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TMI Blog2012 (10) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... - the CLB ought to have focussed on the primary issue before it as to the permissibility of the continuation of the petition and not traversed beyond jurisdiction to ensure that the petitioners before it got their rightful due. The CLB should have appreciated that the petition under Sections 397 and 398 could no longer be prosecuted and ought to have left the petitioners before it free to canvass their grievance as to the inadequacy of the consideration before the appropriate forum. If the share certificates have been deposited by the appellants or their nominees with the CLB pursuant to the direction contained in the order impugned, they shall be immediately returned to the named holders thereof. If the sum of Rs.12,03,47,715 has been deposited by the respondents with the CLB, the respondents will be entitled to refund of the same immediately together with any accrued interest thereon. - ACO No. 169 of 2012 & APO No. 341 of 2012 - - - Dated:- 9-10-2012 - SANJIB BANERJEE , J For the Appellants: Mr S. N. Mookerjee, Sr Adv., Mr Ratnanko Banerji, Adv., Ms Swapna Choubey, Adv. For the Respondents: Mr Anil Kumar Seth, Adv., Ms Sarada Hariharan, Adv. SANJIB BANERJEE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffort in seeking either to establish that the disputes qua the company stood resolved by the settlement of September 17, 2011 or that there was no settlement at all; and it appears that since a similar exercise must have been carried out before the CLB previously, the CLB got taken in by the same and chartered a course which may have been both beyond what was necessary and outside the realms of its authority. The appellants, however, insinuate something sinister. They say that their application was adjourned on specious pretexts before the regular member in charge of the Eastern Region Bench; that the matter remarkably ripened for hearing before a technical member who took charge for a short tenure; and, the inference drawn by the member from the recorded facts is so outlandish that a bit more than mere arbitrariness and unreasonableness has to be attributed to the order impugned. But it is unnecessary to bark up such fruitless tree when the legal question that has arisen can be answered on the basis of a solitary admitted fact. The respondents held, at the time of the institution of the petition, 12,96,250 equity shares of Rs.10/- each and 2,07,200 preference shares of Rs.10/- e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely poor vision and other physical problem and was misled into signing some documents with the intention to fraud or cheat the petitioner. 5. Again in the rejoinder, to the rejoinder of the respondent dated 11th June, 2012, the petitioner has stated that shareholders agreement bearing the month of May, 2011 was not made available to her at any point of time and the respondents neither filed nor mentioned about this agreement. The said draft agreement was signed as blank agreement and along with that, some blank but signed transfer deeds and share certificates were exchanged with a commitment to make a final agreement in the similar form containing facts and figures after final settlement to exchange properly and legally executed share transfer deeds and the fair value of shares is still to be determined. Apart from this, the petitioner has stated that the copy of the letter purported to have been signed by the petitioner and addressed to the Regional Director, Eastern Region of the MCA and addressed to the Registrar of Companies West Bengal and to the Secretary MCA as filed by the respondents on 28/03/2012 along with the Terms of Settlement dated 17/09/2011 contain imitation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same paragraph, the first respondent stated that she repeatedly requested the respondents to finally determine the price of the shares held by the petitioner and also to determine the value of the petitioner s 25% share in the profit of the company. At the following paragraph of her first affidavit, the first respondent herein referred, inter alia, to the claim of the appellants herein that share transfer forms had been executed in May and June of 2011 for transferring the shares held by the respondents herein in the company. The ninth paragraph of such first affidavit reveals as follows in its first two sentences: 9. The petitioner confirms that she had no idea or knowledge of singing a Final settlement agreement and signing share transfer forms. The petitioner hereby submits that the respondents, taking advantage of her extremely poor vision and other physical problems, mislead her into signing some documents, with the intention to fraud (sic, defraud) and cheat the petitioner. In paragraph 12 of the same affidavit, the first respondent herein claimed that she signed the agreement dated 17/09/2011 based on the explanation and representation of the respondents that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xth clause thereunder. The CLB directed the consideration of Rs.12,03,47,715 received by the respondents herein to be deposited with the CLB along with the relevant share certificates for a valuer to be subsequently appointed to assess the worth of the shares. That the consideration in excess of Rs.12 crore was deposited in the bank accounts of the respondents herein in September, 2011 was noticed by the CLB, but no inference was drawn from such fact. But, again, it is unprofitable to get side-tracked by referring to matters of minute detail which may not be of any significance in the backdrop of the primary legal issue. It is equally useless to refer to the letters issued by the first respondent herein to the relevant registrar of companies, the regional director of the ministry of corporate affairs and to the ministry confirming that she had no further complaint relating to the company as she had sold her shares therein, since the first respondent has questioned her signature on such letters in her second affidavit filed before the CLB. In the CLB s eye for the minutae, as apparent from the order impugned, the CLB may have lost sight of the scope of the proceedings before it. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 397 or Section 398 of the Act transfer their shares in the company during the pendency of the proceedings, the complaint becomes irrelevant unless and it is possible only in some cases the transferees of the shares seek to espouse the cause on the ground that the acts complained of were intrinsic to the shares and transcended the personality of the shareholders. In the present case, technically, there was no denial on behalf of the second and third respondents herein as to the transfer of the shares held by them in the company. Even if the respondents stand before the CLB is regarded more charitably, the factum of the execution of the share transfer forms by the respondents was not in dispute. What was in dispute was the adequacy of the consideration therefor. Such dispute was irrelevant in the context of the proceedings under Section 397 and Section 398 of the Act and as to whether the petition could have been continued. As is further apparent from the order impugned, the CLB was minded to right the perceived wrong and ensure that adequate consideration was received by the respondents herein for the concluded transfer of their shares in the company. There is error appar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted the petition to remain on its board to assess the fair valuation of the shares of the petitioners before it in the company which had already been transferred. Such exercise to ascertain the true worth of the shares already transferred was of no consequence to the company and could not have been for the company s benefit and, as such, appears to have been extraneous to the purpose of the proceedings. Unfortunately, this court has failed to engage the respondents attention on such aspect of the matter despite several reminders in course of the hearing. Instead, the respondents have veered off course to emphasise on single-line orders of adjournment to impress that the settlement had never been worked out. But the settlement or the adequacy of the consideration for the transfer of shares is not germane to the issue. Once it was admitted that the share transfer forms were signed and the share certificates made over, the character of the respondents as members of the company was lost and the alleged or perceived inadequacy of consideration would be a matter outside the scope of the proceedings under Section 397 and Section 398 of the Act. The respondents have referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself. If the admission on such score in the first affidavit were to be effectively resiled from, the circumstances as to how the admission was initially made had to be adverted to and elaborated on in the first respondent s second affidavit filed before the CLB. There is nothing in the second affidavit by way of even a line of explanation as to what compelled the first respondent to admit her signature and her execution of the memorandum of settlement of September 17, 2011 or the changed circumstances under which she wished to retract therefrom. A principle of law has to be applied to facts and merely because the principle exists would not permit the first respondent or the other respondents riding piggy-back on the first respondent to wriggle out of an unequivocal admission as to a state of things without any assertion in such regard. Since the petitioners before the CLB were no longer members of the company when the relevant application seeking dismissal of the petition fell for the consideration of the CLB, irrespective of whether the petitioners had been cheated in pennies or in millions in the transaction, the CLB ought to have focussed on the primary issue before it as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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