2022 (5) TMI 585 - Tri - Companies Law

Cancellation of allotment of shares - seeking return of amount granted by the appellant/applicant as Loan to the Respondent No. 1 company - HELD THAT - In this case, though there is no written agreement as regard to the grant of loan, nor any other document has been brought on record, but it is also evident by the conduct of all the respondents that they are not in a position to controvert the claims made by the appellant as regard to the nature of the transaction. If the respondents were in a position to controvert the claims made by the appellant, they could have produced the letter of request or any other document signed by the appellant for purchase of shares of a Private Limited Company which are not freely transferable. Further, they could also produce that the shares, minutes and other share certificate showing the compliance to the provisions of law as regard to issue and allotment of shares - the respondent No. 1 Company is directed to delete the name of the appellant from the Register of Members within two weeks from the date of this order and file requisite documents with RoC also, who shall take on record such documents in terms of the relevant provisions of law. Appeal disposed off.

Summary

Issues involved:
Cancellation of share allotment and repayment of loan by the company.

Analysis:
The appellant sought directions to cancel the allotment of shares and to recover the loan amount with interest from the company. The respondents included the company and its directors. The company and one respondent were served notices, while two directors refused to accept them, leading to all respondents being set ex parte. The appellant alleged providing a loan of Rs. 25 lakh to the company, which was not repaid. The appellant was also allotted shares without consent, allegedly to evade loan repayment. The appellant claimed no involvement in becoming a shareholder and highlighted non-receipt of notices or meeting reports. The counsel for the appellant requested removal from the register of members and cancellation of the share allotment. Despite lack of written agreements or documents, the respondents' conduct indicated an inability to dispute the appellant's claims.

The tribunal noted the absence of evidence to counter the appellant's claims, such as a request letter or documents for share purchase compliance. The tribunal directed the company to remove the appellant's name from the register of members and submit necessary documents to the Registrar of Companies for compliance with the law. However, the tribunal clarified that the loan repayment direction could not be granted in this petition, as separate legal remedies should be pursued for that purpose. The appeal was allowed based on the above decisions, with the registry instructed to promptly share the order with all parties and issue certified copies upon request.