9911796707
TMI Blog2010 (10) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... erred is an extraneous grounds and that order of the CLB in holding removal of the first Respondent as managing director of the first Respondent-company as per the procedure under Section 284 of the Act is not in order and that when the transfer of shares in favour of the Appellants was stated to be established in facts, the finding by the CLB that the Appellants have not proved their shareholding is contrary to the fact and that the CLB has exceeded its jurisdiction in arriving at a conclusion that the Appellants claims are not bona fide. 3. In the light of the earlier judgment passed by this Court in CA No. 10 of 2007, the short facts leading to the filing of the appeal are that the 6th Respondent was a promoter of the first Respondent-company and the land in which the factory of the first Respondent-company is located belonged to the 6th Respondent. The first Appellant and the Respondents 2 and 3 have jointly taken over the first Respondent-company with an understanding that all the three persons should equally invest and carry on the affairs jointly and an agreement was entered accordingly on 27th July, 1989 between the first Appellant and the Respondents 2 and 3 on one side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proper forum. 3.2 The first Appellant has filed another suit in OS No. 49 of 1998 for a declaration that the resolution passed in EGM by which the Appellant was stated to be removed as null and void. It has been the case of the first Appellant that he has not been served with a notice of annual general body meeting ('AGM') as required under Section 284 of the Act. It is stated that there has been some settlement between the first Appellant and the second Respondent by which the second Respondent has agreed to restore the first Appellant as managing director. However, in the meantime, the Respondents 2 to 5 have fabricated certain agreement to the effect that the first Appellant has agreed to transfer his l/5th share in the land of the company in favour of the Respondents 2 to 5 and that was also executed in the unregistered non-judicial stamp paper dated 15th October, 1995. Based on the said unregistered non-judicial stamp paper agreement dated 15th October, 1995, the Respondents 2 to 5 have filed a suit in OS No. 1638 of 1995 for specific performance. It has been the case of the first Appellant that he has never signed such agreement and not received any advance muc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uplicate share certificates representing 3,780 shares in the share capital of the first Respondent-company and the consequent rectification in the register of members of the company ; for a declaration that the removal of the first Appellant as a managing director of the first Respondent-company at the proposed meeting held on 11th August, 1995 as illegal, null and void ; for a declaration that the increase of the authorised share capital and the paid-up capital of the 1st Respondent in the year 1995 and thereafter to the exclusion of the first Appellant as null and void and for a direction to allot proportionate shares to the first Appellant in the first Respondent-company based on the agreement dated 27th March, 1995 ; to supersede the Board of directors appointing independent persons in order to administer and manage the affairs of the first Respondent-company; to restore the first Appellant as managing director of the first Respondent or alternatively for a direction to the Respondents to purchase the shares of the first Appellant at a fair value and to surcharge the Respondents 2 to 5 for their misfeasance, fraud and cheating committed and for a direction to investigate the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said suit by the Respondents stating that the Respondents have originally purchased 80 per cent shares from 6th Respondent and they have subsequently purchased the remaining 20 per cent on 19th December, 1997. When the suits were taken up for trial, the first Appellant has withdrawn the said suits with liberty to approach the proper forum. It was objected by the Respondents. The court has permitted the first Appellant to withdraw the suit without reserving any right to move any proper forum and in spite of it, the first Appellant has wrongly stated as if the Appellants were given permission to move the CLB and, therefore, the filing of the petition is a clear abuse of process of law. 4.2 It is stated that during the pendency of the civil suit, on 15th October, 1995, the first Appellant has executed an agreement in favour of the Respondents 2 to 5 agreeing to release l/5th share in the property purchased vide sale deed dated 19th April, 1995 and a criminal complaint filed by the first Appellant in the Judicial Magistrate, Coimbatore was dismissed, after oral evidence, in the judgments dated 27th May, 2002 and 30th March, 2005 and it was thereafter the Respondents have filed OS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to claim l/5th share in the immovable property as per the two sale deeds and he has also chosen to claim l/5th share in the shares also. The CLB has also found that there are no evidence to show that the first Appellant has deposited a sum of ₹ 19 lakh from his personal account except the amount of ₹ 1 lakh remitted from his personal account. There is an evidence to show that the first Appellant has remitted an amount of ₹ 4,00,000. As per the Respondents, the said amounts were withdrawn by the first Appellant thereafter. The CLB has further found that the first Appellant has chosen to completely rely upon the pleadings of the 6th Respondent in the suit to prove that the sixth Respondent has transferred the shares in favour of the first Appellant. While so, the sixth Respondent has remained ex parte before the CLB. 4.5 For the specific pleadings of the first Appellant that on 15th May, 1995, the sixth Respondent has transferred 3,880 shares in favour of the Appellants' group, with face value of ₹ 100 each having distinctive Nos. 151 to 4030, for a total value of ₹ 3,78,000, there was no evidence on record except the photo copy of share transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 270(1) of the Act, it is the duty of every director to obtain the qualification share within two months after the appointment and the first Appellant has never subscribed the amount even after the appointment. 