2018 (10) TMI 712 - AT - Companies Law

Suspicious transfers - Illegal transfer of shares - Direction to the 1st respondent to restore the name of the appellant-Original petitioner in the member register and issue duplicate share certificates and further direct the 1st respondent to also allot the bonus shares, accrued dividend till date and further if any - Illegal transfer of shares - Appellant argued that the undelivered share certificate is already lying with 1st respondent, and hence it is not possible to transfer the alleged share certificate to anyone and/or 6th respondent by 3rd respondent - Held that - Admittedly the appellant is shareholder of the 1st respondent and holds 6000 equity shares as on 30.6.2015. On the issue that he has not transferred/sold these shares he has drawn our attention to Form No.SH-4, Securities Transfer Form at Page No.445 of the Reply filed by the 1st respondent. On careful scrutiny of the SH-4 form, which is the prescribed form for submitting to the company or its transfer agent for transfer of shares in the name of transferee, we find that the column where the signatures of the transferor is required, the said column is blank . This is the vital column and the said column is blank. Further there is no signature of witness on the said SH-4 form. The column for Name and Address of the witness who confirms that the transferor has signed before him in SH-4 is also blank. Further the columns meant for mentioning Distinctive Nos, Corresponding Certificates Nos is also blank. It goes on to prove that the transferor has not signed the SH-4, Securities Transfer Form, which is mandatory for transferring the shares. Also observe from the audit report conducted by the auditor, Ernst & Young, that the less stamp duty has been affixed on the share transfer form, as observed by Ernst & Young s report, even then the shares have been transferred. This is very serious and also shows the suspicious transaction has been done. We observe that the appellant is a shareholder which means he is the owner of the 1st respondent to some extent. Instead of helping its shareholder, 1st respondent is creating trouble for him and also harassing him. We do not appreciate and expect this type of attitude from 1st respondent. After hearing both the parties at length, we have come to the conclusion that the appellant makes out a case that he has not transferred/sold the shares to anyone, therefore, he has right on his shares and also the bonus shares issued and the dividend declared during the past years. He shall submit indemnity bond to 1st respondent in case later any other claimant proves his title.

Summary

Issues Involved:
1. Transfer of shares without the appellant's consent.
2. Issuance of duplicate share certificates.
3. Entitlement to bonus shares and accrued dividends.
4. Role and responsibility of the Registrar and Transfer Agent (3rd respondent).
5. Jurisdiction and appropriate forum for dispute resolution.

Detailed Analysis:

1. Transfer of Shares Without the Appellant's Consent:
The appellant held 6000 equity shares of the 1st respondent. The shares were allegedly transferred without the appellant's consent or signature. The appellant discovered the unauthorized transfer and requested the issuance of duplicate shares. The transfer was deemed suspicious due to the absence of the appellant's signature on Form No.SH-4, Securities Transfer Form, and other irregularities, such as missing witness signatures and incomplete details. Ernst & Young's audit confirmed the suspicious nature of the transfer, noting that the original transfer form was missing, and the share certificate was handed to an unidentified person. The tribunal concluded that the transfer was unauthorized and invalid.

2. Issuance of Duplicate Share Certificates:
The appellant requested duplicate share certificates, which were not provided by the 1st respondent. The tribunal noted that the appellant had not transferred or sold the shares and was entitled to the shares and any associated benefits. The tribunal directed the 1st respondent to issue duplicate share certificates upon the appellant submitting an indemnity bond.

3. Entitlement to Bonus Shares and Accrued Dividends:
The appellant claimed entitlement to bonus shares announced by the 1st respondent and accrued dividends. The tribunal acknowledged the appellant's right to these benefits, given that the transfer of shares was unauthorized. The tribunal directed the 1st respondent to allot the bonus shares and accrued dividends to the appellant.

4. Role and Responsibility of the Registrar and Transfer Agent (3rd respondent):
The 3rd respondent, appointed as the Registrar and Transfer Agent, was found to have engaged in fraudulent activities, including the unauthorized transfer of shares. The 1st respondent admitted the irregularities and lodged a police complaint against the 3rd respondent. The tribunal held the 1st respondent responsible for the actions of the 3rd respondent, as the latter was appointed by the 1st respondent and acted on its behalf. The tribunal emphasized that the 1st respondent should protect its shareholders and take action against the 3rd respondent for the misconduct.

5. Jurisdiction and Appropriate Forum for Dispute Resolution:
The National Company Law Tribunal (NCLT) initially dismissed the appellant's petition, suggesting that the appellant should approach a civil court. The NCLT cited the pending SEBI investigation and the absence of the alleged transferee, Mr. G.K. Dhariwal, as a party to the petition. However, the appellate tribunal found that the NCLT's decision was flawed, as the appellant had not approached a civil court, and the transferor's signature was missing on the transfer deed. The appellate tribunal concluded that the NCLT should have exercised its jurisdiction and provided relief to the appellant.

Conclusion:
The appellate tribunal allowed the appeal, set aside the NCLT's order, and directed the 1st respondent to restore the appellant's name in the member register, issue duplicate share certificates, and allot the bonus shares with accrued dividends. The tribunal emphasized the responsibility of the 1st respondent to protect its shareholders and take action against the 3rd respondent for fraudulent activities.