9911796707
TMI Blog2007 (8) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 111A read with Section 111 of the Companies Act. 1956 ( the Act ) - (i) to rectify the register of members of The Peninsular Plantations Limited CTPPL ) in respect of 32,492 equity shares of (late) S. Sivaramakrishna Aiyer, by substituting the names of petitioners and respondents 5 to 9 in the place of the second respondent, to the extent of 3.610 equity shares each and remaining two equity shares to any of the petitioners; and (ii) to direct the second respondent to pay in favour of petitioners and respondents 5 to 9, dividends and other accretions, if any, received in relation to 32,492 equity shares of (late) S. Sivaramakrishna Aiyer. 3. The third company petition (C.P. No. 12/2005) is filed under Section 111A read with Section 111 of the Companies Act. 1956 ( the Act ) - (i) to rectify the register of members of The Travancore Rubber Tea Company Limited TRTCL ) - (a) by deleting the names of respondents 3 to 6 in relation to 65.378 equity shares of (late) S. Sivaramakrishna Aiyer, transmitted in favour of the respondents 3, 4 6 and further transferred by the fourth respondent to the fifth respondent: and (b) by substituting the names of petitioners and respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res held by (late) S. Parvathavardhani Ammal and acquired by (late) S. Sivaramakrishna Aiyer in terms of her Will, aggregating 11.510 shares. 5.2 At the time of execution of the Wills, while (late) S. Sivaramakrishna Aiyer held 6,896 equity shares, his wife held 32,492 equity shares in TPPL. (Late) S. Parvathavardhani Ammal bequeathed under Clause 14 of her Will all her shares in TPPL in favour of her husband and upon the demise of S. Parvathavardhani Ammal in February 1998, all her 32.492 equity shares of TPPL devolved on her husband in accordance with her Will. S. Sivaramakrishna Aiyer passed away in September 2000, when he held 39,388 equity shares in TPPL, constituted by 6,896 equity shares held by (late) S. Sivaramakrishna Aiyer as on the date of execution of his Will, namely. 1 7.09.1986 and 32.492 equity shares held by (late) S. Parvathavardhani Ammal and acquired by (late) S. Sivaramakrishna Aiyer, in terms of her Will aggregating 39,388 equity shares. 5.3 At the time of execution of the Wills, while (late) S. Sivaramakrishna Aiyer held 5,524 equity shares, his wife held 28.619 equity shares in TRTCL, (Late) S. Parvathavardhani Ammal bequeathed under Clause 14 of her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the will; and (iii) the three sons named in Clause 10, namely, (late) S. Veerasubramonia Sarma and respondents 3 4 were entitled to one -third shares each only in 5.524 equity shares of TRTCL held by (late) S. Sivaramakrishna Aiyer at the time of execution of the will. Shri Ramakrishnan. learned Counsel, pointed out that the shares acquired by (late) S. Sivaramakrishna Aiyer in the Companies, subsequent to execution of his will fell within Clause 26 of the Will which reads thus; My live daughters and daughters -in -law shall also take equally any items of properties which have been left out in this Will and also the properties I may hereafter acquire and accordingly, each of the daughters and daughters -in -law was entitled to one -ninth share each in 9,081 shares of TWEL, 32,492 equity shares of TPPL and 28.619 equity shares of TRTCL acquired by (late) S. Sivaramakrishna Aiyer either by purchase or through inheritance subsequent to the execution of his will. Nevertheless, the second respondent, the executor of the Will and Chairman and Director of TWEL TPPL had completely taken away the entire shares of (late) S. Sivaramakrishna Aiyer in the Companies solely to himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any under the proviso to Section 111A(2) and 111A(3) read with Sub -section (7) of Section 111A of the Act, which would make applicable the provisions of Section 111(1)(2) and (4) by virtue of Section 111(5) of the Act. By virtue of Section 111A(7), the provisions of Sub -sections (5), (7), (9), (10) and (12) of Section 111 shall, so far as may be, apply to the proceedings before the Company Law Board under this section as they apply to the proceedings under Section 111. The CLB is empowered under Section 111(7) to decide any question relating to the title of any person to the shares, while deciding any application made under this sub -section. In view of this, the CLB can interpret the terms of the Will and decide the title to the shares impugned in the company petitions. It cannot, therefore, be said that by virtue of Section 111(14), the provisions of Sub -sections (1), (2) and (4) of Section 111 are not applicable to the public companies. The principles enunciated by the Bombay High Court in Finolex Industries Limited v. Anil Ramchand Chhabria (supra) have been followed by this Board in Hero Honda Motors Limited v. Unit Trust of India and Ors. (2005) 66 CLA 11. This decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. Similarly, any person who succeeded to shares by way of operation of law can be treated as an investor. The petitioners, being the legal representatives of (late) S. Sivaramakrishna Aiyer, who was an investor, will be entitled to make an application under Section 111A(3) of the Act on the principle that the term Investor includes his legal heir. 5.8 The cause of action arose in these company petitions on account of the unlawful transmission of shares. The petition (C.P. No. 11 of 2005) has been filed after a period of three years and ten months of the transmission of impugned shares in favour of the second respondent which was fraudulently concealed from the petitioners. The respondents also fraudulently failed to file necessary returns containing the details of the shareholding