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TMI Blog2019 (5) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... y then conveniently take a stand of loss of records, hiding behind a vague FIR filed when the heat from OP1 increased. With such shifting stands, the contesting Respondents Appellants failed to convince the learned NCLT and have failed to convince us that OP1 gifted the shares and that due procedures under the Companies Act have been followed regarding change in the Register of members. No document worth the name showing compliances of the Companies Act effecting change in the Register of Members, has been brought before us and the defence that there was a gift, is also not inspiring confidence. Prima facie, the Appellants failed to prove such defence of gift before NCLT and us that the Appellants have justifiable reasons for their action to omit the name of the original Petitioners from the Register of members and to add that of Appellant No.1 - Smiti Golyan. The learned NCLT rightly decided the matter - appeal dismissed. - Company Appeal (AT) No.222 of 2018 - - - Dated:- 25-3-2019 - Mr A. I. S. Cheema, Member (Judicial) And Mr Balvinder Singh, Member (Technical) For The Appellants : Dr. U.K. Chaudhary, Sr. Advocate with Ms. Ranjana Roy Gawai, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses and the same was shut down in March, 2014. Appellants claim that as OP1 incurred huge expenses, as a feeling of guilt and remorse, he thought it fair to gift his shares held by him in two Companies - Nulon India Ltd. (OR1) and Nulon Global Limited to his mother Appellant No.1 in January, 2014 for the upcoming silver anniversary celebration of his parents in February, 2014 in Koh Samui, Thailand. The Appellants claim that gift deed dated 23.01.2014 was prepared by Appellant No.2 Krishan Kumar Golyan (OR2) which was duly signed by the OP1 Yash Golyan. Along with the gift deed, OP1 transferred original 19 share certificates to Appellant No.2 Krishan Kumar Golyan (see Appeal para 7 b ix) and thus, the gift of shares stood complete on 23rd January, 2014 and there was enforceable contract between the Appellant No.1 Smiti Golyan and OP1 Yash Golyan. Again, the Appellants also claim that the gifted shares along with transfer deed were handed over by the OP1 to his mother Smiti Golyan on 23.01.2014 (see Appeal para 7 b x), which she lodged with the Company in the end of January, 2014, and the shares were transferred in favour of the Appellant No.1 Smiti Golyan by fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication before NCLT to stay the proceeding, but it was directed on 12.04.2016 that it would be taken up with the petition but while disposing the Company Petition, the same was ignored. 5. The Appellants claimed that while disposing the Company Petition, NCLT wrongly entered into the issue of ownerships and title to the disputed 4,66,600 shares. 6. The Counsel for the Appellants has argued before us on the above lines and it is stated by him that while deciding the Company Petition, NCLT could not have gone into the title of the shares. It is submitted by him that even if NCLT could go into the compliance under Section 108 of the Companies Act, 1956 ( old Act , in short), the NCLT could not have gone into the question whether there was valid transfer by way of gift deed. According to the Counsel, without evidence being led, NCLT could not have decided title. He relied on the case of Life Insurance Corporation of India vs. Escorts Limited and Ors. reported in (1986) 1 SCC 264 where Hon ble Supreme Court inter alia discussed Judgement in the matter of Vasudev Ramchandra Shelat versus Pranlal Jayanand Thakar and Others reported in (1974) 2 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84. On an overall view of the several statutory provisions and judicial precedents to which we have referred we find that a shareholder has an undoubted interest in a company, an interest which is represented by his shareholding. Share is movable property, with all the attributes of such property. The rights of a shareholder are (i) to elect directors and thus to participate in the management through them; (ii) to vote on resolutions at meetings of the company; (iii) to enjoy the profits of the company in the shape of dividends; (iv) to apply to the court for relief in the case of oppression; (v) to apply to the court for relief in the case of mismanagement; (vi) to apply to the court for winding up of the company; and (vii) to share in the surplus on winding up. A share is transferable but while a transfer may be effective between transferor and transferee from the date of transfer, the transfer is truly complete and the transferee becomes a shareholder in the true and full sense of the term, with all the rights of a shareholder, only when the transfer is registered in the company's register. A transfer effective between transferor and the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead with Section 2(11) and Section 10, it is the Company Court alone which has exclusive jurisdiction. Similarly, under Section 446 the court refers to the Company Judge which has exclusive jurisdiction to decide matters what is covered under it by itself. But this does not mean by interpreting such court having exclusive jurisdiction to include within it what is not covered under it, merely because it is cloaked under the nomenclature rectification does not mean the court cannot see the substance after removing the cloak. 