2019 (7) TMI 1023 - AT - Companies Law

Oppression and mismanagement - rectification of members' register of respondent No. 1-company - forfeiture of shares - HELD THAT - The burden to prove facts constituting oppression or membership of respondent No. 1-company was heavily placed on the petitioner. It was required to be shown successfully that the petitioner became member of respondent No. 1-company. The petitioner has failed to place on record any authentic document issued by the Registrar of Companies recognizing the petitioner as a member of respondent No. 1-company as defined in section 41 read with section 2(27) of the 1956 Act. The legal position is evident from a bare perusal of definition of a member of a company which shows that there should be an application in writing and the name of a member should be entered in the register of members. The provision requires as a condition precedent for membership that the name of the person in question is entered in the register. Secondly such a person may be regarded as a member if he has acquired the right of membership although his name is not in the register. One may become a shareholder in a company by subscribing to memorandum as provided by section 41 of the 1956 Act by allotment apart from other modes - every company making an allotment of shares is obliged to deliver to an allottee a certificate of shares within three months after the allotment. In the case of a transfer, the certificate has to be delivered within two months unless extended by the Tribunal. Transfer of share - compliance with section 108 of the Act 1956 - HELD THAT - There are numerous conditions laid down which are required to be fulfilled before a company can lawfully register a transfer. We have failed to understand why the agreements between the parties have not been produced on record and why Ms. Renu Data has also not been made a party. In the facts and circumstances of the case Ms. Renu Data has been a necessary party as her presence before the court was most important. However, we are of the considered view that the version adopted by the petitioner is far from satisfactory and does not inspire confidence by keeping in view the rudimentary principles and pleadings and law of evidence. Petition dismissed.

Summary

Issues Involved:
1. Allegations of oppression and fraudulent forfeiture of shares.
2. Validity of the purported forfeiture and reissue of shares.
3. Petitioner's qualification to file the petition under section 399(1) of the Companies Act, 1956.
4. Existence and suppression of Share Subscription Agreement (SSA) and Escrow Agreement.
5. Petitioner's entitlement to the shares and rectification of the register of members.

Issue-Wise Analysis:

1. Allegations of Oppression and Fraudulent Forfeiture of Shares:
The petitioner, Greenline Transit Systems P. Ltd., alleged oppression by respondents Nos. 2 and 3 and sought directions to rectify the members' register of respondent No. 1-company. The petitioner claimed that the partly paid-up share capital amounting to 49% shareholding had been illegally and fraudulently forfeited by respondents Nos. 2 and 3, and the petitioner was not reflected as the owner of the 2% fully paid-up shareholding.

2. Validity of the Purported Forfeiture and Reissue of Shares:
The petitioner argued that the forfeiture of 9,67,784 partly paid-up shares was fraudulent and illegal as no call was made, nor any notice of forfeiture was given. The petitioner insisted that the forfeiture was null, void, and invalid, and requested the tribunal to set it aside and re-enter the petitioner's name in the register of members. The respondents countered by stating that the forfeiture was in accordance with the SSA and the escrow agreement, which stipulated that if the NOC was not received within six months, the shares would be forfeited.

3. Petitioner's Qualification to File the Petition Under Section 399(1) of the Companies Act, 1956:
The respondents argued that the petitioner did not meet the basic criteria of shareholding of 10% of the paid-up share capital as required under section 399(1) of the Companies Act, 1956, since the petitioner only had 2% shareholding of the paid-up capital. The petitioner contended that it had legitimate expectations to capture 90% shareholding in respondent No. 1-company once the NOC was granted.

4. Existence and Suppression of Share Subscription Agreement (SSA) and Escrow Agreement:
The respondents claimed that the petitioner had suppressed the existence of the SSA and the escrow agreement dated December 6, 2010, which were crucial to the case. The respondents provided e-mails and other evidence to support the existence of these agreements. The petitioner denied the existence of these agreements and argued that the respondents failed to demonstrate their existence.

5. Petitioner's Entitlement to the Shares and Rectification of the Register of Members:
The petitioner sought the rectification of the register of members to reflect its ownership of the 96,07,843 partly paid-up shares and the 3,92,157 fully paid-up shares. The respondents contended that the petitioner's claim was baseless as the shares were forfeited in accordance with the SSA and the escrow agreement. The tribunal noted that the petitioner failed to produce any authentic document issued by the Registrar of Companies recognizing the petitioner as a member of respondent No. 1-company.

Conclusion:
The tribunal concluded that the petitioner failed to prove the facts constituting oppression or membership of respondent No. 1-company. The tribunal found the petitioner's version unsatisfactory and lacking in credible evidence. Consequently, the petition was dismissed.