9911796707
TMI Blog2019 (12) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... e natural corollary would be that it would then be deemed to be a 'member' within the meaning of section 2(55) of the 2013 Act. In that eventuality, the other reliefs that it is seeking, under sections 241 and 242 of the 2013 Act, could then be granted. Therefore, there would be no bar on a combined application being filed, as is the prevailing norm. The equitable right of the transferee gets metamorphosed into the absolute right of a shareholder only when the names of the transferees after the recognition of the transfer, are entered on the register. This can be viewed from another angle and it is this: when once the transferee does everything that he is required to do under law, to get his name entered on the register by proper lodgement of the instruments of transfer and no other obstacles remain in enforcement of the said right, the transfer becomes effective as against the company also. Thereafter, the company cannot unilaterally alter its articles affecting the aforesaid right of the transferee. In the present case, the reliefs claimed are being sought directly against the company/respondent no. 1 - for the transferee to have maintained an action against the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and (b) the plaintiff praying for similar reliefs simultaneously before this Court and NCLT that would require adjudication on the identical core issue. In light of the same, this matter needs to be decided upon exchange of affidavits. In order to appreciate the finding it is necessary to consider the case made out by the appellants in their pleadings. The plaint states that the respondent no. 1, a company, owns an immovable property, popularly known as Middleton Chambers . The respondent no. 1 is owned, directly or indirectly, by the respondent no. 2 and 3. It is stated that the respondent no. 2 and 3 obtained loans and advances from the appellants at various instances; and that, as on 31st March 2018, a sum of Rs. (approximately) 29,27,00,000 remained due and payable by the respondent no. 2 and 3 to the appellant no. 1 and 2. The plaint states that the respondent nos. 2 and 3 have acknowledged payments received by them from the plaintiffs. It is stated that towards the end of June 2018, the respondent no. 2 and 3 approached the appellants with the promise to make payment of a part of their dues within the next six months, and off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SH-7, giving intimation of amendment of its Memorandum of Association, of increase of its authorized capital and issuance of bonus shares in favour of the respondent no. 2 to 5. It also came to the appellants' knowledge that a board resolution had been passed on 15th October 2018 authorizing the increase of authorized share capital of the company and issuance of bonus shares to the holders of equity shares of the company. An Extraordinary Board Meeting had also been held on 14th November 2018 to increase the authorized capital of the respondent no. 1 and a further meeting had been held on 1st December 2018 allotting bonus shares. This, the appellants allege, is in contravention of an agreement between the parties while getting the appellants to agree on part payment within six months during the end of June 2018 referred to hereinabove. The appellants contend that this amounted to a fraud played by the respondent no. 2 to 5 on the appellants; and the particulars of the fraud have been set out in paragraph 23 of the plaint. In these circumstances, the appellants approached this court, seeking the following reliefs - (a) Declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndant no. 1 or passing any resolution thereat or to deal with, dispose of, alienate, encumber or part with possession of any part of portion of the property of the defendant no. 1 at 10, Middleton Street, Kolkata - 700 071; [other incidental reliefs] The appellants had also filed a petition before the National Company Law Tribunal (hereinafter referred to as NCLT ). In the said petition, the appellants has prayed for similar reliefs as prayed for in the suit. The reliefs claimed are as follows - a. An order directing the respondent to register the transfer the 81,633 shares transferred by Prabha in the name of the petitioner no.1 and, upon delivery of the balance 11,19,173 shares to it, to register the transfer of the same as well as in the name of the petitioners in the manner following and to direct consequent rectification of the share register of the respondent:- 500000 shares transferred by Prabha in the name of the Petitioner no.2 - 3000233 shares transferred by Prabha in the name of the Petitioner no.1 11600 shares transferred by Shanti in the name of the Petitioner no.1 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act or any other law for the time being in force. The question that therefore arises is whether the issues can be determined or the reliefs sought can be granted by the NCLT or the NCLAT under the 2013 Act. Mr. Saha submits that the appellants' cause of action in the present suit in C.S. No. 34 of 2019 is entirely different from the appellants' cause of action in the application preferred before the NCLT under sections 58 and 59 of the Companies Act 2013 being Appeal No. 312/KB/2019. It is submitted that the appellants' cause of action in the present suit is one of breach of agreement, of breach of negative covenant of the agreement, breach of trust, and fraud. The appellants' cause of action in the NCLT petition being Appeal No. 312/KB/2019 is simply the failure on the part of the respondent no. 1 company to register the shares in the appellants' names in its register of members. Mr. Saha submits that the plaint case is that the respondent no. 2, 3, 4 and 5 had made over the entire shareholding