9911796707
TMI Blog1998 (11) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... shares since July, 1988, bearing distinctive Nos. 3561265 to 3561364 with share certificates Nos. 58768 and 58769. These shares were said to be lodged by the second respondent with the company for effecting the transfer in favour of the former. The company claims that the original share certificates were taken from its office by some one before effecting the transfer in favour of the second respondent. Consequently, the company issued duplicate share certificates in lieu of the purported lost original certificates and forwarded them to the second respondent. However, the petitioner has not sold the shares or parted with possession for any consideration. They have been pilfered from the custody of the petitioner. The company issued duplicate share certificates suo motu and forwarded them to the second respondent. There was no request either from the petitioner or the second respondent for issue of duplicate share certificates. The company has not obtained any proof of purchase of shares or indemnity from the second respondent before issuing duplicate share certificates. The issue of duplicate share certificates was approved post facto by the transfer committee and not by the board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nker. They were sent to the company without the date of execution or consideration and not properly filled in. They were either stamped inadequately or not stamped at all. The company registered the transfer summarily without raising any objection about its validity. The transfer is in violation of the provisions of Section 108(1) of the Act and not valid, which empowers the court to rectify the register of members as held in Jagdish Mills Ltd., In re [1954] 24 Comp Cas 241 ; [1954] 56 Bom LR 525. The second respondent has not paid any consideration for the impugned shares and, therefore, transfer without consideration is void in law as propounded in John Tinson and Co. (Pvt.) Ltd. v. Mrs. Surjeet Malhan [1997] 88 Comp Cas 750 (SC) ; [1997] 2 Scale 99 by the Supreme Court. 3. The petitioner was entitled to the 200 bonus shares in March, 1994, when the board of directors resolved to issue bonus shares as held in Shree Gopal Paper Mills v. CIT [1970] 77 ITR 543 (SC). The company failed to dispatch the bonus shares accrued to the petitioner and thereby violated the provisions of Section 113(2) of the Act, which attracts penalty. Partly filled transfer instruments were lodged with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the original share certificates from the second respondent. As the second respondent had been insisting on transfer of the impugned shares the company advised the petitioner to obtain a restraint order from a competent court. Accordingly, the petitioner filed a civil suit before Mumbai Civil Court in C.S. No. 3143 of 1994 and obtained an order of injunction restraining the company from transferring the impugned shares in favour of the second respondent. In August, 1994, the petitioner withdrew the said civil suit, upon which the second respondent advised the company to effect the transfer in her name forwarding three transfer forms duly signed by the petitioner and attested by the bankers. The petitioner did not object for effecting the transfer by the company in respect of the impugned shares in favour of the second respondent. Accordingly, the company had transferred 300 shares in favour of the second respondent on September 24, 1994. The company had evolved necessary procedure for all the transfers and accordingly the transfers were effected by the transfer committee for issuance of duplicate certificates. There has been no irregularity on the part of the company either in is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the petitioner herein had earlier filed a petition under Section 237(b) before the Principal Bench, Company Law Board seeking investigation into the affairs of the first respondent-company on the ground that the company had violated various provisions of the Companies Act as well as the other statutes in issuing duplicate certificates, issue of bonus shares to respondent No. 2 and also registration of transfer of all these shares in favour of respondent No. 2. After hearing the arguments of the petitioner and counsel for the respondents, the Principal Bench dismissed the petition on the ground that the petitioner has not provided sufficient material to convince the same that the affairs of the company were being conducted in a fraudulent manner, detrimental to the interest of the members and the public. The Principal Bench of the Company Law Board had also observed in that order that in the case of alleged violation of the provisions of the Act in respect of issue of duplicate certificates, the right course of action would be to take up the matter with the concerned officers of the Department of Company Affairs for doing the needful. 9. On the basis of the pleadings and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her this petition satisfies the requirements of Section 111A(3) since rectification is sought after registration of the transfer of shares. As per Section 111A(3), the Company Law Board can order rectification only on three grounds, viz., the transfer is in violation of the provisions of the Securities and Exchange Board of India Act or the Regulations made thereunder, the provisions of the Sick Industrial Companies Act or the provisions of any other law for the time being in force. Admittedly, the transfer is not in violation of either the Securities and Exchange Board of India Act/Regulations or the Sick Industrial Companies Act, The only ground under which this petition can be considered is whether the transfer is in violation of the provisions of any law. According to the petitioner, the transfer instruments do not comply with the provisions of Section 108 of the Act. Therefore, this is the only issue that we have to consider. 10. A careful scrutiny of the documents produced both by the petitioner and company, reveals that though the petitioner has alleged in the petition that the shares had been misappropriated/pilfered from the envelope in which they were lying for safe k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company that the issue of duplicate share certificates was considered by the transfer committee of the company and accordingly the duplicate share certificates were duly issued. Though the authority of the transfer committee has been questioned by the petitioner, the fact of approval by the transfer committee has not been denied by the petitioner. It is, therefore, apparent that the duplicate share certificates were issued under the authority of the transfer committee and, therefore, we do not hesitate to uphold the plea of the company. With regard to the transfer of the impugned shares, it is free from doubt that the petitioner withdrew the civil suit filed against the company and with the consent of the petitioner, the transfer of impugned shares was effected in favour of the second respondent, as borne out from the letter dated July 21, 1994, of the petitioner, relevant portion of which runs as follows : As the courts were on holiday and the deadline set by you was too short the matter could not be sorted out immediately. However, as suggested by you, the matter has now been amicably settled and under the arrangement a transfer form duly signed and attested covering 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suit. By entering into some sort of compromise with the broker, he also delivered the duly signed transfer instruments in respect of the cost of 100 shares as well as 200 bonus shares. The company registered the transfer of the 300 shares only after the receipt of transfer forms and, therefore, as far as registration of the transfer of these 300 shares, we are not in a position to find any fault with the company. 'From the narration in the petition it is crystal clear that though the petitioner has settled the matter of 300 shares out of court after filing a suit, he has alleged in the petition that he was pressurised into getting into this settlement and that he has not received the consideration for the shares. As a matter of fact, in this petition, one of the prayers is that the register of members should be rectified by putting the name of the petitioner in respect of these 300 shares. It is on record that the company had taken adequate steps to protect the interest of the petitioner and only when it was lodged with transfer instruments after the out of court settlement, the company registered the shares in favour of Mrs. Shah.' 13. The petitioner also raise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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