2015 (4) TMI 273 - Board - Companies Law

Composite application under Section 59 of the Companies Act, 2013 read with Section 397, 398 and 402 of the Companies Act - Fraudulently transfer of shares - Notice not served of Annual General Meeting or any EOGM - Contradictory statements - Held that - I have considered the rival submissions and perused the record. Upon a careful examination of the petition and the rejoinder filed by the Petitioner, it is seen that the statements made by the petitioner are self contradictory. In para No. 6(d) of the petition, the Petitioner has admitted having received two share transfer forms from the company on or about 15/03/2007 whereby the Petitioner's entire shareholding i.e. 505 shares and 1500 shares-In-question was sought to be transferred to the Respondent Nos. 3 and 4. However, according to the Petitioner, she did not sign the said transfer forms as she never intended to transfer the shares in question held by her in the Company and till date the said unsigned transfer forms are in the possession of the Petitioner as the same was never executed or send back to the Company, whereas in para No.6(i) she has admitted that she received a sum of Rs,20,05,000/- towards part payment of the sale consideration for transfer of the said shares and the balance amount was to be paid upon valuation of the shares by a Chartered Accountant in terms of Articles of Association of the Company. In the instant case, it is a established fact that the Petitioner was paid ₹ 20,05,000/- as sale consideration, which according to case of the Petitioner towards the part payment of the total safe consideration to be determined by the Chartered Accountant in terms of AOA of the Company. However, admittedly the said amount is still lying with the Petitioner and she has not refunded the same till date to the respective Purchasers of the shares-in-question i.e Respondent Nos. 3 and 4 despite her own admission that she never intended to transfer the said shares, as contended by her. Moreover, she has not deposited this amount anywhere including this Board prior to filing of the instant petition. In my view, the Petitioner is therefore a party to such sale transaction having received the said amount which although according to her, is a part payment only. In addition to the above, In the original share certificates the names of the transferees have been duly recorded. The Register of Members of the company has been rectified accordingly. Furthermore, in the instant case, the transfer deeds were partly executed and were handed over to the Petitioner for her signatures. This possibility cannot be ruled out that the Respondents might have forgotten to receive back the said transfer deeds and now the Petitioner out of greed by misusing the same, is trying to resile from the sale transaction in which she herself was a party. The contention of the Petitioner, therefore, in my view is not tenable that the transfer of shares-in-question by way of sale is bad-in-law. I would further like to add here few authorities, wherein it has been laid down that where the Parties have acted upon the transaction of sale, assuming there was some irregularity, such transfer cannot be disown by a person who himself/herself was party to such transaction. it is clear that the Petitioner has failed to prove that the impugned transfer of shares as invalid, ineffective, void and ultra vires and has no value in the eyes of law and thus, liable to be ignored. I am further of the view that non-compliance of Section 108(1) of the Act is not fatal in this case, having regard to peculiar facts of the case stated above. A party who has gained benefit cannot be allowed to disown her own act. It is an old maxim that a person who seeks equity must do equity. Therefore, It is established that the petitioner has not come to the Court with clean hands and therefore, she is not entitled to be heard with respect to her grievance and in any case, is not entitled to discretionary relief by the Court. It is further established that the Petitioner has filed this petition with ulterior motive and collateral purpose to exert pressure on the Respondents and not with genuine objective and on this ground also the petition deserves to be dismissed. - Application dismissed.

Summary

Issues Involved:
1. Maintainability of the petition.
2. Validity of the transfer of shares.
3. Compliance with Articles of Association.
4. Limitation period.
5. Allegations of oppression and mismanagement.
6. Conduct of the petitioner.

Detailed Analysis:

1. Maintainability of the Petition:
The Respondents challenged the maintainability of the petition on the grounds that the Petitioner did not hold the requisite qualification of shares at the time of filing the petition, making her ineligible under Section 399(1)(a) of the Companies Act, 1956. The Respondents argued that the Petitioner had transferred her entire shareholding to Respondent Nos. 3 and 4, and her name was deleted from the Register of Members. The Petitioner contended that she never transferred her shares and that the alleged transfer was bogus, void, and ultra vires. The Court held that a composite petition under Section 59 of the Companies Act, 2013, and Section 397/398 of the Act is maintainable, as the last disputed position of shareholding needs to be examined.

2. Validity of the Transfer of Shares:
The Petitioner argued that the alleged transfer of 2005 equity shares was illegal, void, and ultra vires. The transfer did not comply with Section 108(1) of the Act, which requires a proper transfer deed duly stamped and executed by both the transferor and transferee. The Petitioner claimed that she never signed the transfer forms, which were still in her possession. The Respondents countered that the Petitioner had received the full consideration for the shares and that the shares were duly transferred and recorded in the Register of Members. The Court found that the Petitioner had received Rs. 20,05,000 as sale consideration and retained the amount for over seven years without refunding it, indicating her participation in the transaction. The Court held that non-compliance with Section 108(1) was not fatal in this case, as the Petitioner was a party to the transaction.

3. Compliance with Articles of Association:
The Petitioner argued that the transfer violated Article 15 of the Articles of Association, which mandates that shares be offered to existing members at a fair price determined by the Auditors. The Court found no evidence that the Petitioner requested a valuation by a Chartered Accountant before or after receiving the part consideration. The Court rejected this contention, stating that mutual agreement on the sale consideration negated the need for valuation under Article 15.

4. Limitation Period:
The Respondents argued that the petition was barred by the law of limitation, as the alleged transfer occurred in 2007, and the petition was filed in 2014. The Petitioner claimed that she became aware of the transfer only in 2011 after her husband's death and initiated correspondence with the Company and the Registrar of Companies in 2012. The Court found that the Petitioner had knowledge of the transfer since 2007 and failed to act diligently. The Court held that the petition was time-barred, having been filed after the expiry of three years.

5. Allegations of Oppression and Mismanagement:
The Petitioner alleged acts of oppression and mismanagement by the Respondents, including the dilution of her shareholding from 20% to 0% without due process and the exclusion from the Company's affairs. The Court found these allegations irrelevant, as the Petitioner was not a shareholder since June 2007, and her complaints about non-receipt of notices and reduction in shareholding were baseless.

6. Conduct of the Petitioner:
The Court observed that the Petitioner did not come with clean hands, as her pleadings were contradictory, and she failed to refund the amount received for the shares. The Court held that the Petitioner had filed the petition with an ulterior motive and not with a genuine objective, constituting an abuse of the process of the court.

Conclusion:
The Court dismissed the petition, holding that the Petitioner was not a shareholder at the time of filing the petition and that the petition was barred by the law of limitation. The Court also found the Petitioner guilty of misconduct and not entitled to any relief. The ad-interim order was vacated, and no order as to costs was made.