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2013 (9) TMI 699 - HC - Companies LawRectification of register of members - Appellant not shown as shareholder - Inspection of books of accounts - Whether there was an oral family settlement in 1993 under which the appellant gave up his shares in the company - Held that - appellant cannot question it or act contrary to the terms of the settlement at any later point of time. It is not denied by him that he was a signatory to the letter dated 31.12.1993 written jointly by him and his father S.N. Sud to the Noida authority, under which he withdrew his rights in the company which was allotted the premises at G-58, Sector 6, Noida. There was some debate at the Bar as to what this letter meant, the contention of the learned counsel for the appellant being that the letter referred only to the rearrangement of the partnership business carried on by the appellant and his father and did not refer to the company at all, and the contention of the respondent s counsel being that the reference to the withdrawal of the appellant from his rights was only to the shares in the company, since the appellant did not withdraw from the firm and on the contrary he practically became the full owner of the partnership business, S.N. Sud having decided to become a sleeping partner and that too only till March, 1994. A very crucial aspect of the case is the long period of 15-16 years in which the appellant had accepted the settlement and acted upon it. Not only the appellant, but also the other members of the family did act upon the settlement. It should not be forgotten that the appellant himself got the bag-closing and conveying systems business, earlier carried on by the partnership firm of himself and his father, only in terms of the family settlement. He also resigned from the directorship of the company as he no longer had any interest in the working of the company, having foregone his shares in favour of the other family members. It would therefore be counter-productive for him to question the very existence of the family settlement. But the contention was that the long period of silence or inaction on his part does not amount to acquiescence or estoppel. A shareholder, it was contended, did not have to do anything except hold on to his shares which is what he did in all these years. He also became ill due to acute ulcerative colitis and severe eye problem between 2001 and 2008. But when once he came to know that his name did not appear in the register of members, he immediately hastened to take action. The appellant very well knew of the settlement, because it was only under the settlement that he was getting the bag-closing and conveying systems business, which was henceforth to belong to him exclusively, at least from April, 1994, in return for giving up the shares. He could not have been oblivious to the anxiety of his parents to provide for his sister and nephew, given the fact that they were all staying in the same premises and being aware of the tragedy that had fallen upon her. If he had not accepted the terms of the settlement, he would have made his intentions known at a very early stage and would have resisted when asked to part with the shares. He kept his mouth shut, when there was no compulsion upon him to do so, which can only mean acceptance of the settlement. His long silence for a period of 15-16 years was in conformity and consistent with the family settlement. He had consciously given up his shares in the company. For reasons best known to him, he now wants to resile from the earlier position. That, in the light of the authorities to which I have referred, cannot be permitted. There is no explanation for his long silence. The illness from which he was said to have been suffering is not supported by any medical reports. That does not appear to have hampered the business which he was carrying on at any rate, no evidence has been brought on record to show that his individual business also suffered on account of his illness. There is total absence of any explanation for the long delay or laches. Moreover, the appellant has confined his claim to the 2500 shares which were allotted to him in 1983 and has not made any claim over the shares left by his deceased parents who died in 1995 and 2001. Further, the copy of the extracts from the minutes-book as on 20.06.1997, filed by the appellant himself, shows that on that date there were only three shareholders S.N. Sud, Manju Shiv Sud and Pankaj Shiv Sud. The appellant had referred to the inspection report of the chartered accountant which stated that the annual returns for the years 1990-91 to 1998-99 were not available in the records of the RoC; the same inspection report, in the opening paragraph, notes that as per the records available with the RoC, as on 31.03.2000, the status of the shareholding of Rs. 6,50,000 was that Manju Shiv Sud held 39,650 shares of Rs. 10 each amounting to Rs. 3,96,500 and Pankaj Shiv Sud held 25,350 shares of Rs. 10/- each amounting to Rs. 2,53,500. This shows that even on 31.03.2000, the appellant was not a shareholder - Decided against appellant.
Issues Involved:
1. Rectification of the register of members under Section 111(4) of the Companies Act, 1956. 2. Alleged family settlement and relinquishment of shares. 3. Delay and laches in filing the petition. 4. Validity of the appellant's claim to shares. Issue-wise Detailed Analysis: 1. Rectification of the Register of Members under Section 111(4) of the Companies Act, 1956: The appellant sought rectification of the register of members, claiming he was a shareholder. The respondents argued that the appellant had relinquished his shares as part of a family settlement in 1993. The Company Law Board (CLB) dismissed the petition, noting the appellant's long silence and lack of evidence to support his claim. The High Court upheld the CLB's decision, emphasizing the absence of any written transfer deed and the appellant's failure to act within a reasonable period. 2. Alleged Family Settlement and Relinquishment of Shares:The respondents contended that there was an oral family settlement in 1993, under which the appellant gave up his shares in the company. The appellant denied this, stating he did not sign any document relinquishing his shares. The CLB found that the family settlement was acted upon by all parties, including the appellant, who had accepted the settlement and acted upon it for 15-16 years. The High Court agreed, citing several Supreme Court judgments that support the sanctity of family settlements and the principle that such settlements need not be in writing. 3. Delay and Laches in Filing the Petition:The respondents argued that the petition was filed after an inordinate delay of 16 years, which amounted to laches. The appellant claimed he was ill between 2001 and 2008, which prevented him from raising his claim earlier. The CLB found the appellant's delay unexplained and amounting to laches, disentitling him from claiming any relief. The High Court upheld this finding, noting the lack of medical evidence to support the appellant's illness and emphasizing the importance of acting within a reasonable period. 4. Validity of the Appellant's Claim to Shares:The appellant confined his claim to the 2500 shares allotted to him in 1983, avoiding the more complex issues related to the shares claimed on the death of his parents. The High Court found no merit in the appellant's claim, noting the absence of his name in the company's records and the long period of inaction. The court emphasized the importance of family settlements in maintaining peace and harmony and found the appellant's attempt to resile from the settlement after 16 years unacceptable. Conclusion:The High Court dismissed the appeal, upholding the CLB's decision and emphasizing the principles of family settlements, the need for timely action, and the absence of any question of law arising from the CLB's findings. The court also imposed costs of Rs. 25,000 on the appellant.
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