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TMI Blog2010 (8) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... l was issued by this Court. 2. The appeals arise out of the Company Petition No. 61/2006 filed by the first respondent in these two appeals. The first respondent filed a petition under Sections 397 and 398, read with Sections 235, 402 and 403 of the said Act before the Company Law Board against the company M/s. Crystal Island Park Pvt. Ltd., (hereinafter, referred to as the said Company ) and one Mr. Marc William Rodrigues (hereinafter referred to as the said Marc Rodrigues). In the said Company Petition, the said Company filed Company Application No. 325/2006 for challenging the maintainability of the Company Petition. The said Marc Rodrigues filed Company Application No. 201/2009 in the said Company Petition for challenging the maintainability of the Company Petition. By the impugned Order, the learned Member of the Company Law Board held that the Company Petition was maintainable and that the first respondent in these appeals had requisite qualification under Section 399 of the said Act to maintain the Company Petition under Sections 397/397 of the said Act. Accordingly, Company Applications No. 325/2006 and 201/2009 were dismissed. 3. It will be necessary to briefly refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. 11/2005 filed in this Court. It is, therefore, contended that the first respondent could not raise any objections before this Court to the said Company Petition. It is alleged in the Company Petition filed by the first respondent that there were several instances of mismanagement and oppression. It is alleged that the said Mark Rodrigues denied access to the petitioner to the documents and the books of accounts of the said Company. One of the prayers made in the Company Petition is that the forfeiture of shares/change of share holding of the first respondent be declared to be illegal. A direction is sought against the said Mark Rodrigues to transfer so much shares of the said Company to the first respondent, so that his holding will be 50%. A direction is sought against the said Mark Rodrigues to provide access to the first respondent to all the documents and books of accounts of the said Company. A direction is sought for holding an independent inquiry and investigation into the affairs of the said Company. 6. In Company Application No. 325/2006 filed by the said Company, a prayer is made for dismissing the Company Petition on the basis of preliminary objections. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e presence of the first respondent and the said Mark Rodrigues, the Board agreed to transfer the entire the shareholding of the said Company to M/s. Grandeur. In fact the transfer notices were issued by the first respondent and the said Mark Rodrigues in favour of M/s. Grandeur and in fact, the nominee of M/s. Grandeur was admitted as an additional Director of the said Company in the aforesaid meeting of the Board. The first respondent tendered his resignation and necessary Form 32 pursuant to the first respondent's resignation was also filed. The first respondent's shareholding was bought by M/s. Grandeur for a consideration of ₹ 1.51 crores, which was duly paid to the first respondent and a receipt for the sum of ₹ 1.51 crores has been issued by the first respondent. It is contended that as the first respondent was not a member or the shareholder of the said Company, he had no locus to file the petition. 7. Company Application No. 201/2009 was filed by the said Mark Rodrigues. The said application was for challenging the maintainability of the Company Petition. The said Mark Rodrigues adopted the objections raised by the said Company in Company Application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of this Court sanctioning the Scheme of Amalgamation operates in rem. Therefore, the said order cannot be assailed in collateral proceedings. The learned Senior Counsel invited attention of this Court to the findings recorded by the learned Member of the Company Law Board. He pointed out that the learned Member of the Company Law Board has gone to the extent of holding that the fraud vitiates all acts, including the orders of this Court. He submitted that in any case, the entire grievance made in the Company Petition is as regards nonperformance of the terms and conditions of the MOU by the second respondent and the same is not covered by ambit of Sections 397/398 of the said Act. He submitted that the learned Member has gone to the extent of observing that the order of amalgamation of the companies passed by this Court stands vitiated by the acts done in a fraudulent manner. He submitted that the Company Law Board had no jurisdiction to hold that the order of this Court sanctioning the scheme of amalgamation stands vitiated by the fraud. The learned Senior Counsel, therefore, submitted that the inferences drawn by the learned Member of the Company Law Board are completely errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the said Company. He submitted that the first respondent has still in his custody the original share certificates and an inquiry will have to be made by the Company Law Board, after ascertaining from the records whether the first respondent continues to be a member. He submitted that a fraud has been played by the appellants and that the purported transfer of the shares is an fraudulent act. He submitted that the fraud vitiates the transfer and as the first respondent was admittedly in possession of more than 13 % shares, he had locus to file the petition. He submitted that any judgment and order obtained by fraud is void and an issue of nullity can be raised even in collateral proceedings. He placed reliance on a decision of the Apex Court in the case of A.V. Papayya Sastry and Ors. v. Govt. of A.P. and Ors. AIR 2007 SC 1546 and another decision of the Apex Court in the case of S.P. Chengalvaraya Naidu (dead) by LRs. v. Jagannath (dead) by LRs. and Ors. AIR 1994 SC 853. He submitted that the Company Law Board has not decided the petition on merits, but only prima facie findings are recorded for the purposes of determining the issue of maintainability of the Company Petition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remaining shares were shown to have been held by the said Mark Rodrigues. It is alleged that there were only two Directors of the said Company. Change in shareholding pattern should have been only with the consent of the first respondent. It is alleged that the notices of amalgamation petition were blocked, taking undue advantage of the fact that the first respondent was resident of Delhi. It is alleged that the said Mark Rodrigues is not interested in the welfare and well-being of the said Company and his conduct shows lack of probity and fairness. Various prayers have been made, including a prayer for declaration that the change of shareholding pattern of the first respondent be declared as illegal. The second prayer is for a direction to the said Mark Rodrigues to transfer requisite shares to the first respondent for bringing the share holding of the first respondent to the level of 50%. Various directions have been sought such as an independent inquiry and investigation into the affairs of the said Company. 