2017 (7) TMI 1019 - Tri - Companies Law

Period of limitation - transfers registered without duly complying with the FEMA Regulations - eligibility of application made by a depository company participant or investor or the Security Exchange Board of India - Held that - Time of filing the petition during 2011 have not made any application showing sufficient cause for the condonation of delay or even during the course of arguments no such explanation has been made. Thus, the counsel for Respondents/petitioners have neither shown sufficient cause for the prolonged delay, nor payed for condonation of delay in the matter in hand. However, he made a reference to the ruling of the CLB given in S. Kanthimathy v. Woodlands Estates Ltd. 2008 83 SCL 491. In the said case, under para 22, it has been observed that it is a settled law that delays in bringing the appeals are required to be condoned in the interest of justice, where no gross negligence or deliberate inaction or lack of bona fide is imputable to the party seeking condonation of delay and in the said matter the legal heirs were engaged in resolving the dispute before approaching the CLB and the CLB had taken the ground of their being engaged in resolving the disputes as sufficient cause for condonation of ten months delay. But in this case, Respondents/petitioners have never given any explanation with regard to the delay caused in filing the company petition. Therefore, this ruling is not applicable to the facts and circumstances of the present case, as the facts in this matter are distinguishable from that of the facts stated in the ruling referred above. From 2007 to 2011 there is a lapse of four years which is abnormal delay in filing the petition. Therefore, the present petition is barred by delay and laches.

Summary

Issues Involved:
1. Limitation period for filing the petition.
2. Compliance with FEMA Regulations and RBI approval.
3. Non-joinder of necessary parties.
4. Non-payment of consideration for share transfers.

Issue-wise Detailed Analysis:

1. Limitation Period for Filing the Petition:
The primary issue raised by the Respondents pertains to the period of limitation as prescribed under Section 111A(3) of the Companies Act, 1956. This section mandates that an application regarding the transfer of shares or debentures must be filed within two months from the date of transfer. The petitioners admitted to signing the transfer forms in 2004 and 2006, and they had knowledge of the transfer by 2007, as evidenced by an email dated 5.6.2007 and a public notice dated 30.10.2007. Despite this, the petition was filed only in 2011, well beyond the prescribed period. The Tribunal referenced the Apex Court decision in Balwant Singh v. Jagdish Singh, emphasizing that "sufficient cause" must be shown for any delay, which was not demonstrated by the petitioners. Consequently, the petition was deemed barred by delay and laches.

2. Compliance with FEMA Regulations and RBI Approval:
The petitioners argued that the share transfers were not compliant with FEMA Regulations and lacked prior approval from the Reserve Bank of India (RBI). They contended that as per Regulation 10B of the Foreign Exchange Management (Transfer or Issue of Securities by a Person Resident Outside India) Regulations, 2000, the transfer required RBI's prior permission. Additionally, the transfer should have adhered to Section 108 of the Companies Act, 1956. However, the Tribunal did not find these arguments sufficient to override the limitation issue.

3. Non-joinder of Necessary Parties:
The petition was also challenged on the grounds of non-joinder of necessary parties. The petitioners failed to include Mr. Varghese George and other transferees as parties in the company petition. The Tribunal highlighted that the absence of these necessary parties further weakened the petitioners' case, as they were integral to the dispute.

4. Non-payment of Consideration for Share Transfers:
The petitioners claimed that no consideration was paid for the transfer of shares. The Tribunal noted that the appropriate remedy for this grievance would be to file a suit in a civil court for the recovery of the sale consideration. This view was supported by the ruling in Heeral Constructions (P.) Ltd. v. Blue Pearl Developments (P.) Ltd., which stated that grievances regarding non-payment of agreed sale consideration should be addressed in a competent civil court.

Conclusion:
The Tribunal concluded that the petition was barred by delay and laches, lacked necessary parties, and the appropriate forum for the grievance regarding non-payment of consideration was a civil court. Consequently, the Company Application No. 69 of 2011 was allowed, and the company petition T.C.P. No. 66 of 2016 (CP No. 15 of 2011) along with C.A. No. 171 of 2011 was dismissed. The interim order, if any, was vacated, and there was no order as to costs.