of the respondent no. 1 company to the appellants and despite doing so, they thereafter proceeded to enhance the authorized capital and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75 CWN 704 (paragraph 23). Therefore, the appellants contend that this court is empowered to determine the suit under section 9 of the Code of Civil Procedure. In this context, reference is made to Secretary of State v. Maskand Company AIR 1940 PC 105 for the proposition that exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. In rebuttal to the contention about the maintainability of a combined application before the NCLT, Mr. Saha submits that section 241 and 244 clearly bar a non-member from approaching the NCLT for reliefs under section 242 of the 2013 Act; and therefore, what cannot be done directly cannot also be done indirectly. For the proposition that what cannot be done directly cannot be done indirectly, reliance is placed on State of Haryana v. M.P. Mohla [2007] 1 SCC 457 (paragraph 15) and Rashmi Rekha Thatoi v. State of Orissa [2012] 5 SCC 690 (paragraph 37). It is submitted that as a transfer of shares is completed with the execution of share transfer deeds and the delivery of shares, where they are in physical form, the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Act . Consequently, it is submitted that the powers of the NCLT under section 58 and 59 of the Companies Act 2013 are limited and are not as expansive as its powers under section 242 of the 2013 Act. It is submitted that it is well settled that the transferee of shares acquires a beneficial interest in the shares transferred even before his name is registered in the register of members. Reference in this regard is made to Mathalone v. Bombay Life Insurance Co. AIR 1953 SC 385, Killick Nixon Ltd. v. Bank of India [1985] 57 Comp Cas 831 and National Travel Services v. CIT reported at (2018) 3 SCC 95 (paragraphs 12, 18 and 19). Mr. Saha states that the appellants are, as such, already the beneficial owners of the entire shares of the respondent no. 1 company. As the transferor of the said shares, the respondent nos. 2 to 5 are in the position of trustees of the appellants and are obliged to act only as per the instructions of the appellants. They cannot in any event act in a manner detrimental to the beneficial interest of the appellants in the shares. In fact, even the voting rights in respect of the said shares, could, if at all, be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to approach this Court with the instant suit. In this context, it is submitted that regard must be had of the jurisprudential doctrine of 'ubi jus ibiremedium', that is there can be no wrong without a remedy. It is submitted that the fact that the appellants are in possession of the share certificates and signed share transfer forms in respect of 12,00,806 equity shares of the respondent no. 1 company, represented to be the entire paid up capital of the said company, is evidence of the fact that the appellants are the 100% shareholders of the respondent no.1 company. As such, the grant of the interim reliefs sought by the appellants in G.A. No. 552 of 2019 need not await any declaration from the learned NCLT that the appellant's are the shareholders of the respondent no.1 company, or have a beneficial interest in the said shares, thereby entitling them to participate in the management of the company as per the provisions of section 2(27) of the Companies Act, 2013. It is submitted that the respondents have acted in breach of trust by attempting to prejudicially alter the authorised share capital and shareholding pattern of the respondent no.1 company, des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Single Judge has proceeded to deny the interim reliefs sought in G.A. no.552 of 2019 upon holding that the interim reliefs sought both in the suit and in the application under section 58 and 59 before the NCLT are the same and that a litigant cannot be allowed to seek similar reliefs in different forums at the same time. The learned Single Judge has erred in failing to appreciate that the appellants' cause of action in the suit is entirely different and distinct from the cause of action in the application under sections 58 and 59 before the NCLT. The learned Single Judge further erred in failing to appreciate that it is settled law that while section 10 of the Code of Civil Procedure, 1908 prohibits the Court from proceeding with the 'trial' of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit, the word 'trial' for the purposes of section 10 of the Code must be construed to mean a judicial examination and determination of the issue in civil or criminal court by competent tribunal. It is settled law that section 10 of the Code of Civil Procedure, 1908 is not a bar to the institution of the sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at (2018) 208 Comp Cas 496 (paragraphs 5, 10, 27, 28 and 35) and M. Square Caterers and Hospitality Pvt. Ltd. 2012 SCC Online CLB 109 (paragraph 1 and 7). It is submitted that since the NCLT is empowered to determine the question under section 58 or 59 of the 2013 Act, a combined application could also be made in the instant case; and if the NCLT found in favour of the appellants on the issue of section 58-59 of the 2013 Act, it could then go on to try the issues under section 241-242 of the 2013 Act. It is submitted that section 430 of the 2013 Act is a complete bar on the civil court on issues which the NCLT is empowered to determine. For this proposition, reference is made to Shashi Prakash Khemka v. NEPC Micon reported at 2019 SCC Online SC 23, SAS Hospitality Pvt. Ltd. v. Surya Constructions Pvt. Ltd. reported at 2018 SCC Online Del 11909, Viji Joseph v. P. Chander (decision by the Madras High Court in Original Side Appeal Nos. 29 and 30 of 2019 and C.M.P. Nos. 1884 and 1904 of 2019) (paragraphs 8.6, 8.14, 9, 13-17), and Chiranjeevi Rathnam v. Ramesh (decision by the Madras High Court, Madurai Bench, in C.R.P.