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2019 (5) TMI 521 - AT - Companies LawTransfer of shares - whether the shares were transferred in the first place? - whether the Respondents could rightly claim that all due procedure under the Companies Act was followed for omitting the name of OP1 and entering the name of OR2 in the register of members? HELD THAT - We are unable to accept the defence of the Appellants in the Company Petition that OP1 had transferred his shares to the Appellant No.1. The Appellants - original Respondents 2 and 3 first took defence to claim that in alleged normal and general practice of the Company, the shares were transferred; then subsequently they took a defence of handing over of shares with transfer forms to claim that there was gift (without referring to any document); and yet subsequently, took a stand that there was also a gift deed executed. They then conveniently take a stand of loss of records, hiding behind a vague FIR filed when the heat from OP1 increased. With such shifting stands, the contesting Respondents Appellants failed to convince the learned NCLT and have failed to convince us that OP1 gifted the shares and that due procedures under the Companies Act have been followed regarding change in the Register of members. No document worth the name showing compliances of the Companies Act effecting change in the Register of Members, has been brought before us and the defence that there was a gift, is also not inspiring confidence. Prima facie, the Appellants failed to prove such defence of gift before NCLT and us that the Appellants have justifiable reasons for their action to omit the name of the original Petitioners from the Register of members and to add that of Appellant No.1 - Smiti Golyan. The learned NCLT rightly decided the matter - appeal dismissed.
Issues Involved:
1. Validity of the share transfer. 2. Compliance with Section 108 of the Companies Act, 1956. 3. Jurisdiction of the NCLT to decide the title of shares. 4. Alleged fraudulent transfer of shares. 5. Evidence of the gift deed and transfer forms. 6. Rectification of the Register of members under the Companies Act. Detailed Analysis: 1. Validity of the Share Transfer: The Appellants claimed that shares were transferred to Appellant No.1 as a gift from OP1. They argued that the transfer was valid and followed due procedure. However, the initial response from the Appellants indicated that the shares were transferred as part of a "normal process" and family arrangement, without mentioning any gift deed. Subsequent claims introduced the existence of a gift deed, which was not initially mentioned. The NCLT found inconsistencies in the Appellants' claims and doubted the veracity of the gift deed. 2. Compliance with Section 108 of the Companies Act, 1956: The Appellants argued that the NCLT should not have delved into the title of the shares and should have only examined compliance with Section 108 of the Companies Act, 1956. The NCLT, however, found that the Appellants failed to provide evidence of compliance with the required procedures under Section 108 for the transfer of shares. The NCLT noted the absence of share transfer forms and other necessary documents, which the Appellants claimed were lost. 3. Jurisdiction of the NCLT to Decide the Title of Shares: The Appellants contended that the NCLT did not have the jurisdiction to decide on the title of the shares and that such matters should be addressed in a civil suit. However, the NCLT and the appellate tribunal referred to the judgment in "Ammonia Supplies Corporation (P) Ltd. vs. Modern Plastic Containers Pvt. Ltd.," which clarified that the NCLT has the jurisdiction to decide on matters related to the rectification of the register of members, including incidental questions. 4. Alleged Fraudulent Transfer of Shares: The Respondents (original Petitioners) argued that the transfer of shares was fraudulent and that OP1 never signed any transfer deed. They claimed that the Appellants, who were managing the company, used their position to effect the transfer without OP1's consent. The NCLT found merit in the Respondents' arguments and noted the suspicious circumstances surrounding the alleged transfer, including the loss of documents and the shifting stands of the Appellants. 5. Evidence of the Gift Deed and Transfer Forms: The Appellants initially did not mention the existence of a gift deed but later introduced it as evidence. The NCLT scrutinized the gift deed and found it unconvincing. The tribunal noted that the gift deed was written by Appellant No.2 and questioned why OP1 did not write it himself. Additionally, the affidavits provided by the Appellants to support the gift claim were found to be dubious, with one affidavit being backdated. 6. Rectification of the Register of Members: The NCLT concluded that the Appellants failed to justify the transfer of shares and the omission of OP1's name from the register of members. The tribunal ordered the rectification of the register to reinstate OP1 as the shareholder of the disputed shares. The appellate tribunal upheld the NCLT's decision, emphasizing that the NCLT has exclusive jurisdiction under Section 59 of the Companies Act, 2013, to determine matters related to the rectification of the register of members. Order: The appeal was rejected, and each of the Appellants was ordered to pay costs of ?50,000 to Respondent No.2 (OP1).
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