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2023 (12) TMI 790 - HC - Companies LawSeeking permanent prohibitory injunctions restraining the defendant (including his attorneys, assigns, successors-in-interest, agents, authorized persons or anyone acting for and/or on his behalf) from alienating, transferring, selling, creating any encumbrance, third-party rights or any other interest of any kind - Order XXXIX Rule 1 and 2 of the Code of Civil Procedure, 1908. Documentation issued in respect of the transfer of shares to the Defendant - delivery of the shares and the subsequent conduct of the parties - HELD THAT - Any entry in the register of shareholders of a company is statutorily required to be authenticated in the manner prescribed in the aforesaid rule. There is a statutory presumption that such authentication was carried out in the present case, during which process, there is no plea of any doubt being expressed or any objection being raised by the plaintiff or any other person as to the inclusion of the defendant in the register of members of the concerned company - the transfer of shares in favour of the defendant and the subsequent inclusion of the defendant in the register of members of the plaintiff was pursuant to a statutorily recognised process. For the purpose of the present application, there can be no presumption against the validity of the transfer in favour of the defendant pursuant to a statutorily mandated process, especially when the execution of Form SH-4 by the plaintiff is admitted and it is not the case of the either of the parties that the concerned company has not adhered to the provisions of under the Companies (Management and Administration) Rules, 2014 and the Companies (Share Capital and Debentures) Rules, 2014. In MANECKJI PESTONJI BHARUCHA AND OTHERS VERSUS WADILAL SARABHAI AND COMPANY AND OTHERS 1926 (3) TMI 1 - MADRAS HIGH COURT , the Privy Council was concerned with a situation where blank transfer Forms had been executed by the registered holders of shares of a company. Admittedly, in all these agreements, to which both the plaintiff and the defendant were parties, the defendant was represented to be as a shareholder of the concerned company. It is completely untenable for the plaintiff to suggest that the defendant was wrongly portrayed as a shareholder in all these agreements or that the plaintiff was induced to sign these agreements. There is no merit in the contention of the plaintiff that the contract for sale of shares did not fructify in the sense contemplated under the Sale of Goods Act, 1930, and/or that title therein did not pass to the defendant. This Court is not inclined to grant an interim injunction in favour of the plaintiff/applicant, as prayed for. However, considering that the shares of the defendant in question are subject matter of the present suit and considering that the plaintiff has also made an alternative prayer seeking damages, it is directed that in case, the defendant proposes to transfer/deal with/alienate the shares in question, prior intimation with regard to any such proposed transaction(s) together with details thereof, shall be provided to the Court. Application disposed off.
Issues involved:
1. Validity of the oral agreement dated 02.07.2018. 2. Payment of purchase consideration. 3. Transfer of title and ownership of shares. 4. Plaintiff's entitlement to rescind the agreement. 5. Plaintiff's claim for interim injunction. Summary: 1. Validity of the oral agreement dated 02.07.2018: The plaintiff sought a declaration that the oral agreement dated 02.07.2018 for the transfer of 2,447 equity shares in RIPL to the defendant was rescinded and terminated. The plaintiff also executed "Form SH-4" on the same date but claimed not to have received the purchase consideration. 2. Payment of purchase consideration: The plaintiff alleged that the defendant did not pay the purchase consideration of INR 24,470. The defendant, however, contended that the amount was paid in cash at the time of the agreement. The plaintiff issued a "Rescission and Termination Notice" on 18.03.2023, asserting non-payment of consideration. 3. Transfer of title and ownership of shares: The court noted that "Form SH-4" was duly executed, reflecting the consideration received, and the defendant was recorded as a shareholder in the company's register. The court emphasized that the statutory process under the Companies Act and Sale of Goods Act was followed, indicating the transfer of shares to the defendant. 4. Plaintiff's entitlement to rescind the agreement: The court held that the plaintiff's contention of non-payment did not invalidate the contract. The Sale of Goods Act allows for the transfer of title even if the payment is postponed. The plaintiff's own legal notice admitted the postponement of payment, and the court stated that the plaintiff's remedy lies in suing for the unpaid consideration or claiming damages. 5. Plaintiff's claim for interim injunction: The court found no merit in the plaintiff's case for interim relief. The plaintiff's acknowledgment of the defendant as a shareholder in multiple agreements and the statutory compliance in transferring shares negated the claim for an injunction. The court directed that the defendant must inform the court of any proposed transactions involving the disputed shares. Conclusion: The court dismissed the plaintiff's application for interim injunction, emphasizing that the observations were solely for deciding the application.
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