9911796707
TMI Blog2005 (3) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... ctually handing over the relevant share certificates in respect of the gifted shares: ( iii )Whether the first joint shareholder, in the case of joint shareholding, could not transfer the said joint shares by gifting away the same without the consent or concurrence of the second joint shareholder. 2. Some of the brief facts which are relevant for the purpose of determination of the issues raised in the present case can be summarised as under: 3. The appellant, namely, Shree Shanti Textile Mills Private Limited is a private limited company and is closely held by the family members of one Nyalchand R. Shah (since deceased). The company is incorporated and registered in the year 1959. Originally there were three shareholders of the company holding 25 shares each. Sometime thereafter 450 further shares were issued to the said original three shareholders in proportion of 150 shares each. On 8-6-1972, 10 shares were transferred to Mrs. Kamla Shah, 10 shares were transferred to Mr. Ramesh Shah and five shares were transferred to Mr. Siddharth Shah. This transfer of 25 shares was from the shares which were held originally by Nyalchand Shah. On 8-6-1972 Mrs. Kamla Shah and Mr. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... witnessed by family doctor and attested by Notary. On 24-2-1999 Kamla Shah signed a letter recording the gift of 1290 shares in favour of Siddharth Shah. On 3-3-1999, Kamla Shah sent a registered A.D. letter along with transfer deed with an affidavit and covering letter stating that she has gifted 1,290 shares in favour of Mr. Siddharth Shah. Along with the said letter she also lodged the necessary transfer deed duly executed with the company on 5-3-1999. The company received the said letter dated 3-3-1999 but sent no reply. On 14-3-1999, Kamla Shah expired. It is the case of the appellant company that the said transfer lodged by Kamla Shah during her life time were rejected by the appellant company due to defects therein and such rejection was orally communicated by the company to the respondent No. 1 herein who was a director at that point of time. However, it is disputed by the respondent No. 1 that any such decision was taken by the company refusing to transfer the said shares. On 5-7-1999, an application was made by Ramesh Shah who is one of the directors of the appellant company for deletion of the name of Kamla Shah in respect of her holding of 1380 equity shares since acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany was bound and liable to transfer the same in favour of the respondent herein. 7. The Company Law Board by the impugned order has held that the company is bound and liable to transfer the said shares as Kamla Shah was the sole holder of said 1,290 shares and not joint holder with Ramesh Shah. Secondly, it has been held that there is a valid gift in favour of the respondent from the deceased Kamla Shah and thirdly it has been held that there has been valid application for transfer and the company was bound to transfer the said shares in favour of respondent. Accordingly the Company Law Board has by impugned order directed the company to rectify the Register of Members and transfer 1,290 shares belonging to the deceased Mrs. Kamla Shah to the name of the respondent and deliver the same within one month from the date of the said order. 8. It is this order which is the subject-matter of appeal before me and the learned counsel appearing for the appellant under section 10F of the Companies Act has raised the aforesaid substantial questions of law which are set out hereinabove. 9. In support of the aforesaid questions of law, the learned counsel for the appellant has ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of exercise of power by the Company Law Board or for that matter to give direction to transfer the shares, the Company Law Board is required to see whether the refusal of the Board of Directors for transferring of the said shares is bona fide, in the interest of the company or totally mala fide. It has been contended by the learned counsel for the respondent company that the acts of the Board of Directors and the conduct of the Board of Directors is totally mala fide and thus requires no interference by this Court in the present appeal. It is therefore, contended that in fact there was no Board of Directors meeting held and no notice was served on the respondent herein in respect of a meeting where the application of the respondent was declined and the transfer of the shares in his favour was rejected. It has been further strenuously contended by the learned counsel for the respondent and in my view with substantial merits therein that the company in the present case has been acting in a total mala fide manner and is relying upon the documents which by contemporaneous evidence can be established to be not genuine and highly suspicious. It has also been contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said certificate or by maintaining separate register of transfer of shares. (3) There is not even a record of the minutes of the Board Meetings from time-to-time indicating the transfer of the shares and/or allotment of shares from time-to-time in favour of one party or the other. The learned counsel for the appellant has candidly admitted that there are no records of board meetings and there are no minutes for the contemporaneous period in which the shares allotment and/or transfer is registered in the Register of Members. (4) There is admittedly a return of allotment filed under section 75 of the Companies Act, 1956 at the relevant period of time in 1972 and 1978 when Mrs. Kamla Shah was allotted shares and the same is in the record of Register of Companies. (5) There is a Register of Members produced before me prepared in 1972 and has been relied upon so as to indicate that the transfer of the shares from time-to-time has been recorded in such Register of Members. 12. Thus, it is very clear from the conduct on the part of the company that the company is not carrying on its business and its activities in accordance with the laid down procedural requirements of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he point of time when he became the director. However, closely scrutinising the said share certificate, the learned counsel for the respondent pointed out that certificate No. 27 contains the date 12-3-1999 in place of 12-3-1992 . It has been surprising that the certificate Nos. 6 to 26 contains the date 12-3-1992 . Certificate No. 27 contains the date 12-3-1999 and once again share certificate Nos. 28 to 38 contains the date 12-3-1992 . It obviously indicates that there has been a slip while preparing the said certificate and the year 1999 has crept in certificate No. 27 which is the year in which the said certificates are prepared for the first time. It is because in the year 1999 the disputes between brothers Ramesh Shah and respondent had started due to gift of the said by mother Mrs. Kamla Shah to the respondent herein. Of course the learned counsel has made light of it saying that this is an error and this error should be ignored. I would have accepted the same but for the fact that the said share certificates are signed by father and son, kept in custody of the company all throughout and obviously to defeat the right of the respondent herein are prepared by