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TMI Blog2015 (4) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, by virtue of the Articles of Association and the power conferred thereunder refuses to register the sale ordered by the Insolvency Court in England, the purchaser cannot do anything except to come to India and seek redressal in the manner provided by the Indian Companies Act. The Company Law Board had omitted to see that what was challenged by the appellant was not really the procedure adopted by the Insolvency Court in United Kingdom, in bringing the shares to sale. What was agitated by the appellant was that the second respondent, who was a Director of the first respondent, committed a breach of trust and kept the appellant away from the whole episode and bought all the shares for a token consideration. Suppose any one other than the second respondent had purchased the shares, they would have faced a formidable task in getting the transfer recognized and registered in India. Therefore, the attack of the appellant was not really to be construed as an attack on the procedure adopted by the Insolvency Court in United Kingdom. It was an attack on the conduct of a Director, who held a fiduciary relationship and who was bound by the Articles of Association of the Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equities. It is true, that in order to maintain a petition under Sections 397 and 398 of the Companies Act, the acts of oppression complained of, should be a series of acts continuing upto the date of filing of the petition. But it does not mean that when the entire holding of a company incorporated in England, in the shares of a company incorporated in India is sold outside India for a consideration of one GBP, shocking the conscious of any court, the same can be rejected as an isolated instance not warranting an action under Sections 397 and 398 of the Companies Act. Therefore, the said argument also deserves to be rejected. - Decided in favour of appellant. - Company Appeal No.3 of 2011 - - - Dated:- 16-4-2015 - V.Ramasubramanian J For the Appellant : Mr.H.Karthik Seshadri For the Respondents : Mrs.Ambili Menon, Mr.Sanjay Kumar Judgment This is an appeal filed under Section 10-F of the Companies Act, 1956 challenging an order passed by the Company Law Board, dismissing the petition filed by the appellant under Section 397, 398 and 402 of the Companies Act alleging oppression and mismanagement. 2. I have heard Mr.H.Karthik Seshadri, learned counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant sought certain details, before he could initiate the talks of settlement. The Company Law Board passed an order on 28.04.2008, directing the respondents to furnish all details by 07.05.2008 and to list the matter for hearing on 19.06.2008 and 20.06.2008 if there was no settlement. (vii) But no settlement took place and hence the matter came to be adjourned from time to time. When the petition was taken up in 2009, the appellant moved an application in C.A.No.32 of 2009, for an amendment. By an order dated 21.08.2009 passed in the said application, the Company Law Board directed the respondents to furnish the details regarding allotment of shares by 11.09.2009. (viii) According to the appellant, there was a change of Judicial Member and the case was later posted for hearing on the preliminary issue of maintainability. The issue of maintainability was raised on the ground that what was under challenge was a transfer of shares that took place under the Insolvency Laws of the United Kingdom and that therefore, the Company Law Board in India would not have jurisdiction to deal with the same. (ix) However, the appellant claims that he argued only the applications for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Law Board was right in holding that it had no jurisdiction to test the fairness of the procedure adopted by the Joint Receivers in England for the sale of the shares, even after holding the main petition to be maintainable in law? (ii) Whether the Company Law Board was right in holding that the appellant was guilty of acquiescence, waiver and laches? (iii) Whether the Company Law Board was right in throwing out the plea of pre-emptive right of purchase of the shares guaranteed to the appellant under the Articles of Association of the Company? QUESTION NO.(i): 8. It is seen from the order of the Company Law Board that the respondents raised a preliminary objection about the maintainability of the Company Petition on the ground that the sale, of the shares of a company incorporated in United Kingdom, under the Insolvency Laws of United Kingdom, can be challenged only before the Courts in the United Kingdom. While dealing with the said contention, the Company Law Board held in para 8 that the sale of assets/properties of a company incorporated in United Kingdom would be governed by the laws of United Kingdom and not by the Indian Companies Act. However, the Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the third respondent, by virtue of being a shareholder in the first respondent company was bound by the terms and conditions of Memorandum and Articles of Association. Even the third respondent cannot commit a breach of any of the terms and conditions contained in the Articles of Association. 13. Under Section 108(1) of the Act, a company shall not register a transfer of shares in a company unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee has been delivered to the company along with the certificate. 14. A detailed procedure is prescribed under Section 111 as to when a company can refuse to register the transfer of or the transmission by operation of law, of the right to any shares. There are provisions for maintenance of Register of Members and for filing of Annual Returns, containing the details including the details of the members. 15. Therefore, it is clear that any transfer or even a transmission by law, can take place only in accordance with the procedure prescribed in the Companies Act, 1956. What the Company Law Board has omitted to see is the fact that despite the procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remain as such even at the hands of the Receiver. Therefore, the first question of law is to be answered in favour of the appellant. QUESTION NO.(ii):- 19. The second question of law is as to whether the Company Law Board was right in holding that the appellant was guilty of acquiescence, waiver and laches. It is contended by the respondents that waiver is a question of fact and that once the Company Law Board has recorded a finding on the question of waiver, it is not possible for this Court to sit on appeal over the said finding of fact, especially in view of Section 10F of the Companies Act, 1956 which permits an appeal only on a question of law. The respondents rely upon the decision of the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd., vs. State of Uttar Pradesh AIR 1979 SC 621, where it was held that waiver is a question of fact and it must be properly pleaded and proved. 