2020 (1) TMI 810 - AT - Companies Law

Transfer of shares - execution of transfer deed - entitlement of allotment of 60000 shares which were due to R1 (including R2) on right basis by the appellant company - time limitation - HELD THAT - Appellant company in their correspondence with the Respondent has already accepted to issue shares to the Respondents as per their entitlement on production of court orders, affidavit and indemnity bond and on payment of ₹ 120000/- being the consideration amount of 60000 shares. During the course of arguments when we asked learned counsel for the appellant when the Letter of Administration has been submitted by the Respondent then why did you insist for affidavit and indemnity bond. When Letter of Administration has been issued, it means that the Appellants are discharged from their liability. On this, the learned counsel for appellant apologised. The appellant is a listed company in real estate and is very well aware of legal formalities. By insisting affidavit and indemnity bond again and again inspite of Letter of Administration issued clearly establish that the Appellants are harassing the poor investors. The act of the appellants deserves some penal action. We also note that the Respondents are entitled for 60000 shares as per entitlement on payment of consideration. Respondent will make payment of consideration to the appellant company within 15 days from the date of receipt of this order and he shall be entitled to the benefit of the membership from the date of payment - Appellant company will transfer/arrange for transfer 60000 shares to the Respondent within 30 days from the date of receipt of payment - impugned order upheld.

Summary

Issues Involved:
1. Entitlement of legal heirs to shares.
2. Delay in approaching the company for transfer of shares.
3. Requirement of court orders and other documents for transfer.
4. Jurisdiction of NCLT under Section 58(4) of the Companies Act, 2013.
5. Limitation period for filing the petition.
6. Allegations of arbitrary and malicious denial of share transfer.

Issue-wise Detailed Analysis:

1. Entitlement of Legal Heirs to Shares:
The judgment confirms that the legal heirs of Mr. Devki Nandan Kaura, who held 150 shares (converted to 6000 shares after split and bonus issue), are entitled to these shares. The core dispute revolves around the entitlement to an additional 60,000 shares on a rights basis. The Respondents argued that they were entitled to these shares as legal heirs, and the NCLT upheld this entitlement, directing the registration of the transfer.

2. Delay in Approaching the Company for Transfer of Shares:
The Appellant argued that the Respondents approached the company after 20 years, which should bar their entitlement. However, the Respondents contended that they applied for the share transfer on 25.05.2007 and complied with the company's requirements, including obtaining a Letter of Administration. The NCLT found that the Appellant had never intimated the Respondents about any limitation period and had, in fact, indicated that the final decision would be made upon receipt of court orders. Thus, the issue of delay was dismissed as having no force.

3. Requirement of Court Orders and Other Documents for Transfer:
The Appellant required the Respondents to submit a court order, an Affidavit-cum-Indemnity Bond, and a demand draft for the consideration amount. The Respondents complied by obtaining a Letter of Administration and submitting the required documents. The NCLT noted that the Appellant's insistence on additional documents despite the Letter of Administration was unnecessary and amounted to harassment. The Tribunal directed the Appellant to transfer the shares upon payment of the consideration.

4. Jurisdiction of NCLT under Section 58(4) of the Companies Act, 2013:
The Appellant contested the NCLT's jurisdiction to entertain the petition under Section 58(4). However, the NCLT held that the petition was maintainable and dismissed the Appellant's objections. The Tribunal found that the refusal to register the transfer of shares without sufficient cause fell within its purview.

5. Limitation Period for Filing the Petition:
The Appellant argued that the petition was filed beyond the limitation period. However, the NCLT found that the Appellant had never raised this issue during the correspondence and had, in fact, indicated that the decision would be made upon receipt of court orders. Therefore, the limitation argument was dismissed.

6. Allegations of Arbitrary and Malicious Denial of Share Transfer:
The Respondents alleged that the Appellant's refusal to transfer the shares was arbitrary, malicious, and illegal. The NCLT agreed, noting that the Appellant had accepted the Respondents' compliance with the requirements but later denied the transfer. The Tribunal found the Appellant's actions to be harassing and deserving of penal action.

Judgment and Directions:
The NCLT upheld the Respondents' entitlement to the shares and directed the Appellant to register the transfer of 60,000 shares upon payment of the consideration. The Tribunal issued further directions for the execution of the transfer deed and imposed a cost of ?5,00,000 on the Appellant, to be deposited with the National Defence Fund. The interim order was vacated, and the Appellant was given specific timelines to comply with the directions.