2022 (2) TMI 1178 - AT - Companies Law

Seeking rectification of register of members of the appellant company - cancellation of excess 51,889 equity shares allotted to Respondent No.1 - HELD THAT - Any aggrieved person may appeal to the Tribunal for rectification of the register. After filing of the application, the Tribunal (NCLT) either dismiss the appeal or direct rectification of the records of the register and has power to direct the company even to pay damages if any sustained by the party aggrieved. Therefore, the Tribunal has power to direct the authorities to rectify the Register of the Members by cancelling the shares. However, the NCLT in the impugned order taken a stand that the Appellant has not approached the Registrar of Companies. The NCLT has power to order/ direct the concerned authorities to rectify the register of members even by cancelling the excess shares. However, the NCLT erred in observing that the appellant has not approached the Registrar of Companies. This tribunal is of the view that the NCLT miserably failed to exercise the power and its jurisdiction as vested in it. Further the NCLT ought to have considered on the factual aspect of the inadvertent error and the appellant company bonafidely informed the RBI and its Regulators with regard to the inadvertent error / bonafide mistake crept in and sought permission to rectify the mistake by cancelling the excess shares. Even the R1 company also through its Board Resolution expressed their No Objection for cancellation of excess shares. This Tribunal comes to a resultant conclusion that the appellant has made out a prima facie case to allow the appeal - matter is remanded back to the NCLT and the learned NCLT is directed to consider cancellation of 51,889 equity shares allotted to Respondent No.1 and direct the ROC to carry out necessary rectification of records relating to share capital and share premium account - appeal allowed by way of remand.

Summary

Issues:
- Appeal against the Impugned Order dated 5th February 2021 passed by NCLT, Bengaluru Bench for dismissal of Company Petition.
- Rectification of Register of Members by cancelling excess equity shares allotted to Respondent No.1.
- Compliance with FEMA Regulations and RBI guidelines regarding conversion of shares.
- Jurisdiction of NCLT to order rectification of register without approaching Registrar of Companies.

Analysis:
- The Appellant, a private limited company, filed an appeal against the dismissal of its Company Petition seeking rectification of the register of members by cancelling 51,889 excess equity shares allotted to Respondent No.1. The NCLT dismissed the petition for not approaching the Registrar of Companies as required by Sec.59 of the Companies Act, 2013.
- Sec.59 empowers the Tribunal to rectify the register of members upon appeal, directing necessary actions including cancellation of shares. The appellant sought permission from RBI and received a No Objection Letter from Respondent No.1 for the cancellation of excess shares.
- Despite advice from RBI and consent from Respondent No.1, the NCLT failed to exercise its jurisdiction properly. The Tribunal noted the inadvertent error in share conversion pricing and the steps taken by the appellant to rectify the mistake.
- Considering the legal provisions and factual circumstances, the Tribunal set aside the NCLT's order, restoring the Company Petition. It directed the NCLT to consider cancelling the excess shares and instructed the ROC to rectify the records. The appellant was allowed to file additional affidavits for statutory changes, and the NCLT was urged to expedite the proceedings.

This detailed analysis highlights the legal and procedural aspects of the case, emphasizing the Tribunal's decision to allow the appeal and provide specific directions for rectification of the register of members.