with the Registrar of Companies. The petitioners were unaware of the fact and date of transmission, with reasonable diligence, until the respondents 1 2 disclosed the date of transmission in their counters. This Bench, by an order dated 27.07.2005 appointed an Advocate Commissioner to authenticate the statutory records of TPPL. but the respondents did not permit the Advocate -Commissioner to auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n here above sufficient cause for the delay in having filed the petition (C.P. No. 11 of 2005) after a delay of ten months, which may be condoned by invoking the provisions of Section 5 of the Limitation Act. 5.9 The Indian Succession Act, 1925 does not confer executive jurisdiction on civil courts to interpret any Will, but only in respect of probate and administration of estate. A Will can be interpreted by all judicial forums. The interpretation of the terms of the Will is not a matter within the province of the District/High Court. In a number of cases the CLB has interpreted the investment agreement. Any legal document can be interpreted by the CLB. as there is no legal bar in the Indian Succession Act. The genuineness and validity of the Will are not under dispute. None of the parties has initiated any legal proceedings in any Forum challenging the Will. However, the contesting parties are claiming to the exclusion of each other, the impugned shares under the Will of (late) S. Sivaramakrishna Aiyer. When the contentious issue falls within the ambit of Sections 111 and 111A, this Board does not lose jurisdiction to decide the same, despite the fact that it involves the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of directors of the company to insist on production of succession certificate/probate of Will in view of the controversies raised by a legal heir regarding the identity of the legal heirs of the deceased member. This Bench, can, therefore, interpret the Wills under dispute, more so when there is only difference of opinion on the interpretation of the relevant clauses therein. 5.11 The Company petitions involve the interpretation of the Will of (late) S. Sivaramakrishna Aiyer and the Will of (late) Mrs. S. Parvathavardhani Ammal. The disputes are on account of the shares inherited by (late) S. Sivaramakrishna Aiyer from his wife and shares purchased by (late) S. Sivaramakrishna Aiyer after the date of his Will. The question for adjudication is whether such shares devolve on the sons under Clause 10 of the Will or whether these shares devolve equally on the daughters daughters -in -law under Clause 26 of the Will. All parties admit the genuineness and validity of both the Wills. Before interpreting the Wills, the socio -economic status of the testators and the circumstances in which the Wills came to be executed by them will have to be considered by the Bench. Both the testato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of both the Wills together will reveal that both the testators wanted their shares to devolve in a particular manner, despite the fact that at the time of execution of the Wills neither of them knew as to who would expire first. (Late) S. Sivaramakrishna Aiyer and (late) S. Parvathavardhani Ammal. therefore, carefully planned that their Wills so that the wealth of the family represented by the shares would devolve in a similar and identical faction regardless of whether S. Sivaramakrishna Aiyer died first or whether S. Parvathavardhani Ammal died first. Annexure -A forming part of the written arguments of Shri Ramakrishna, learned Counsel represents the devolvement of shares if S. Sivaramakrishna Aiyer had died first and S. Parvathavardhani Ammal died, thereafter. Annexure -B represents the devolvement of shares if S. Parvathavardhani Ammal died first and S. Sivaramakrishna Aiyer died later. Shri v. Ramakrishnan, learned Counsel, pointed out that whoever dies first, namely, whether S. Sivaramakrishna Aiyer or S. Parvathavardhani Ammal the end result will be identical in terms of Annexures A B mentioned supra. If the interpretation of the petitioners are accepted, the shares de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of TRTCL, which reportedly ratified the minutes of the share transfer committee, was held on the same day at 3.30 p.m. The minutes of the share transfer committee consists of 30 pages of handwritten minutes. It would be physically impossible to write these minutes in half an hour and then place the minutes for approval before the meeting of the board of directors of TRTCL which however, without application of its mind registered the transmission of shares. Furthermore, the petitioners 2 3 were directors present at the board meeting, but asserted that the transmission of shares was never placed before, considered or approved at the said board meeting. The petitioners 2 3 never acquiesced or approved the transmission of shares. The directors favoured the second respondent and failed to act independently. The second respondent abused his powers and ensured that the impugned shares in TRTCL were transmitted exclusively to his brothers contrary to the terms of the Will. The fifth respondent, being one of the daughters was aware of the disputes among the children of (late) S. Sivaramakrishan Aiyer, prior to her purchase of the shares as borne out by various letters exchanged among th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his interest in the shares. This has not been duly satisfied while transmitting the shares of (late) S. Sivaramakrishna Aiyer in TPPL. The Board of directors, while interpreting the Will failed to act fairly and therefore, the interpretation of the Company has to be set aside. The executor ought to have taken steps for transmission of the impugned shares, but in the instant cases, the legal