13. Now, it will be necessary to consider the preliminary objections raised by the said Company. It is contended that the first respondent is neither a member, nor a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Grandur. It is submitted that there is no evidence of transfer of the shares. It is submitted that no documentary evidence has been produced by the said company to show transfer of shares. It is contended that the first respondent had signed certain blank papers in good faith and trust which were used by the said Mark Rodrigues. It is submitted that the document showing the resolution passed by the Board of Directors of transferring the shares is false and fabricated. The first respondent denied various averments made in the application filed by the said company. A rejoinder was filed by the said company in which it was contended that the cashier order was drawn by HSBC in favour of the first respondent from the account of the Grandeur Real Estate Company Pvt. Ltd. in the sum of ₹ 1,51,00,000/-. A reliance was placed in the rejoinder on a statement dated 26th September 2006 issued by the said Bank confirming clearance of the cashier order in favour of the first respondent. Various documents concerning transfer of the shares have been annexed to the application of the said company as well as the said rejoinder. 15. The first issue is whether the petition under Sections 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the first respondent is no longer shown as shareholder of the said Company. After holding this, in the impugned order it is observed that the first respondent has made out a prima facie case of manipulation. It is observed that on the eve of merger of the companies, the first respondent had 13% shares and the transfer of the said shares is disputed by the first respondent. It was observed that notwithstanding the fact that the first respondent is not shown as a shareholder, it is not necessary for the first respondent to apply for rectification. It was observed that the claim of the first respondent can be looked into by the Company Law Board. It was observed that merely because the aggrieved person has more than one remedies, including a Civil Suit, it does not mean that such a person should be driven to first exhaust the remedy in Civil Court or any other forum. It was observed that the first respondent lacked requisite knowledge as he was denied access to the statutory records and documents. In the impugned order, it is noted that the case of the first respondent is that there has been a fabrication of records. 16. One factual aspect goes to the root of the matter. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the alleged fraudulent transfer of the shares. On this aspect it will be necessary to consider a decision of the Gujarat High Court in the case of Gulabrai Kalidas Naik and Ors. v. Laxmidas Lallubhai Patel and Ors. MANU/GJ/0006/1975MANU/GJ/0006/1975 : [1977] 47 Comp Cas 151 Guj. This was a case where the petitioners filed a composite petition under Sections 397 and 398 as well as under Section 155 of the said Act. In the said decision, the Gujarat High Court held thus: Prima facie, reading these sections together, it becomes clear that in order to acquire the status of a member of a company, name of the person seeking to be a member must be entered in the register of members, and only then he acquires the status of a member of a company. It is obligatory upon the company to maintain a register of its members. Now, if a person claims to be a member of the company, and either his name is not entered in the register, or having been once entered in the register, is, without sufficient cause, omitted therefrom, then the person aggrieved or any member of the company or the company may apply to the court for rectification of the register. Such an application can be made, either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Sections 397 and 398. If the petitioners' petition under Section 155 fails, obviously, they cannot maintain a petition under Sections 397 and 398, because they are not members. Now, it may be that in a given case, the petitioners invoking court's jurisdiction under Sections 397 and 398 are in a position to show that even though their names are not to be found in the register of members of the company, yet they have such an indisputable and unchallengeable title to the membership of the company that court may entertain a petition at their instance. But, in the facts of this case, the petitioners themselves admit that they themselves signed blank transfer forms pursuant to a certain understanding with the respondent No. 4 and that respondent Nos. 1, 2, 3 and 8 by a subterfuge have taken their shares from respondent No. 4. It is true that the share certificates are with the petitioners and their associates. But the fact remains that as the record stands today the shares of the petitioners and their associates were transferred from their names to the name of the respondent No. 4 and respondent No. 4, in turn, transferred the shares through his constituted attorneys t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of fraudulent transfer of shares is illegal inasmuch as in the Company Petition there is no challenge to the transfer of the shareholding of the first respondent. In absence of any such challenge, even assuming that the Company Law Board has jurisdiction to go into the question of fraudulent transfer of shares, the Company Law Board could not have decided the said question. Hence, the said finding recorded by the Company Law Board is perverse inasmuch as there is absolutely no basis for the said finding. That is how a question of law clearly arises and in an appeal under Section 10F, this Court will have to interfere. 18. However, the said Company Petition need not be dismissed as it is always open for the first respondent to file appropriate proceedings or to take appropriate steps for challenging the alleged fraudulent transfer of the shares and for establishing that on the date on which the Company Petition was filed, he was a member of the said Company and that he was qualified to file a petition. Therefore, time of twelve weeks deserves to be granted to the first respondent to file appropriate proceedings or to take appropriate steps. Till the expiry of period of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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