28. Question for scrutiny before us is the peripheral field within which the court could exercise its jurisdiction for rectification. As aforesaid, the very word rectification connotes something what ought to have been done but by error not done and what ought not to have been done was done requiring correction. Rectification in other words is the failure on the part of the company to comply with the directions under the Act. To show this error the burden is on the applicant, and to this extent any matter or dispute between persons raised in such court it may generally decide any matter which is necessary or expedient t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Suit purporting to have been executed on 23.01.2014. The NCLT rightly considered the said gift deed and did not rely on it. The Civil Suit has been filed during pendency of the proceedings before NCLT to mislead and misguide NCLT. There was no compliance of provisions of Section 108 of the old Act which correspond to Section 56 of the new Companies Act of 2013. The Appellants husband and wife transferred the shares to themselves. The shares were transferred in the name of Appellant No.1 in connivance with the Appellant No.2 and Respondents 5 and 6 to take control of the whole Company so as to oust the Respondents original Petitioners. It has been argued that in NCLT, the Appellants were asked to produce the share transfer documents on several occasions, but they failed to produce a single document to show the transfer of shares as per law. The alleged gift deed is in the handwriting of Appellant No.2 Krishan Kumar Golyan. According to the Respondents, it is a fabricated and forged document and NCLT rightly held that the same could not be recorded as an expression of free-will to gift 4,66,600 shares. The Respondents claimed that OP1 never signed or executed any such gift de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Petitioners that this document (Page 236) is odd in Annual Return where all other pages were signed by Appellants. Apart from this, the record shows that initially OP1 alone had filed the Company Petition before his grandparents joined the Amended Petition. The rights of the OP1 would stand independently, even from his grandfather - OP2 - Mahabir Prasad Golyan. 12. Thus, the fact remains that till the disputes started, the name of the OP1 was reflected in the records of the Company as shareholder of 4,66,600 shares. 13. The Appellants have relied on the Judgement of Life Insurance Corporation and Judgement in the matter of Vasudev Ramchandra Shelat (both referred supra). We have gone through the Judgements. In para 10 of the Judgement in the matter of Vasudev Ramchandra Shelat, the Hon ble Supreme Court observed as under:- 10. In the case before us, the registered document was signed by the donor as the giver as well as by the donee as the accepter of the gift, and it is attested by six witnesses. In it, the donor specified and gave particulars of the shares meant to be gifted and undertook to get the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholder and then filed rectified Returns showing that the OP1 was no more a shareholder, they being in the management would have to show as to how their acts are justified, and burden is on them. 16. Admittedly, the Appellants are the parents of OP1, who held the shares, and the Appellants were earlier living jointly with Original Petitioners - contesting Respondents 2 to 4 and the record shows that due to relations getting strained somewhere in 2015, the Appellants shifted from the bungalow in Sainik Farm. Apparently, access to the shares of OP1 would not be difficult. The Company Petition as initially filed by OP1 claimed that the Appellants shifted somewhere in February, 2015 and he had sent e-mail dated 19.02.2015 claiming loss of shares and asking for duplicates. Copy of the e-mail is at Page 245. In response, Ajay Sharma from accounts department asked for certain compliances like giving copy of FIR, Affidavit, etc. OP1 complied it is claimed. It appears that there were exchange of e-mails and OP1 kept asking for duplicate shares. Subsequently, Appellant No.2 - Krishan Kumar Golyan sent Reply on 30th March, 2015 attached to his e-mail. Copy of the e-mail i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understanding for convenience sake which practice was adopted for other group companies also was relied on. The letter did not purport to say there were transfer forms executed and shares handed over and in compliance of provisions of the Companies Act, the shares were transferred. The letter was relying on some usual normal and general practice etc. and overall reading gives an impression that whenever desired, the names were simply changed. 