heirs themselves had taken the steps for transmission in their favour. Thus, the Companies acted malafide and the decision in having transmitted the shares has to be set aside. The board of directors acted as per the dictates of the second respondent. In view of this, the impugned shares may be reverted back to the deceased S. Sivaramakrishna Aiyer. In the alternative, the CLB may interpret the Will and give the shares impugned in the petitions, in favour of the petitioners. There was no application by the second respondent, as the executor of the Will for transmission of the shares to the legatee. The Company did not obtain any independent legal advice, but blindly followed the directions of the second respondent in transmitting the impugned shares. The shares of (late) S. Sivaramakrishna Aiyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of shares. At the same time Section 111A(3) uses both the expressions instrument of transfer or the intimation of the transmission . Hence, it is only where an application is made under Section 111A(3), the CLB can exercise its power with regard to a transfer or transmission of shares, subject the restrictions laid down in Sub -section (3). It is relevant to point out that Section 111. dealing with a private company, uses the expression instrument of transfer or the intimation of such transmission , the latter part of which is absent in Section 111A and such absence is certainly not a lacuna or omission by oversight. Furthermore, Sections 7 14 of the Depositories Act contemplate the registration of transfer of securities with depository on receipt of intimation, and does not cover any transmission of security and consequently, Section 111 A. which is creation of the Depositories Act, cannot encompass transmission of shares. Therefore, a person who is aggrieved by reason of a company refusing to accept a transmission of shares can only seek his remedy through a civil court, whose jurisdiction is not barred either in Section 111 or 111A of the Act. Therefore, the ratio laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of register of members. At best, it can be said that after the insertion of Section 111 A. with effect from 20.9.95. a member of a Company who has no statutory right under the Companies Act to seek rectification of register of members. His common law.' right, however. remains in tact and he can assert that right by filing a suit before a court of competent jurisdiction. ... (para 134) The Madras High Court while re -enforcing the principles enunciated by the Bombay High Court in Shirish Finance and Investment P. Ltd. v. M. Sreenivasulu Reddy (supra) held in NEPC Micon Ltd. and Ors. v. Sashi Prakash Khemka and Ors. (2007) 137 CC 917 that the jurisdiction of the CLB under Section 111 A recognizes a right under the provisions of the Companies Act to seek relief in summary manner for rectification. Yet, at the same time, the common law right of an aggrieved person to file a petition, as regards the violation under other laws in force is always available on the date as well as post the date when the amendment was brought forth, with effect from January 15. 1997. The judgements in Gopal Krishna Baliga v. Poona Industrial Hotel Limited and Tej Prakash S. Dangi v. Coramandal Pharmaceu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of shares. Thus, the language in the proviso rules out the applicability of the provision to a transmission of shares . There is no power conferred on the CLB to register a transmission of shares under Section 111 A(2), as the claim of the petitioners is based on a right of transmission by virtue of a Will. The second category of remedy contemplated is an application under Sub-section (3) which can be made only by depository, company, participant, investor or Securities and Exchange Board of India. Section 111A uses the expression investor and not member . The petitioners do not come under any one of the five categories of persons mentioned therein. The decision of the learned Single Judge in M. Srinivasulu Reddy v. Kishore R. Chhabria (supra) lays down the proposition that except for the five categories of persons no other person can move the CLB by way of an application or seek redressal under Sub -section (3) of Section 111A. Such other party can only move the civil court in common law for suitable remedy. Therefore, the petitioners, not being one of the five categories of persons, are disentitled to file any application under Sub -section (3) and should be directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transgene Biotek Ltd. (2006) 71 SC 319, wherein it was held that no relief under Section 111A can be granted if it is found that complicated questions of fact and law, or disputes of complicated nature or serious disputes relating to title are involved. There are serious disputes involving interpretation of the Wills of the deceased S. Sivaramakrishna Aiyar and S. Parvathavardhani Ammal, which shall be tried in a civil court, more so when complicated questions of facts and law are involved in the matter. 6.5 The Limitation Act. 1963 will apply only to a suit, appeal or application made in a court of law after the prescribed period. By virtue of Section 2(a) of the Limitation Act, 1963, applicant includes petitioner and application in terms of Section 2(b) includes a petition. As per Section 2(1), suit does not include an appeal or an application. Section 3 of the Limitation Act provides that subject to the provisions contained in Sections 4 to 24, every suit instituted, appeal preferred and application made after the prescribed period shall be dismissed. By virtue of Section 5 of the Limitation Act, any appeal or any application as specified therein but not any suit may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Corporation of India (1995) 2 CLJ 203 (SC), at paragraph 26 (at page 217). the Supreme Court, while dealing with the scope of the Special Court constituted under the Special Court (Trial of offences Relating to Transactions in Securities) Act, 1992, held that the Special Court is intended to encompass curial or judicial bodies which have the jurisdiction to decide matters or claims, inter alia, arising out of transactions in securities entered into between the stated dates in which a person notified is involved. But there is no decision whatsoever to support the view that the Company Law Board while dealing with an application under Section 111A acts as a civil court. 