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TMI BlogBAR IN SECTION 22 OF SICA DOES NOT EXTEND TO ANY DIRECTIONS ISSUED BY COMPANY LAW BOARD UNDER SEC. 111/111A OF COMPANIES ACT, 1956X X X X Extracts X X X X X X X X Extracts X X X X ..... BAR IN SECTION 22 OF SICA DOES NOT EXTEND TO ANY DIRECTIONS ISSUED BY COMPANY LAW BOARD UNDER SEC. 111/111A OF COMPANIES ACT, 1956 - By: - Mr. M. GOVINDARAJAN - Corporate Laws / IBC / SEBI - Dated:- 14-10-2009 - - Sec.22 of Sick Industrial Companies (Special Provisions) Act, 1985 ('SICA' for short) bars any judicial proceedings against the company which is brought under the provisions of SICA. The company may go sick but bar of Sec. 22 of SICA is no protection to the company for the default in transferring the shares under Secs.111 and 111A of the Companies Act and the said bar does not extend to any direction which may be issued by the Company Board for rectification of Register of Members. The same has been confirmed by the Company Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board, Southern Region Bench in 'Vallur Mohamed Saheb V. Golden Agro Tech Industries Ltd., and others' (2008) 84 CLA 374 (CLB). The facts of the case run as follows: The petitioner was a school teacher by profession, purchased during December 1996, 2700 equity shares of Rs.10 each comprised in Certificate Nos. 13951 to 13960, 13029 to 13037 and 13961 to 13968. The transfer deeds executed on 19th December 1996 were sent to the then Registrar and Share Transfer Agent through courier. The share transfer was not effect. The petitioner approached the transferor in this regard. It was reported that the RTA received the share certificates and requested to wait some time as it would take time for effecting the transfer of the shares in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transferor. Despite the continuous reminders the shares were not transferred to the petitioner. The petitioner filed a complaint before the Consumer Forum which dismissed the complaint on the ground that the Consumer Forum had no jurisdiction to entertain such complaint. The petitioner also approached the Lok Adalat against the company and RTA. Lok Adalat also dismissed the complaint on the ground that the respondents did not appear before Lok Adalat. In these circumstances, the petitioner is seeking directions against respondents to pay an amount of Rs.1,38,560 with future interest till the date of realization or to issue duplicate share certificates in favour of the petitioner and award costs of this application. The company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed counter in which it pleaded the following points: The transferor had purchased 2700 shares of Rs.10 each and the purchase was not made directly from the company but from the RTA; The company is not aware of the transaction that had taken place in this regard; The petition is purposefully made against the company knowing fully well that it was the RTA who is in charge of dealing with the transfer of share certificates. The RTA should issue the duplicate shares if it is satisfied as to the loss of original share certificates; The company became a sick unit and is registered with the Board of Industrial and Financial Reconstruction ('BIFR' for short); The petition is not maintainable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of Sec. 22 of SICA; The petitioner may be directed to approach the BIFR and the petition may be dismissed with cost. The Company Law Board after considering the points raised by the petitioner and the respondent observed as follows: The company, being the principal of RTA cannot shrink of its responsibility on account of the inaction of RTA who was its agent; The facts not in dispute are that the transferor originally acquired 2700 shares of Rs.10 of the company which were sold in favour of the petitioner. The petitioner and the transferor executed the transfer deeds on 19th December, 1996 upon which the petitioner lodge the transfer deed along with the original share certificates to RTA to transfer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his favour on 28th December, 1996 through courier. Since the company and RTA failed to deliver the share certificates in favour of the petitioner, the transferor entered into a series of correspondence and submitted indemnity bond, fresh transfer deed for obtaining duplicate share certificates and transferring the shares in favour of the petitioner. Though the RTA assured in its communication dated 5th November, 1997, addressed to the transferor that the issue of duplicate share certificates and transfer in favour of the petitioner would take some time due to certain formalities but no action has been taken; The petitioner was also unsuccessful before the Consumer Forum and Lok Adalat, thereby the legal rights of the petitioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver the impugned shares got unduly delayed over a decade; The company, though reportedly a sick company, cannot take protection under Sec. 22 of the SICA; Sec.22 of SICA contemplates that where in respect of an industrial company an enquiry under Sec.16 is pending, or any scheme referred to under Sec. 17 is under preparation or consideration by the BIFR or any appeal under Sec.25 is pending, no proceedings for the winding up of the industrial company or for execution, distress of the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in respect of any loans or advances granted to the industrial company shall lie or be proceeded with further, save with the consent of BIFR or the appellate authority; When a petition is made under Sec. 111/111A of the Companies Act the Company Law Board may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted there from the register; The bar embodies in Sec. 22 of SICA does not extend to any direction which may be issued by the Company Law Board under Sec. 111/111A of the Companies Act for rectification of the register of members of the company; In view of this legal position, the resistance of the company for not registering the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of shares constituting miniscule 2700 shares only in favour of the petitioner is not tenable. The Company Law Board directed the company to rectify its register of members by placing the name of the petitioner in the name of the transferor and consequently issue fresh shares certificates to the petitioner. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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