4.7 The CLB has also gone into the original minutes of GSS Spinners (P.) Ltd. and found that the name of the first Appellant does not figure anywhere as the transferee of shares. As per the resolution dated 5th May, 1995 and subsequent of the Board meeting held on 18th May, 1995, the second Respondent was appointed as new chairman. It is true that the CLB having found that the name of the first Appellant was not available anywhere as the transferee of any share, it has been stated that on the resignation of the 6th Respondent as chairman, and appointment of second Respondent, as a new chairman on 18th May, 1995, there was a resolution to appoint the first Appellant as managing director and the third Respondent as executive director and in the said resolution, the first Appellant has been made as a signatory. However, the said finding given by the CLB has been given to arrive at a conclusion that when the first Appellant was a signatory to the resolution dated 18th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 18th May, 1995 to 25th May, 1996 and accordingly disbelieved the case of the Appellants. As per the income-tax returns, which only relate to the year 1996-97 ; 1998-99, it has been presumed that the sixth Respondent was holding the shares during the relevant point of time and in 1998-99, the sixth Respondent was not holding the same since it was the specific case of the second Respondent that the shares were transferred to his name by the sixth Respondent in the year 1997 and it was those circumstances, the CLB has held that the 1st Appellant has not proved this case. 4.11 The CLB, while dealing with the next document relied upon by the Appellants, which is a letter of the chartered accountant, by name, K Narayana Swami, dated 16th March, 1997, who is stated to have introduced the first Appellant to the 6th Respondent for the purchase of Mill and the immovable property, has found that the said letter, which is relied upon by the first Appellant, was relied upon after the disputes have arisen and, therefore, the same cannot be taken into consideration. In fact the CLB has also compared the handwriting in the letter with the handwriting in the original minutes and found there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be arrived at in dismissing the application for oppression, mismanagement, or investigation by the Central Government in the affairs of the company. It is clear that the CLB has decided the entire issues against the Appellants on the factual assertions on the basis of which there are no question of law involved in the case as it is seen on record. 5. The main contention raised by the learned Counsel for the Appellants that the CLB has relied upon the income-tax returns and wealth tax returns of the 6th Respondent to come to a conclusion that the disputed shares have not been transferred in the name of the Appellants stating that it is not admissible, especially when the 6th Respondent in his written statement has specifically admitted the transfer of shares in the names of the Appellants. The fact remains that the said suit filed by the Appellants, in which the admission is stated to have been made by the 6th Defendant in transferring the shares, came to be dismissed as withdrawn and, therefore, it is clear that even if such admission has been made by the 6th Respondent in his written statement, the same cannot be taken as a proof for the factum of transfer of shares especi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellants. In the absence of such tangible evidence, it is not possible for the CLB to come to the rescue of the Appellants. When the first and basic relief of factum of transfer of shares has not been substantiated by the Appellants, the subsequent relief becomes redundant. Unless the required shares stand in the name of the first Appellant, he loses his right under the Act to continue to be the managing director since acquisition of qualification share within two months from the date of appointment of the managing director is a mandatory requirement, failing which, he automatically loses the post of the managing director. 9. While so, the Respondents 2 to 5, who are the remaining directors are certainly entitled for enhancing the authorised share capital and that can never be treated as oppression or mismanagement at all. While Section 397 of the Act specifically enables only the members of the company, who are entitled to make a complaint about oppression, Section 398 of the Act enable the members of the company to make a complaint about mismanagement and for exercising such a right either under Section 397 or 398, it is contemplated under Section 399 of the Act as foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 1872 has held as follows: The High Court also observed that an admission in a pleading can be used only for the purpose of the suit in which the pleading was filed. The observations of Beaumont, CJ In Ramabai Shriniwas v. Bombay Government AIR 1941 Bom. 141 lend some countenance to this view. But those observations were commented upon and explained by the Bombay High Court in D.S. Mohite v. S.I. Mohite: AIR 1960 Bom. 153. An admission by a party in a plaint signed and verified by him in a prior suit is an admission within the meaning of Section 17 of the Indian Evidence Act, 1872, and may be proved against him in other litigations. The High Court also relied on the English law of evidence. In Phipson on Evidence, 10th edn., article 741, the English law is, thus, summarised: Pleadings, although admissible in other actions, to show the institution of the suit and the nature of the case put forward, are regarded merely as the suggestion of counsel, and are not receivable against a party as admissions, unless sworn, signed, or otherwise-adopted by the party himself. Thus, even under the English law, a statement in a pleading sworn, signed or otherwise adopted by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of papers produced by the Appellants regarding the register of members as well as registration of share transfer during the particular time shows that the 6th Respondent has not transferred any of the shares in the name of the Appellants. On the other hand, the records evidently show that the transfers were effected in the names of the Respondents 2 to 5. 