6.6 By virtue of Section 10E(1) of the Act, CLB being creature of a statute is not a Court. The CLB created by the Central Government is discharging such powers and functions as are conferred on it, by or under the Act or any other law, and shall also exercise and discharge such other powers and functions of the Central Government under the Act or any other law as may be conferred by the Central Government. In terms of Section 10E(4C) every Bench of the CLB shall have the powers which are vested in a Court unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of the expression defined so as to comprehend not only such things as they signify according to their natural import, but also those things to which the clause declares they shall include. The words means and includes on the other hand, indicate an exhaustive explanation of the meaning which, for the purpose of the Act. must invariably attach to those words or expression . Thus, even under the Companies Act, the CLB cannot be equated to a civil court. Section 24 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 provides that Limitation Act shall, as far as may be, apply to an application made to Debts Recovery Tribunal. By virtue of Section 36 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. 2002. the provisions of Limitation Act are applicable to the Debts Recovery Tribunal, whereas there is no such specific provisions in the Companies Act. Nevertheless, the question of latches will have to be looked into by the CLB, in which case, whether the delay caused by the petitioners causes any prejudices to the respondents shall be considered. If the CLB, being creature of law is not to be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners attempt to invoke Section 17 for the condonation of the delay. The CLB is not being a Court cannot invoke Section 17 of the Limitation Act. The rights of the petitioners have accrued on the death of S. Sivaramakrishna Aiyer namely, 19.09.2000 and therefore, by virtue of Article 113, they ought to have enforced their rights over the shares within three years of death of S. Sivaramakrishna Aiyer, which has not been done, but enforced only on 26.07.2005, thereby the right of the petitioners is lost. According to the petitioners, as set out in para 1.5 of the application, in C.A. No. 81 of 2005, seeking condonation of delay in filing the company petition (C.P. No. 11 of 2005), they are aware of the disputes between brothers and sisters relating to the Will of (late) S. Sivaramakrishna Aiyer, which is the subject matter of the company petition. There has been no plea of fraud or mistake played by the respondents in relation to the transmission of shares and therefore, the company petition filed after expiry of three years from the date of death of S. Sivaramakrishna Aiyer is not maintainable. Furthermore, no details of fraud have been either furnished in the company application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding by a competent civil court. The CLB would relegate the parties to a civil court for the proper adjudication. 6.9 The Supreme Court while dealing with the principles of interpretation of statutes held in (a) Sri Nasiruddin v. State Transport Appellate Tribunal that if the precise words used are plain and unambiguous, they are bound to be construed in their ordinary sense and further that where the words are plain the Court would not make any alteration; (b) Vemareddy Kumaraswamy Reddy and Anr. v. State of A.P. - held that (i) a statute is an edict of the legislature, the elementary principle of interpreting or construing a statute is to gather the means or sentential legis of the legislature. The Court cannot read anything into a statutory provision which is plain and unambiguous; (ii) Courts must avoid the danger of a priori determination of the meaning of a provision based on their own pre -conceived notions of ideological structure of scheme into which the provision to be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of interpretation; (iii) while interpreting a provision the Court only interprets the law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would render any of the expressions inoperative. The Court will look at the circumstances under which the testator makes his Will such as the state of his property, of his family and the like. (e) To the extent that it is legally possible effect should be given to every disposition contained in the Will, unless the law prevents effect being given to it. If there are two repugnant provisions conferring successive interest, if the first interest created is valid the subsequent interest cannot take effect but a court of construction will proceed to the farthest extent to avoid repugnancy. 