birth certificate, and share certificates, proving that Rajesh Himmatlal Shah was the original shareholder. The death certificate confirmed that Rajesh Himmatlal Shah died on September 12, 2003, making it impossible for him to have transacted the shares in 2012.

2. Whether the petitioner furnished requisite documents for transmission of the schedule shares of the deceased father:
The petitioner furnished all necessary documents for the transmission of shares, including the succession certificate issued by the Bombay High Court, which was acted upon by several other companies. The Tribunal noted that the petitioner had submitted all required documents for the transmission of shares in accordance with the law.

3. What is the effect of the succession certificate:
The succession certificate issued by the Bombay High Court is conclusive and binding, as per Section 381 of the Indian Succession Act, 1925. The Tribunal emphasized that the respondents do not have the discretion to refuse compliance with the succession certificate. The certificate is a judgment in rem and cannot be questioned in this petition.

4. Whether the respondent followed the prescribed procedure in issuing duplicate shares to respondent No. 3:
The Tribunal found that respondents Nos. 1 and 2 failed to properly verify the bona fides of the third respondent, who impersonated the original shareholder. The issuance of duplicate shares was based on inadequate verification and improper documentation. The Tribunal criticized the respondents for their lack of due diligence and for contributing to the fraud.

5. Whether the respondents are justified in refusing the transfer of the shares of the father of the petitioner:
The Tribunal held that the respondents were not justified in refusing the transfer of shares to the petitioner. The refusal was based on the issuance of duplicate shares to an imposter, which was found to be fraudulent. The Tribunal noted that the petitioner cannot be made to suffer due to the respondents' failure to identify the true owner.

6. What relief the petitioner is entitled to:
The Tribunal directed respondent No. 1 to transfer 3,100 equity shares to the petitioner within two weeks. The petitioner is entitled to corporate benefits like dividends from January 16, 2016, one year prior to the filing of the petition. Respondents Nos. 1 and 2 are allowed to take legal action under the Indemnity Bond dated December 3, 2012, and are liable to compensate any claims arising from the trading of the transferred shares. The Tribunal ordered compliance within three weeks, failing which the respondents would be liable to pay bank interest on the due amount.

Conclusion:
The Tribunal concluded that the shares were originally issued to the petitioner's father, and the petitioner, as the legal heir, is entitled to the transmission of these shares. The respondents' refusal to transfer the shares was deemed unjustified, and the issuance of duplicate shares to an imposter was found to be fraudulent. The Tribunal ordered the transfer of shares to the petitioner and granted partial corporate benefits, while also allowing the respondents to seek indemnity as per the bond executed by the imposter.