11. The hon'ble Supreme Court while dealing with the rectification of the register under Section 155 of the Act in Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers (P.) Ltd. :: AIR 1998 SC 3153 : [1998] 30 CLA 355 : [1998] 7 SCC 105 has held that a party who pleads that any transfer of shares has been effected, it has to be proved as to whether the procedure contemplated under the Act has been followed for the purpose of effecting such transfer. While comparing the provision of 1913 Act and the present Act, the hon'ble Apex Court has held as follows: 29. Both under the 1913 Act and 1960 Act a procedure is prescribed for admitting a person as member by purchase or transfer of shares of that company. With reference to 1913 Act under Section 29, a certificate of shares or stock shall be prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been arbitrarily deprived of, the court can entertain application even though the qualification shares are not available, so as to decide it on merit. I am afraid that such a situation does not exist on the facts of the present case as stated above. 13. The case of the Appellants themselves is for issuance of duplicate certificates and that has been resisted by the 1st Respondent-company on the ground that the Appellants have never purchased the shares and the amounts contributed by the first Appellant was in support of the purchase of the property which cannot be construed to be a purchase of shares and in such a situation, it would have been highly improper for the Board if such application under Sections 397 and 398 was entertained. 14. In fact, in World Wide Agencies (P.) Ltd. v. Margarat Desor :: AIR 1990 SC 737 :[1990] 3 CLA 248 : [1990] 1 SCC 536 which was at length explained by me in the earlier appeal filed by the Appellants, the hon'ble Supreme Court while holding that the right given under Section 397 is to a member of the company and, therefore, unless the person is a member, he cannot maintain the said application. But there are circumstances, wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reliance placed by the learned Counsel for the Appellant on the judgment of the Supreme Court in Thimmappa Rai v. Ramanna Rai: [2007] 5 CTC 287 : AIR 2007 SCW 3271 to explain about the fact of admission made by the party in the earlier proceedings as per Section 58 of the Indian Evidence Act cannot be pressed into service on the facts of the case. In fact, that was a case where, in a proceeding before the land tribunal, one of the parties has made an admission by way of declaration that the possession of the lands held by him was on behalf of the members of the family and when such a person filed a suit for partition, it was held that the earlier declaration is admissible against such person in the suit for partition. Paragraph 25 of the said judgment of the hon'ble Supreme Court is self-explanatory in this regard and the same reads as follows: An admission made by a party to the suit in an earlier proceedings is admissible as against him. Such an admission being a relevant fact, the courts below in our opinion were entitled to take notice thereof for arriving at a decision relying on or on the basis thereof together with other materials brought on records by the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the shares in the absence of registration of the transfer in the company's book. One of us, who was a party to the above Division Bench decision, whilst attempting to harmonise the provisions of the Transfer of Property Act and the Companies Act, observed that the transfer of the interest in the shares from the transferor to the transferee is independent of the requirement of its registration for the purposes of the Companies Act, as, without an anterior transfer, there can be no question of applying for registration of it. In all such matters, the guiding principle is whether the transferor, as donor or as seller, has done everything in his power to divest himself of title to his shares. So long as the substance of the transaction is demonstrative and clear and is not susceptible to any ambiguity, then the form or method (unless otherwise provided by any statute) by which the gift or transfer was made ought not to loom very large, insofar as common law is concerned, for a court to conclude about the validity of the transfer of the title or property in the shares to the donee or the purchaser, if the divestiture of title is complete. The only fact that certain formalitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal under Section 10(f) of the Act is certainly limited to the extent of deciding on a question of law arising out of the order of the CLB. The CLB is certainly a final authority on facts and, therefore, while exercising the powers under Section 10(f) of the Act, this Court cannot re-appreciate the evidence analysed by the CLB. Hence, interference by this Court under the said provision in appeal can be only in cases where there is either a perverse finding or finding given on no evidence or the finding is arbitrary. In my considered view, not one of such instance has arisen on a reference to the impugned order of the CLB for the court to interfere. 21. In V.S. Krishnan v. Westfort Hitech Hospital Ltd.: [2008] 83 CLA 371 : [2008] 3 SCC 363 while referring to the scope of Section 10(f) of the Act, the hon'ble Supreme Court has restricted the power of High Court under Section 10(f) only in cases where the order of the CLB is against the law, decided on irrelevant material and decided by omitting to construe the relevant materials. The relevant portion of the judgment is as follows: It is clear that Section 10F permits an appeal to the High Court from an order of the CLB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to consider, the decision of the CLB is final even though the High Court might not, on the materials, have come to the same conclusion if it had the power to substitute its own judgment - Sree Meenakshi Mills Ltd. v. CIT AIR 1957 SC 49. In between the domains occupied respectively by questions of fact and of law, there is a large area in which both these questions run into each other, forming enclaves within each other. The questions that arise for determination in that area are known as mixed questions of law and fact. These questions involve first the ascertainment of facts on the evidence adduced and then a determination of the rights of the parties on an application of the appropriate principles of law to the facts ascertained. The ultimate finding on the issue must, therefore, be an inference to be drawn from the facts found, on the application of the proper principles of law, and in such cases an inference from facts is a question of law. In this respect, mixed questions of law and fact differ from pure questions of fact in which the final determination, equally with the finding or ascertainment of basic facts, does not involve the application of any principle of law. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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