6.10 It was on the ground of such non -impeachable principles and statutory mandate, as envisaged in Chapter 6 of the Indian Succession Act the transmission of the impugned shares to the second respondent was effected. The dispute as to who is entitled to the shares falls within the testamentary jurisdiction of the civil court and not within the jurisdiction of the Company Court under the Act. (Late) S. Sivaramakrishan Aiyer and (late) Mrs. Sivaramakrishna Aiyer simultaneously executed the Wills on the same day in the presence of the same witnesses. The two Wills are more in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are not specifically bequeathed under the Wills of both the deceased. The Wills upto Clause 9 are identical. It is the wish of the testators that the management and control of the four companies, namely TRTCL, The Peermade Tea Company Limited, TPPL and TWEL are to be in the control of the respective legal heirs to whom the shares are bequeathed. By virtue of Clause 14, (late) S. Parvathavardhani Ammal, bequeathed to her husband all her shares in TRTCL, TPPL and TWEL. In Clause 15 she bequeathed the balance of shares in the other companies to her five daughters equally. Thus, there is a consensus between the two deceased testators that the companies, which are divided as above, should be managed and controlled by the respective legal heirs. In terms of the principles governing Section 83 of the Indian Succession Act, as borne out by the first illustration therein, the respondents are entitled for the shares which have been acquired by the testator after execution of the Will. Section 87 envisages that the intention of the testator may be given effect to as far as possible . According to the Law Lexicon by P. Ramanatha Iyer the phrase so far as may he means to the extent po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Indian Succession Act an executor has wide powers to dispose of the property of the deceased, vested in him under the Will either wholly or in part, in such manner as he may deem fit. Section 332 contemplates the assent of the executor to complete a legatee's title to his legacy. By virtue of Section 333, the assent of the executor is essential to divest his interest as executor and to transfer the subject of the bequest of the legatee. Therefore, the petitioners must make a claim with the executor, being the legal representative of (late) S. Sivaramakrishna Aiyer, who is legally charged with duty of distributing the estate of (late) S. Sivaramakrishna Aiyer and not CLB. The petitioners cannot make any request with the Companies for transmission of the impugned shares, ignoring the statutory right of the executor. The transmission of shares has been done with concurrence of the executor and hence the executor shall be deemed to have applied for transmission of shares. The only remedy available to the aggrieved person is to challenge such transfer of shares by filing a suit in a civil court. The dispute raises complicated questions of law and fact which cannot be decided by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the register of members, but the prayer of the petitioners is far more number of shares. The petitioners never approached the companies for transmission of the impugned shares. There has been no cause of action for the present company petitions. 6.15 (Late) S. Sivaramakrishna Aiyer held 70,902 shares in TRTCL on the date of his death, which includes the shares purchased and acquired by him from (late) S. Parvathavardhini Ammal as per her Will. The transmission of shares in TRTCL to the respondents 3 4 and (late) S. Veerasubramonia Sarma was based on legal advice obtained and acted upon, by the executor of the Will. The respondents 3 4 had duly applied to TRTCL on 20.11.2002 and (late) S. Veerasubramonia Sarma on 29.03.2003 seeking transmission of the shares, in accordance with the regulations of TRTCL. The share transfer committee had on 29.03.2003 approved the transmission of the shares to the transferees, which was ratified on the very same date unanimously by the board of directors consisting of the petitioners 2 3 apart from two independent directors out of a total strength of seven directors. At the board meeting held on 27.06.2003. the minutes of the aforesaid boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgements of the Bombay High Court in (a) M Srinivasulu Reddy v. Kishore R Chhabria; (b) Shirish Finance Investments P Ltd v. M. Srinivasulu Reddy (Division Bench); and (c) Gopal Krishna Baliga v. Poona Industrial Hotel Ltd (supra) would categorically show that the civil court is also competent to entertain a suit for the rectification of register of members at the instance of a member, while the CLB may pass orders in a proceeding under Section 111A of the Act. The Judgment in Karamsad Investments Ltd v. Nile Limited and Ors. (supra) dealing entirely with different set of facts and concerning mainly with violation of the mandatory provisions of Section 108A of the Act, is inapplicable to the facts of the present cases. The High Court of Andhra Pradesh in Tej Prakash Dangi v. Coromandal Pharmaceuticals Ltd. (1997) CC 270 when considered the validity of the forfeiture of shares owned by the petitioners in M/s Coromandel Pharmaceuticals Ltd. held that the petition was not maintainable as the petitioners were unable to indicate the section under which the petition was required to be filed before the company court. The decision in Finolex Industries Limited v. Anil Ramchand Chhabri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal, relevant clauses of which read thus: 111(1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission hy operation of law of the right to, any shares or interest of a member in, or debentures of the company, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. (2) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be may appeal to the Company Law Board against any refusal of the company to register the transfer or transmission, or against any failure on its part within the period referred to in Sub -section (1), either to register the transfer or transmission or to send notice of its refusal to register the