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TMI Blog2010 (2) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... at the provisions of the Limitation Act do not apply to the proceedings before the Company Law Board ? (b) Whether the Company Law Board was right in presuming that the petitioner had knowledge in 2003 about the transfer of shares from the date when he has inspected the records of the company at the Registrar of Companies when the records were available at the Registrar of Companies even in the year 1997 for inspection ? (c) Whether the Company Law Board was right in exercising its jurisdiction under section 111 of the Companies Act, 1956, by ignoring the decisions relied on by counsel for the appellants to show that when the matter admittedly involves forgery, fraud, lack of title, etc., the civil court alone will have jurisdiction ? (d) Whether the Company Law Board was right in making a presumption against the appellants to their disadvantage for not producing the minutes of the meeting of the board, register of members and share transfer when these documents were not admittedly in dispute before the Company Law Board ? (e) Whether the Company Law Board was right in directing rectification of register of members after factually holding that the respondent had transferred the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed with the Registrar of Companies, Madras dated September 19, 1997, revealed that the equity shares held by the respondent in the company had been transferred in favour of the second appellant Paneerselvam without the knowledge of the respondent. In the circumstances, the respondent called upon the appellants herein to rectify the register by re-entering the name of the respondent in the register. The claim was, however, refuted by the appellants in the reply dated May 2, 2003. 4. In the above circumstances, the respondent herein filed a company petition before the Company Law Board alleging that the letter dated December 30, 1995, was only as regards the respondent coming out of the company's directorship and the receipt of the money was only towards profit sharing. In the circumstances, there was no transfer effected of the shares held by the respondent herein. The respondent contended that he came to know about the transfer of 101 equity shares which stood in his name to the name of the second appellant only on March 31, 2002, on an inspection of the annual return filed by the company with the Registrar of Companies. The respondent stated that he neither executed any transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law Board followed the decision in the case of Jagjit Rai Maini v. Punjab Machinery Works P. Ltd. reported in [1995] 4 Comp. LJ 110 ; [2001] 103 Comp. Cas. 979 (P & H), and thus rejected the plea of the appellants on the question of limitation. 8. As regards the merits of the case, the Company Law Board pointed out that even though the share transfer was stated to have been effected on December 30, 1995, the transfer was registered on January 31, 1997. The first appellant had not chosen to produce before the Company Law Board the original minutes of the meeting of the board of directors approving the transfer of the impugned shares or the register of members or share transferred in the custody of the appellants herein. The Company Law Board further pointed out that the share certificates and transfer deeds were not in the custody of the company, since January 3, 1996, in which case, it was not known how the company could register the transfer on January 30, 1997, without the custody of the share certificates and transfer deeds. 9. Learned counsel appearing for the appellants, taking serious exception to the point of limitation held against them, made his submission on the aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is necessary to refer to the decision of the apex court reported in [1998] 94 Comp. Cas. 310; [1998] 7 SCC 105 (Ammonia Supplies Corporation P. Ltd. v. Modern Plastic Containers P. Ltd.), where the apex court considered the scope of section 155 of the Companies Act (prior to the Amendment Act 1988). Referring to the scope of section 155 of the Companies Act, the Supreme Court pointed out that the court has the discretion to find out as to whether the dispute raised is really for rectification or is of such a nature that unless decided first, it would not come within the purview of rectification. It pointed out that the word "rectification" itself connotes some error which has crept in requiring correction. Error would only mean everything as required under the law has been done yet by some mistake the name is either omitted or wrongly recorded in the register of the company." 14. Dealing with the qualification for rectification, the Supreme Court pointed out that it must be shown that every procedure prescribed under the Act has been complied with for registering the name in the register of the company and that the person seeking rectification must show what had not been complied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or dispute between persons raised in such court it may generally decide any matter which is necessary or expedient to decide in connection with the rectification." 17. The case of the respondent herein is that on the day when he came out of the board, the respondent gave a letter as well as "no claim" declaration. A reading of the same shows that all that the respondent had received was only a profit amount due from the company for the transactions up to December 30, 1995. Much emphasis was placed on this letter by the appellants, particularly to the two lines, which are as follows : "There is no other transaction I will involve myself in the name of the company, viz., N.S. Nemura Consultancy India P. Ltd. Madras." 18. I do not think that by reading these two lines one can reach a definite conclusion that the respondent had divested himself of all his rights as a shareholder of the company by giving up the shares that he held. A reading of this letter dated December 30, 1995, gives a definite understanding of the fact that he had received his share of profit from the company. The resignation of the respondent from the post as director and the declaration of the respondent herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be to direct the parties to exhaust their remedies before the civil forum. I do not find such a course need be adopted herein, since, even on a prima facie view, to accept the case of the appellants, the basic documents which are to be placed before the Board for accepting such a plea are admittedly not forthcoming from the appellants herein. It is no doubt true that the respondent herein had done nothing since 1997 to 2002 to check the status of his shares with the first appellant company, but by that aspect alone, one cannot presume that there had been a transfer of shares by the respondent to the appellants and that he had executed a transfer deed. 22. The case of the respondent herein is that on his checking of the registers in the year 2002, he came to know that the name had been transferred in favour of the second respondent Paneerselvam without his knowledge. Hence, on the transfer of shares, the respondent sought for rectification of the register of shares. The consistent case of the respondent is that he continued to be the owner of the shares and that on finding the registers of the company in the Registrar of Companies some time in 2002 carrying the name of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to putting a seal of approval as to the contravention of the mandatory provisions of the Act. The case of the appellants is not one falling under the second proviso to section 108 of the Act, viz., transmission by operation of law. Section 108(1) of the Act does not speak of any execution by the company, the transfer has to be by a shareholder through an instrument of transfer duly stamped and executed by or on behalf of the transferor or the transferee and delivered to the company. In the absence of anything shown that there was a transfer in terms of section 108 of the Act, rightly, the Company Law Board allowed the petition. In these circumstances, I do not find any substantial question of law to interfere with the findings of the Company Law Board. 26. In the light of the said fact that the respondent had the knowledge as to the transfer only in the year 2002 and the company petition thus preferred within a period of three years, the view of the Company Law Board that the action was well within the limitation, hence, merits to be accepted. In the circumstances, the order of the Company Law Board (A. Devarajan v. N.S. Nemura Consultancy India P. Ltd. [2006] 130 Comp. Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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