2015 (5) TMI 591 - Board - Companies Law

Application for rectification of the register of members u/s 111 r/w section 402 & 403 of the Companies Act, 1956 - Illegally allotment of shares - Wrongly admitted as a member / shareholder of company - No provision u/s 111A regarding allotment is valid or not - Held that - The allegation of the petitioner is that it has been Illegally allotted shares of the Respondent company without notice to the petitioner; therefore, sought for rectification of register. The case of the petitioner is about allotment, but not on transfer as laid under sub-section (l11A) of the Companies Act. It is clear that there are two provisions under the Companies Act dealing with rectification of share register, one is section 111 of the Act 1956 deal with private limited companies, another is section 111 A of the Act 1956 deal with public limited companies. It is true sub-section (4) of section 111 has not said rectification is limited transfer and transmission of the shares, whereas the heading of section 111A of the Act itself says rectification of register is on transfer, therefore, an issue in relation to allotment in public limited companies will not fall within the ambit of section 111A of the Act 1956. There is no provision in section 111A analogous to sub-section (4) of Section 111 of the Act 1956, therefore there being no provision under section 111A to go beyond transfer and transmission cases, I believe CLB is not conferred with jurisdiction under section 111A either to say allotment is invalid or valid.n view of the same, this Bench is of the opinion that the issue being related to allotment of the shares to the petitioner, the impugned allotment of shares being in relation to the Public Limited Company, Company Law Board has no jurisdiction to adjudicate as to whether allotment made to the petitioner is valid or not. - Decided against the appellant.

Summary

Issues:
Rectification of register of members for wrongful shareholder listing and consideration adjustment.

Analysis:
1. The petitioner filed a petition under sections 402 and 403 of the Companies Act, 1956 seeking rectification of the register of members of the respondent company due to being wrongly shown as a shareholder. The petitioner claimed that the respondent had entered into an agreement to sell an Industrial Plot to the petitioner for a total consideration, part of which was paid as earnest money.

2. The petitioner alleged that the respondent failed to execute the sale deed as agreed, and later discovered that they were shown as a shareholder without consent. The petitioner argued that this was done to divert attention from a civil case against the respondent. The petitioner requested the removal of their name from the register of members.

3. The respondent denied the allegations and did not provide any documentation to support their position. During the hearing, the respondent's counsel stated they had no instructions from the respondent to file a sur-rejoinder or make submissions.

4. The Company Law Board analyzed the provisions of section 111A of the Companies Act, 1956, which deals with the rectification of the register of transfer for public limited companies. It was noted that the petitioner's case was about an allotment, not a transfer, and thus fell outside the scope of section 111A.

5. Section 111A(2) allows for the appeal to the Tribunal if a company refuses to register a transfer of shares, but this provision is applicable pre-registration and not to cases of allotment. Section 111A(3) pertains to post-registration cases involving violations of specific laws, not wrongful allotments.

6. The absence of a provision in section 111A similar to sub-section (4) of section 111 led the Board to conclude that it lacked jurisdiction to determine the validity of the allotment. The Board suggested that the petitioner pursue the matter in a civil court.

7. Consequently, the Company Law Board dismissed the petition, stating that as the issue related to the allotment of shares in a public limited company, it did not have jurisdiction to decide on the validity of the allotment. The petitioner was advised to address the matter in a civil court if desired.