same. (3) An appeal under Sub -section (2) shall be made within two months of the receipt of the notice of such refusal or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... punishable with fine which may extend to fifty rupees for every day during which the default continues. ... ... ... ... ... ... (14) In this section company means a private company and includes a private company which had become a public company by virtue of Section 43A of this Act. Section 111A dealing with rectification of register on transfer runs as follows: (1) In this section, unless the context otherwise requires company means a company other than a company referred to in Sub -section (14) of Section 111 of this Act. (2) Subject to the provisions of this section, the shares of debentures and any interest therein of a company shall he freely transferable, provided that if a company without sufficient cause refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of transfer, as the case may he is delivered to the company, the transferee may appeal to the Company Law Hoard and it shall direct such company, to register the transfer of shares. (3) The Company Law Board may. on an application made by u depository, company, participant or investor or the Securities and Exchange Board of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1A(2) by necessary implication. This in my view is the only harmonious construction which can he put on proviso to Section 111A(2) of the Act to give effect to the intention of the legislature. The proviso cannot be read in isolation. It has to be in the manner indicated above. No dichotomy or disharmony can be created in the rights and remedies of the shares held in public companies object of the Depositories Act (Section 28) is to make law in addition and not in derogation of the law for the time being in force . 12. A combined reading of Section 111(5) and Section 111A(7) would show that transmission of shares by operation of law is also governed by Section 111A, as borne out by the decision in Finoiex Industries Limited v. Anil Ramchand Chhabria (supra) the relevant portion of which reads thus: By virtue of provisions of Section 28 of the Act, if cannot be held that Section 111A(3) is restricted to rectification of the register only in transfer matter. This would mean that no remedy 1 rectification is available in case of loss of shares, bad deliveries, theft and forgery This would be in derogation of the law for the lime being in force. Remedy provided in Section 111A(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the transferee in respect of a refusal to register a transfer or the intimation of transfer and not of transmission of shares by operation of law. Any person, who is aggrieved on account of a company refusing to accept transmission of shares can only seek his remedy only through a civil court, (whose jurisdiction is not barred in Sections 111 111A of the Act), in support of which a number of decision has been cited by learned Senior Counsel. The lis in - (i) Gopai Krishna Baiiga v. Poona Industrial Hotel Limited (supra) is whether the civil court has jurisdiction to entertain a suit for rectification of register of member, in view of the provisions of Section 111 of the Act. (ii) Tej Prakash S Dangi v. Coramundal Pharmaceuticals Limited (supra) pertains to the validity of the forfeiture of shares held by the petitioners in Mrs. Coromandal Pharmaceuticals Ltd.; (iii) Karamsad Investment Ltd. v. Nile Limited (supra) mainly deals with (a) justification of the company for refusal of registration of shares on account of violation of the provisions of Section 108A and Securities and Exchange Board of India Takeover Regulations 1997 and (b) whether the expression sufficient cause o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned single Judge of the Bombay High Court while considering the legal proposition whether a judgment is an authority on proposition of law, which it decides, found that the lis in the judgment of the learned single Judge in M. Srinivasulu Reddy v. Kishore R. Chhahria. (supra) and of the Division Bench in Shirish Finance Investment (P) Ltd. v. M. Sreenivasulu Reddy (supra) is that the right of rectification of the shares is common law right and such right is not affected by the provisions of Section 111A, which inter -alia, confers on the CLB, the power to rectify the register. The learned single Judge of the Bombay High Court in this judgement, after considering a series of decisions of various High Court, Apex Court and of Privy Purse pointed out that a decision is only an authority for what it actually decides. The essence in a decision is its ratio and not every observations found therein nor what logically follows from the various observations made in it. 14. Applying this golden rule, the various Judgments cited by learned Senior Counsel for the respondents do not decide the proposition of law laid down in Finolex Industries Limited v. Anil Ramchand Chhahria (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a recent amendment brought about by the Depositories Ordinance, 1996, Section 111 has been confined to a private company and a new Section 111A empowers the Company Law Board to direct any company to rectify the register or the records if the transfer of shares is in contravention of the provisions of the Securities and Exchange Hoard of India Act or regulations made there under or in the Sick Industrial Companies (special provisions) Act, 1985, being obiter -dicta will not render any assistance to this Bench, while adjudicating the lis between the contesting parties before me. Consequently, the petitioners are entitled to invoke the provisions of Section 111 read with Section 111A for the relief of rectification of register of members of the Companies for the reason