18. The above letter dated 30th March, 2015 further shows that OP1 had by 30th March, 2015 became serious regarding change in the name of register of members and had also filed FIR seeking search warrant of the office premise. This letter mentioned further:- The wrong information in said FIR is that, you were aware that physically no share certificates were in your possession as such there were no justifications for you to mentioned in the said FIR that original share certificates were lost or misplaced. Even you have not given the number of shares or number of share certificates in the said FIR. Further, you have wrongly mentioned that original share certificates are in possession of Shri Krisha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onferencing and the shares were transferred. With the initial Petition, OP1 had filed the Affidavit of Mahabir Prasad Golyan the other Director, that he had no notice of any such meeting. It remains a fact that although Appellants took a stand of loss of records, no supportive evidence of even video conferencing was brought forth before the NCLT. Our reference to the pleadings in the Reply would show that the initial stand taken by the Appellants was that the gifted shares along with transfer deeds were handed over by OP1 to his mother. In these pleadings, no evidence of existence of any gift deed was mentioned. In fact, even in the Civil Suit 31/2016, filed by the Appellant No.1 before the Civil Judge, Senior Division (copy at Page 536), similar stand was taken. It was mentioned in para 5 of Plaint:- 5. That huge expenses were spent by parents of defendant No.1 on his studies and then further huge expenses were spent in setting up the restaurant for him and further in meeting the losses in running of the restaurant and all these were borne by parents of defendant No.1 and because of feeling of guilt and remorse and on account of huge losses suffered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... husband of plaintiff on instructions of defendant No.1 and defendant No.1 signed the same. The gifted shares alongwith gift deed dt. 23.01.2014 and signed transfer deeds were handed over by defendant No.1 to plaintiff in January, 2014 which were lodged by plaintiff with the companies in the end of January, 2014 and ultimately were transferred in favour of the plaintiff on 14.02.2014. [ Emphasis Supplied ] Thus, somewhere in 2017, the Appellants came up with a stand that not merely the shares were handed over and share transfer forms were executed, but that there also existed what is called gift deed . Impugned Order of NCLT shows that learned NCLT painstakingly looked into the various aspects and analysed Section 108 of the old Act to see if there were necessary compliances. NCLT found that there was nothing to show that such compliances had been done. NCLT found that the Appellants failed to show instance of any transfer deed by adducing any evidence. NCLT also discussed the said supposed to be gift deed , as has been reproduced by NCLT in para 39 of its Judgement. Undisputedly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OP1 on 26th March, 2015 at 12.06 p.m. Thus, after such e-mail being sent at 12 O clock in the afternoon, said Ajay Sharma appears to have lodged short FIR at 2.30 p.m. as at Page 391 claiming that one day earlier itself, he lost all the concerned records. The Appellants thus conveniently took a stand that they are unable to show copy of Board Meeting or share transfer forms. In the circumstances, conduct of Appellants is suspect. We are unable to accept the defence of the Appellants in the Company Petition that OP1 had transferred his shares to the Appellant No.1. The Appellants - original Respondents 2 and 3 first took defence to claim that in alleged normal and general practice of the Company, the shares were transferred; then subsequently they took a defence of handing over of shares with transfer forms to claim that there was gift (without referring to any document); and yet subsequently, took a stand that there was also a gift deed executed. They then conveniently take a stand of loss of records, hiding behind a vague FIR filed when the heat from OP1 increased. With such shifting stands, the contesting Respondents Appellants failed to convince the learned NCLT and have fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.) and Others Civil Appeal Nos.1965 1966 of 2014 decided on 8th January, 2019 2019 SCC OnLine 223, the Hon ble Supreme Court of India dealt with disputes which were before the Hon ble Supreme Court relating to exercise of power under Section 111-A of the Companies Act, 1956 (relating to rectification of register on transfer) and noticed above Judgement in the matter of Ammonia Supplies . It was observed:- Learned counsel for the appellants has drawn our attention to the view expressed in Ammonia Supplies Corporation (P) Ltd. vs. Modern Plastic Containers Pvt. Ltd. and Others (1998) 7 SCC 105, to canvass the proposition that while examining the scope of Section 155 (the predecessor to Section 111), a view was taken that the power was fairly wide, but in case of a serious dispute as to title, the matter could be relegated to a civil suit. The submission of the learned counsel is that the subsequent legal developments to the impugned order have a direct effect on the present case as the Companies Act, 2013 has been amended which provides for the power of rectification of the Register under Section 59 of the said Act. Learned counsel has also drawn our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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