20. It is true that all rights, including statutory rights can be waived, provided no public interest is involved. A statutory right can be waived subject to certain conditions. But waiver must be specifically pleaded and the burden of proof is upon the party pleading the same to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and a statutory right can be waived subject to a few exceptions. In Krishna Bahadur vs. Purna Theater [(2004) 8 SCC 229], the Supreme Court pointed out the distinction between the estoppel and waiver. While estoppel is a rule of evidence, waiver is contractual. But to constitute waiver, it must be clearly established that a party against whom waiver is set up was fully aware of his rights, but had agreed not to assert the right, for a consideration. 25. In the case on hand, there was absolutely no evidence for the Company Law Board to come to the conclusion that the appellant was aware of the intended sale and that he still failed to exercise the right, leading to waiver. 26. As an alternative to the plea of waiver, the respondents pleaded estoppel. According to the respondents, estoppel by conduct is established in this case. In joint Chief Controller of Imports and Exports vs. H.R. Trading Company [(1964) ILR 2 Mad. 224], relied upon by the learned counsel for the respondents, the Court quoted from Halsbury's Laws of England to the effect that when one party has by his words or conduct, made to another a promise or assurance which was intended to effect the legal rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that estoppel is a rule of equity flowing out of fairness striking on behaviour deficient in good faith. Therefore, what is important is that it is a rule of equity and that it must flow out of fairness. I do not know how the respondents can be said to have acted with fairness. In the course of hearing of this appeal, the appellant expressed willingness to purchase the entire shareholding for even Rs.one Crore, but the second respondent was not willing to accept it though he had purchased it for just one Pound Sterling. Therefore, it is not for the respondents who have acted unfairly to invoke a rule of equity flowing out of fairness. 31. In fact in the very same decision the Supreme Court pointed out that there can be no estoppel against statute and that what is statutorily illegal and void, cannot be enforced by resorting to the rule of estoppel. Hence the respondents cannot set up estoppel against the appellant. 32. Lastly, let me take up the question of laches. I do not know how the plea of laches is set up against the appellant. If we have a look at the sequence of events, it is seen that the fourth respondent was appointed as Administrative Receiver for the third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... know how these maxims can be applied to the case on hand. The appellant had approached the Company Law Board within four months. The second respondent is a person who was aware of the prescription contained in the Articles of Association of the first respondent company. It was his duty to have pointed out to the Receivers that the appellant also had a preemptive right. Therefore, it is not up to the second respondent to set up these pleas against the appellant. 38. The second respondent has filed a counter affidavit. The focus in the counter affidavit is primarily on the extensive investment made by the second respondent in the first respondent company and the amount realizable by him. But unfortunately, one wrong cannot set right another wrong. It is out of the scope of the present petition to find out whether the appellant is guilty of any mismanagement or whether the second respondent has suffered a huge loss or not. The Company Law Board was primarily concerned about the validity of the sale of shares of the third respondent company in the first respondent company to the second respondent for a nominal amount of one Pound Sterling. It is this issue that has to be addressed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease try to get back to me tomorrow if you can so that I can get the deal done before they forget. I am sure you will have some questions which I will try to answer. Best regards, Chris. It will be clear from the above mail that the second respondent did not inform the appellant in clear terms as to what he had planned to do. But the second respondent projected in the Board meeting held on 18.9.2006 as though the appellant was informed of the decision to buy the shares on 3.8.2006 itself. Therefore, as held by the Supreme Court in Parameshwari Prasad Gupta v. Union of India [(1973) 2 SCC 543], the meeting of the Board of Directors dated 18.9.2006, to which the second respondent who was an interested person was a party and in which details regarding the number of shares sold and the sale consideration were not mentioned, was void and the decisions taken thereon cannot bind the appellant. 42. The contention of the learned counsel for the appellant that the sale of the entire shareholding of the third respondent in the first respondent company cannot be construed strictly as a sale by an Official Assignee in respect of the property of an insolvent, cannot be easily reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07, sent by the second respondent to the appellant, there is a reference to the transfer of two properties. But there is no reference to the share transfer. But in a reply sent by the appellant to the second respondent on 5.1.2007, there is a vague reference to share transfer without any further detail. This statement in the mail dated 5.1.2007, cannot be taken to be conclusive. In any case, there is no equity in favour of the second respondent. He is not a person who has bailed out the third respondent when it was in distress, to claim equity in his favour. He has just paid one GBP for the entire shareholding of the third respondent in the first respondent. Therefore, he cannot plead equities. 46. Relying upon the decision of the Supreme Court in Sangramsinh P.Gaekwad v. Shantadevi P.Gaekwad [2005 (11) SCC 314], it was contended by Mr.Sanjay Kumar, learned counsel for the respondents 3 and 4 that in any case, a single act of transfer of shares cannot constitute oppression and mismanagement. Therefore, he contended that the ultimate conclusion reached by the Company Law Board cannot be found fault. 47. It is true, that in order to maintain a petition under Sections 397 and 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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