that the remedies are available to all kinds of shares held in a public limited company under the proviso to of Section 111A(2) and 111A(3) of the Act, which would make applicable the provision of Section 111(1), (2) and (4) by virtue of Section 111(5) of the Act. It cannot be therefore, argued that Section 111A does not en -com -pass, transmission of shares and that an aggrieved person can only seek his relief in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestor. The underlying principles governing Section 399 on the right of members to apply under Sections 397 and 398 as pointed out by Shri Ramaknshnan, learned Counsel will be of some assistance to reach a definite conclusion. The applicants must hold the requisite number of shares in terms of Section 399 at the time of invoking the provisions of Section 399. The Apex Court, while considering the right of legal representatives of a deceased member in World Wide Agencies P. Ltd and Anr. v. Mrs. Margaret T. Desor and Ors. (supra) held that when a shareholder dies, his estate is entrusted in the legal representatives. Where a member dies and his name being still reflected in the register of member, his legal representatives are entitled to proceed under Section 397/398, even if their names are not yet entered in the register of members. It could not be a just construction of the provisions to deny the legal representatives of the deceased member the right to maintain a petition under Section 397/398. Applying the same principles, it is not necessary for any person to invest his own funds to gain the status of an investor, but is would be sufficient, if one's predecessor interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated questions of facts or law or disputes of complicated nature or serious disputes relating to title are involved. Where the allegations are forgery and fabrication of documents, which could only be resolved by oral testimony tested by cross examination cannot be resolved on the strength of the averments made in the affidavits, defeating the purpose and object of the summary procedure prescribed by Section 111, 111A. The proper course in such cases of complexity, necessitating investigation is to relegate the parties to a civil suit. The Full Bench of the Delhi High Court in Ammonia Supplies Corporation (Private) Limited v. Modern Plastic Containers Private Limited (supra) held that the jurisdiction exercised by the Company under Section 155 (now under Section 111, 111A) is discretionary and summary in nature. In exercise of its discretionary and summary jurisdiction, the Company Court can decline to entertain any petition for rectification of the register of members involving disputed and complicated questions requiring examination of evidence and would be justified to reject the petition and relegate the parties to a civil suit Tin -Apex Court, while affirming the judgment of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r therein and relegated the parties to a civil suit. In this connection, the categorical findings of this Board, in Khurshid Alam v. P. Pagnon Co. Private Limited and Ors. (supra) assume relevance which reads as under: Whether to deal with the issues under Section 111 ot the Act or relegate the parties to a suit, depends purely upon the facts and issues involved in a proceeding and there can be no rigid yardstick to decide the same in one way or the other. In fact as held by the apex court in the case of Ammonia Supplies Corporation (P.) Ltd v. Modern Plastic Containers Pvt. Ltd. , it was for the court dealing with the matter to be prima facie satisfied whether realty it was a complicated question or made to look as one It is also n be borne in mind that if any rigid rule is to be followed that complicated issues should always he relegated to suit, the very objective of the Legislature in conferring jurisdiction to the Company Law Board under Section 111 and providing such wide power would he defeated making the same purposeless and nugatory. In most cases, under this section one or more complicated issues always arise and the jurisdiction of the Board can he sought to he ousted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under Section 111 before tin amendment was exercised hy the court under Section 155 Noncing the history of enactment of Section 111, it was observed as follows: Section 111, as set out above, was incorporated in the Act subsequent to the report of a committee appointed to consider amendments to the Companies Act. The Sachar Committee, as it came to be called, said. Under the existing law, there are two remedies open to an aggrieved person to file an appeal under Section 111, or to apply to the court for rectification of the share register under Section 155 We think that these two remedies should now be assimilated and provision be made tat one placer for a person aggrieved (including any person aggrieved by (sic) refusal of the Board of directors to register a transferor transmission of shares) to apply to the CLB as proposed to be consmuted for rectification of the share register on any of the grounds mentioned in Sub -clause (a) or (b) or Sub -section (1) of the present Section 155 Our proposals are (sic) Accordingly, we would recommend as follows Sections 111 and 155 should he assimilated into a single statutory provisions. Section 155, as it read before 31st May 1991 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performed by courts of civil judicature under Section 155. It is empowered to make order directing rectification of the' company's register, as to damages costs and incidental and consequential orders It may decide any question relating to the title of any person who is a party before it to have his name entered upon the company's register and any question which it is