2017 (4) TMI 1630 - HC - Companies Law

Whether the appellant had given her consent for exit from the respondent nos. 1 and 6 on the basis of the valuation report to be made by the valuers based on the balancesheet of respondent nos. 1 and 6 as of 31st March, 1998? - whether the order passed by the Company Law Board based on such alleged consent rendered by the appellant and her daughter is perverse or not? HELD THAT - Under Sections 397 and 398 of the Companies Act, 1956, the petitioner has two options available i.e. (i) to exit from the company in question on payment of fair valuation and (ii) to pursue the petition or an appropriate action alleging oppression and mismanagement and to take it to its logical conclusion. In my view, the appellant could not pursue both the options simultaneously, once having agreed to exit from the respondent nos.1 and 6 on the condition that the appellant is paid fair valuation of her share. The Company Law Board has ample powers under Section 402 of the Companies Act, 1956 to order the valuation in the event of the petitioner having agreed to exit. The orders passed by the Company Law Board under Section 402 of the Companies Act, 1956 for valuation of such shares for the purpose of exit of the appellant is enforceable as a decree of the Court. Since the order passed by the Company Law Board and by this Court under Order XXXII Rule 7, Sub-rule (2) is voidable, appropriate proceedings had to be filed for repudiation of the contract as voidable. Since no steps are taken by the respondent no.7 after attaining the age of majority till date, those orders passed by the Company Law Board and also by this Court would continue to be binding on her. The order dated 22nd July 2011 is not challenged by any of the parties including the respondent no.7. Whether the respondent no.1 could have issued any duplicate shares in favour of the respondent no.7 and that also without allegedly not following the requisite procedure under the provisions of the Companies Act, 1956 and other provisions of law? - HELD THAT - It is not in dispute that neither the appellant and her daughter, nor the respondent no.7 could produce the original share certificates of the late Mr.Anthony Maynard before the respondent no.1 for transmission of those shares in their respective names in the ratio of 1/3rd of the total shareholding of the late Mr.Anthony Maynard in their favour each and to rectify the register of shares. A perusal of the company petition along with the company application filed by the appellant and her daughter also clearly indicates that in her alternate prayers, the appellant herself had prayed for issuance of duplicate share certificates of the originals of those share certificates representing 2/3rd of the shareholding of the late Mr.Anthony Maynard if originals were not available with the respondent no.1 - the respondent no.1 has already made a submission before this Court that the duplicate share certificates in respect of 1/3rd share of the appellant and her daughter also would be issued by the respondent no.1 and can be deposited with the National Company Law Tribunal. The appellant is thus not affected in any manner whatsoever insofar as the duplicate share certificates are concerned. No question of law arises in any of these company appeals and thus no interference with the impugned order passed by the Company Law Board is warranted in these appeals under section 10F of the Companies Act, 1956. The Company Appeal are dismissed.

Summary

Issues Involved:
1. Consent for Exit and Valuation Date
2. Transmission and Preemptive Rights
3. Issuance of Duplicate Share Certificates
4. Jurisdiction of Company Law Board and Validity of Orders

Issue-Wise Analysis:

1. Consent for Exit and Valuation Date:
The appellant contested the consent order dated 22nd July 2011, arguing it was conditional and did not reflect all agreed terms. The court found that the appellant had indeed agreed to exit on fair valuation based on the balance sheet as of 31st March 2008. The appellant's subsequent attempts to modify or challenge this agreement were deemed inconsistent and afterthoughts. The court emphasized that the consent order was clear, signed by authorized counsel, and no additional terms were recorded. The appellant's arguments about alleged conditions and liberties not recorded in the order were rejected as they were not supported by the court's records or subsequent actions. The court upheld the agreed valuation date and dismissed the appellant's claims for a different valuation date or additional considerations.

2. Transmission and Preemptive Rights:
The appellant argued that the transmission of 1/3rd shareholding of late Mr. Anthony Maynard to respondent no.7 was illegal and that she had preemptive rights to purchase those shares. The court found that the appellant had admitted the respondent no.7's entitlement to 1/3rd shareholding in her pleadings and prayers. The court also noted that the order for transmission of shares to respondent no.7 had attained finality and was implemented. The appellant's claims of preemptive rights were dismissed as the Articles of Association did not mandate offering shares to family members first. The court concluded that the appellant's agreement to exit nullified her preemptive rights, and the respondent no.7 was free to deal with his shares.

3. Issuance of Duplicate Share Certificates:
The appellant challenged the issuance of duplicate share certificates to respondent no.7, claiming non-compliance with Section 84(2) of the Companies Act, 1956. The court found that the respondent no.1 had followed the requisite procedure and issued duplicate shares after the original certificates were untraceable. The appellant's own prayers included a request for duplicate shares if originals were not available. The court upheld the issuance of duplicate shares as valid and compliant with the law.

4. Jurisdiction of Company Law Board and Validity of Orders:
The appellant argued that the Company Law Board's orders for transmission of shares and impleadment of respondent no.7 were illegal and void. The court found that these orders were not challenged by the appellant and had attained finality. The court emphasized that such orders could not be indirectly challenged in the present appeals. The court upheld the Company Law Board's jurisdiction and the validity of its orders, dismissing the appellant's claims.

Conclusion:
The court dismissed the appeals, upholding the consent order for exit on fair valuation, the transmission of shares to respondent no.7, the issuance of duplicate share certificates, and the validity of the Company Law Board's orders. The court directed the National Company Law Tribunal to expedite the hearing of pending company petitions and applications.