(PD)(MD) No. 870 of 2017 and C.M.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders of the company, they cannot obtain any order of injunction against the properties of the respondent no. 1 company as shareholders are not the owners of the properties of the company. Any order to be obtained by a shareholder as against the company's assets will have to necessarily be regarding the affairs of the company and therefore, within the jurisdiction of the NCLT. Before I go on to analyse the present case, it is important to broadly understand the contours and effect of Section 430 of the Companies Act 2013. Section 430 of the Companies Act 2013 was notified by MCA Notification S.O. 1934(E) dated 1st June 2016 (w.e.f. 1st June 2016). The section states - Section 430. Civil Court not to have jurisdiction - No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force an no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here, unless the statute contains words which expressly or by necessary implication exclude the common law remedy the party suing has his election to pursue either that or the statutory remedy. The second class of cases is, where the statute gives the right to sue merely, but provides, no particular form of remedy : there, the party can only proceed by action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it .The remedy provided by the statute must be followed and it is not competent to the party to pursue the course applicable to cases of the second class. The scope of an exclusion clause or an ouster clause has been explained by the Privy Council in Secretary of State v. Mask Co. AIR 1940 PC 105, wherein it is stated- It is settled law that the exclusion of the jurisdiction of civil courts is not to be readily inferred, but that such exclusion must be either explicitly expressed or clearly implied. It is also well settled that even if the jurisdiction is so excluded, the civil courts have jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said right and liability shall be determined by the tribunals so constituted, and whether remedies normally associated with actions in Civil Courts are prescribed by the said statute or not. (3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals. (4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit. (5) Where the particular Act contains no machinery for refund' of tax collected in excess of constitutional limits or illegally collected a suit lies. (6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a meeting was illegal. In Oriental Benefit and Deposit Society Ltd. v. Bharat Kumar K. reported at (2001) 103 Comp Cas 947 (Mad)(DB) , it was held that a civil suit lay for restraining consideration of agenda item of a meeting. In Niranjan Singh v. Edward Ganj Public Welfare Association Ltd. [1977] 47 Comp Cas 285 (P H), it was held that a civil suit lay to challenge the validity of a notice calling a meeting. In Prakasam (P.) v. Sree Narayana Dharma Paripalna Yogam [1980] 50 Comp Cas 611 (Ker), it was held that the validity of an Annual General Meeting can only be questioned in a civil suit and the company court has no jurisdiction to grant relief in such matters. Lastly, in a suit relating to the validity of forfeiture of shares, where a notice of forfeiture was published in a newspaper and the validity of the same was under question, it was held in Tej Prakash S. Dangi v. Coromandal Pharmaceuticals Ltd. [1997] 89 Comp Cas 270 (AP) that such a matter could not go to the company court. However, this view was reversed in K. Venkat Rao v. Rockwool (India) Ltd. Ltd reported at (2002) 108 Comp Cas 494 (AP)(DB) wherein it was held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other. But objections were subsequently raised about the jurisdiction of the civil court to hear the matter. It was held that the disputes relating to the question as to whether the parties were illegally disposed are disputes of a civil nature and therefore maintainable before the civil court. It was held that such a suit, apart from the general law, would also be maintainable under section 6 of the Specific Relief Act 1963. In such matters, the court would not be concerned even with the question as to title/ownership of the property. (See Dwarka Prasad Agarwal v. Ramesh Chandra Agarwal [2005] 6 SCC 220. Section 58 of the 2013 Act envisages that if a private company limited by shares refuses, whether in pursuance of any power of company under its articles or otherwise, to register transfer of, or transmission by operation of law of right to, any securities or interest of a member in the company, it shall within a period of thirty days from date on which instrument of transfer, or intimation of such transmission, as the case may be, was delivered to company, send notice of refusal to transferor and transferee or to person giving intimation of such transmission, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact of any person having become or ceased to be a member, person aggrieved, or any member of the company, or company may appeal in such form as may be prescribed, to Tribunal, or to a competent court outside India, specified by Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the register. Subsection (2) of Section 59 envisages that the Tribunal may, after hearing parties to appeal under subsection (1) of Section 59 of Act of 2013 by order, either dismiss appeal or direct that transfer or transmission shall be registered by company within a period of ten days of receipt of order or direct rectification of records of depository or register and in latter case, direct company to pay damages, if any, sustained by party aggrieved. Subsection (3) of Section 59 of Act of 2013 