necessary or expedient to decide, it may make interim orders. Failure to comply with any order visits the company with a fine. In regard to all these matters it has exclusive jurisdiction (except under the provisions of the Special Courts Act, which is the Issue before us). In exercising its function under Section 111 the CLB must and does, act judicially. Its orders are appealable The CLB, further, is a permanent body constituted under a statute. It is difficult to see now it can he said to he anything other than a court, particularly for the purposes of Section 9A. 10. We are of the view that same principle is applicable in the Limitation Act also. Orders of the CLB under Section 111 is further appealable to the High Court and if is curative in nature. Not acting as persona designata the CLB functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any of the legal heirs, but serious disputes are in relation to the interpretation of certain material clauses forming part of the Wills. While according to the petitioners, a Will can be interpreted by all judicial/quasi judicial authorities, it is vehemently opposed by the respondents that a Will has to be interpreted in an appropriate proceeding by a competent civil court. In this connection, Section 75 of the Indian Succession Act, 1925 states as follows: For the purpose of determining questions as to what person or what property is denoted by any words used in a Will, a court shall inquire info every material fact relating to the persons who claim to he interested under such Will, the property which is claimed as the subject of disposition, the circumstances of the testator and of his family, and into every fact a knowledge of which may conduce to the right application of the words which the testator has used. (Section 75) 24. A combined reading of Section 2(bb) and Section 75 of the Indian Succession Act, as observed by Shri T.K. Seshadri, learned Senior Counsel, would only mean that for the purpose of determining as to what person or what property is denoted by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for both sides on interpretation of the relevant clauses of the Will of (late) S. Sivaramaknshna Aiyer supported by a number of case laws and various provisions of the Indian Succession Act, justifying their respective stand taken in the matter. 25. Having found that it is only a civil court which has jurisdiction to determine questions as to what person or what properly is denoted by any words in a Will, it shall now be considered whether the action of the board of directors of TPPL and TRTCL in transmitting the impugned shares, on the strength of the Will left by (late) S. Sivaramakrishna Aiyer, in favour of the second and other respondents, calls for the intervention of the CLB, requiring rectification of the register of members of TPPL, and TRTCL. Against the background of arguments advanced by learned Senior Counsel that the fundamental principles governing interpretation of a Will as contemplated in Chapter 6 of the Indian Succession Act and laid down by various High Courts and the Apex Court have been properly followed, in accordance with the regulations of the Companies, by the board of directors of TPPL and TRTCL before effecting the transmission of impugned shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares at such meetings. All the relevant minutes are silent as to whether the board of TPPL and TRTCL have ascertained the details in relation to - (i) number of shares held by (late) S. Sivaramakrishna Aiyer at the time of execution of his Will; (ii) number of shares acquired by (late) S. Sivaramakrishna Aiyer after the date of his Will: and (iii) number of shares held by (late) S. Sivaramakrishna Aiyer at the time of his death, in these Companies, which are absolutes essential before according approval for transmission of the impugned shares. None of the clauses of the Will was ever interpreted, before approving the transmission of shares, as founded reflected in, even one of the minutes discussed supra. The categorical assertion of Sri Ramakrishnan, learned Counsel, that the share transfer committee meeting was allegedly held at 3 p.m. on 29.03.2003, approving the transmission of shares in TRTCL and that the board meeting of TRTCL, which reported I ratified the minutes of the share transfer committee, was held on the same day at 3.30 p.m. The minutes of the share transfer committee consist of 30 handwritten pages and hence n would he physically impossible to write these min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of shares by the fifth respondent was without notice of any defect in title therein. Thus, the names of the transferees are found, without sufficient cause, entered in respect of the impugned shares at the instance of the board of directors, in the register of members of TPPL, and TRTCL. The prayer in C.P. No. 10 of 2005 is for (i) rectification of the register of members of TWEL in respect of (a) 2429 shares of TWEL reportedly held by (late) S. Sivaramakrishna Aiyer at the time of execution of his Will by substituting names of the respondents 3, 4, 6 10 to 13 in the place of the second respondent: and (b) 9081 shares of TWEL acquired by (late) S. Sivaramakrishna Aiyer subsequent to the execution of his Will by substituting the names of petitioners, and the respondents 5 to 9, whereas the register of members of TWEL reportedly reflects only 15 shares held in the name of (late) S. Sivaramakrishna Aiyer. It is far from doubt that there was no cause of action in respect of this company petition for the reason that the shares of TWEL continue to remain in the name of (late) S. Sivaramakrishna Aiyer. 27. In view of the foregoing conclusions and in exercise of the power under S ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
