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2016 (3) TMI 33 - Board - Companies LawRestoration of directorship - jurisdiction of this court conferred under sections 397 13, 52, 500/- which is amount paid by respondent No. 2 for purchasing of shares within two weeks from the date of receipt of a copy of this order.
Issues Involved:
1. Legality of removal of Petitioner No. 1 as director under Section 284 of the Companies Act. 2. Validity of the transfer of shares without a proper instrument of transfer. 3. Applicability of the proviso to Section 108 of the Companies Act concerning the loss of the instrument of transfer. Detailed Analysis: Issue 1: Legality of Removal of Petitioner No. 1 as Director The petitioners argued that no special notice was given for holding the Extraordinary General Meeting (EGM) to remove Petitioner No. 1 as a director, violating Section 284(2) of the Companies Act, 1956. The respondents failed to provide evidence of any notice served to the petitioner. The court held that the removal of Petitioner No. 1 as a director without proper notice was illegal, declaring the resolution passed at the EGM on 27.06.2013 as null and void. Consequently, Petitioner No. 1 was reinstated as a director, though not entitled to sign any cheques due to the withdrawal of his bank guarantee. Issue 2: Validity of the Transfer of Shares Without a Proper Instrument of Transfer The court examined whether the transfer of shares was valid without a proper instrument of transfer. According to Section 108 of the Companies Act, a duly stamped and executed instrument of transfer is mandatory for registering the transfer of shares. The petitioners claimed no transfer deed was executed, alleging fraud by the respondents. The respondents' assertion that the transfer deed was lost was found unconvincing, as they failed to provide evidence of the existence of the original document or the attesting witnesses. The court concluded that the transfer of shares did not comply with the mandatory provisions of Section 108, thereby restoring the petitioners' shareholding in Respondent No. 1-company and declaring the annual return for 2013 showing the transfer as null and void. Issue 3: Applicability of the Proviso to Section 108 The respondents argued that the transfer was covered by the proviso to Section 108, which allows registration of transfer if the instrument is lost, provided the Board of Directors is satisfied. The court rejected this argument, stating that the existence of the original instrument must be proved first. The respondents failed to establish the existence of the original document, and the self-serving statements regarding the lost documents were not credible. Therefore, the proviso to Section 108 was deemed inapplicable. Conclusion The court partially succeeded in the petition, reinstating Petitioner No. 1 as a director and restoring the petitioners' shareholding in Respondent No. 1-company. The respondents were directed to rectify the register of members and upload a new e-form 32 on the ROC website within two weeks. The petitioners were required to refund the amount paid for the shares within two weeks from the receipt of the order.
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