adding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in that behalf. Section 75 of the Companies Act, 1956 provides for names and addresses of the allottees of the shares by the company. Once the shares are allotted even in joint names, both the persons are allottees and are required to be mentioned in the return under section 75. The document produced by the respondent is the most authenticate and contemporaneous document with time period of 1972 and 1978 when shares were allotted in favour of Kamla Shah (since deceased). In view thereof I do not find any justification for interfering with the final order of the Company Law Board when it held that the documents produced by way of return of allotment from the Registrar of Companies is believable and reliable and, therefore, and same should be accepted. However, the learned counsel for the appellant has thereafter urged that it is not open for the Company Law Board to reject the Register of Members because the Register of Members under sections 151 and 152 of the Companies Act, 1956 is a primary document on which the reliance should be placed by the Company Law Board. I am of the opinion that in the facts and circumstances of the present case, particularly the conduct on the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reasons that the records can be produced from the Registrar of Companies to establish any case by any third party. This reliance placed on section 610 is relevant, valid and justified and the consequent finding arrived at on the basis of the said reliance is also legal, valid and justified. I, therefore, reject the contention of the learned counsel for the appellant that Kamla Shah was the joint holder with Ramesh Shah and that the Register of Members being the primary evidence is the only document which the Company Law Board should look into for the purpose of ascertainment of the aforesaid fact. 14. The next contention raised by the learned counsel for the appellant is that there has been no valid transfer in favour of the appellant herein. In support of the aforesaid contention, the learned counsel for the appellant has also relied upon a judgment of the Supreme Court in the case of Howrah Trading Co. Ltd. v. CIT AIR 1959 SC 775 for contending that the words "Member", "shareholder" and "holder of share" are interchangeable words. The words "holder of a share" are equal to the word "shareholder". I do not see any relevance of the said judgment to the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of stamp makes the transfer document invalid as being in non-conformity with the provisions of section 108 of the Companies Act, 1956 and, therefore, there is no valid application and, thus, the order passed by the Company Law Board is liable to be set aside. Dealing with the second contention first that the transfer document should have been accompanied by share certificate and non-accompaniment thereof has made the application for transfer of shares invalid. I am of the opinion that the said contention is required to be simply rejected because the share certificates were admittedly always in the custody of the company itself and were never forwarded to the shareholders at all. In view thereof, the contention that the share certificates should have been accompanied with the transfer document is plainly speaking unsustainable. It is not open for the company to demand that the share certificate should accompany the transfer documents when they are in the custody of company itself. The contention of the learned counsel for the appellant that it was open for Kamla Shah to first apply for delivery of share certificate and collected the same and thereafter tendered the same along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncelled to the respondent herein within the prescribed period of time limit of 60 days where the respondent could have rectified the said defects. However, the respondent company has failed to show that in fact the company has pointed out the defects in the share transfer form to the respondent herein within a reasonable period of time. In view thereof, it is not open in my opinion for the respondent company to raise such contention at a belated stage and subsequent to the expiry of the said Mrs. Kamla Shah. I, therefore, reject the said contention raised by the learned counsel for the appellant pertaining to the non-compliance of section 108 by virtue of non-cancellation of the stamps affixed on the said transfer forms. 18. On the other hand, the learned counsel for the respondent has relied upon the judgment of the Apex Court in the case of Hindustan Steel Ltd. v. Dilip Construction Co. AIR 1969 SC 1238 holding that the Stamp Act being a fiscal measure enacted to secure revenue for the State, it cannot be permitted to be used as a weapon of technicality to defeat the sub-stantial rights of the parties in respect thereof. 19. In my opinion, in light of the judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as appropriate and open to the deceased to execute the gift of the movable assets without the said document being registered because under the Registration Act the same does not require to be registered. The learned counsel for the respondent has, in my opinion, rightly relied upon a judgment of the Apex Court in the case of Vasudev Ramchandra Shelat v. Pranlal Jayanand Thaker AIR 1974 SC 1728 which inter alia indicates that the gift does not become invalid for non-compliance of the formalities prescribed under the Companies Act. In that case in paragraph 10 it has been held as under: "10. In the case before us, the registered document was signed by the donor as the giver as well as by the donee, as the acceptor of the gift and it is attested by six witnesses. In it, the donor specified and gave particulars of the shares meant to be gifted and undertook to get the name of the donee put on to the registers of the companies concerned. The donor even said that she was, thenceforth, a trustee fork the benefit of the donee with regard to the income she may get due to the fact that her name was still entered in the registers of the companies concerned as a shareholder. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law Board to come to a proper assessment by considering the material and documents evidence both which are in custody of the company as well as documents filed by the company with the Registrar of the Companies. (2) Insofar as gift is concerned, I am of the opinion, that in view of the fact that the share certificate was in the custody of the company itself, it is not open for the company to contend that the transfer document did not accompany the said share certificate and/or deed of gift did not accompany the share certificate and, therefore, there could not have been a valid gift deed merely because the same did not accompany the share certificate. The aforesaid circumstances, would not make the gift deed in favour of the respondent invalid in law. (3) Insofar as the third question of law is concerned, I am upholding the findings of the Company Law Board that Mrs. Kamla Shah was singly holding all the said shares and, therefore, the question of law as framed that the first joint shareholder in the case of joint shareholding could not transfer the said joint shares does not arise and I accordingly decline to answer the same. 23. The appeal is disposed of accordingly. No ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