envisions that provisions of Section 59 shall not restrict right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled to voting rights unless voting rights have been suspended by an order of the Tribunal. Subsection (4) of Section 59 of Act of 2013 provides that where transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) shall not be deemed to be a reduction of share capital. While considering Section 111A of the 1956 Act, it was held by the Supreme Court that a seriously disputed question of title cannot be decided by the Company Court or Company Law Board. This conclusion was arrived at by the Supreme Court by taking into consideration jurisdiction of the Company Law Board being summary in nature. However, the rationale of the old line of cases, including Ammonia Supplies Corpn. (PT) Ltd. v. Modern Plastic Containers (P.) Ltd. reported at 1998 (7) SCC 105 , Public Passenger Service Ltd. v. M.A. Khadar AIR 1966 SC 489, and Standard Chartered Bank v. Andhra Bank Financial Services Limited [2006] 6 SCC 94 (paragraph 29 and 32), was on the lines that difficult questions could not be answered. This delineation has however now been done away with. In the Companies Act 2013, section 407 onwards deal with the constitution of the Tribunal. Section 420 has vested the Tribunal with powers to 'pass such orders thereon as it thinks fit'. The Tribunal is also vested with the power of review. Section 424 provides the Tribunal the same powers and functions as are vested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r what is not covered under Section 155, the Civil Court would have jurisdiction. Paragraph 27 of the Supreme Court judgment in Ammonia Supplies (supra) is illuminating and instructive for two reasons. Firstly, it delineates out what rectification proceedings are and what its ambit covers. Secondly, as pointed out in the wonderful judgment by Justice Prathiba Singh in SAS Hospitality (supra), the courts have always consistently made it clear that if the jurisdiction of the Company Court was exclusive, the jurisdiction of the Civil Court was barred in respect of power to rectify the register of members . The decision of the Supreme Court in Canara Bank v. Nuclear Power Corpn. of India Ltd. 1995 (3) JT SC 42 is also noteworthy though it has not directly dealt with the question of exclusion of jurisdiction. In paragraph 16 it was observed as under:- 16. It will be seen that the CLB now exercises the powers that were exercisable by the Court under Section 155. It is entitled to direct rectification of the register and the payment of damages by the company. It is entitled to decide any question relating to the title of any person who is a party to the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudication of such matters cannot be doubted to be summary in nature. So, whenever a question is raised CLB/Tribunal/Company Court has to adjudicate on the facts and circumstances of each case. If it truly is rectification, all matters raised in that connection should be decided by the Company Court/CLB and if it finds adjudication of any matter not failing under it, it may direct a party to get his right adjudicated by a civil court. Thus, there is a thin line in appreciating the scope of jurisdiction of the Company Court/Company Law Board in rectification matters. The rectification jurisdiction is exclusive if the matter truly relates to rectification but if the issue is alien to rectification, such matter may not be within the exclusive jurisdiction of the Company Court/Company Law Board. Thus, the jurisdiction under Section 111 is somewhat summary in nature and that if a seriously disputed question of tile arose, the Company Court should relegate the parties to a suit, which was the more appropriate remedy for investigation and adjudication of such seriously disputed question of title. The issue as to whether there has been a proper lodgement of shares and un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary or expedient to decide in connection with the application for rectification. (6) the decision of the Tribunal on any such petition shall be final. In fact, the reliefs claimed before the NCLT and the reliefs claimed in the suit are same and/or have same and/or similar effect. The appellants, before filing of the suit, appears to have taken steps to initiate appropriate proceedings on 15th February 2019 before the NCLT under Section 58 and 59 of the 2013 Act and before waiting for the outcome of the result of the said proceeding rushed to the High Court on 18th February 2019 by presenting a plaint and moved the interlocutory application on 26th February 2019 by which time their prayer for interim orders was refused by the NCLT. Three-fourth of the plaint is a reproduction of the petition filed before the NCLT. The plaintiff in our view has taken a chance before this court after having failed to obtain a similar relief before the tribunal. In the plaint, it is stated that as on 31st March 2018, a sum of (approximately) ₹ 29,27,00,000 remained due and payable by the respondent no. 2 and 3 to the appellant no. 1 and 2. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company in their names and to do the needful in that regard, the said Mr. JoydeepNath expressed his unwillingness to accept the same, without, however, providing any reason therefor. In the circumstances, in the afternoon of 27th December 2018 itself, the plaintiffs sent to the defendant no. 1 the share scrips/certificates of the lot of 81633 shares transferred to them by the defendant no. 3 along with their transfer deeds by registered post with acknowledgement due. This was done to place on record the making of an application by the plaintiffs for the transfer of the said shares in the face of refusal by the said JoydeepNath to accept their applications. Documents evidencing such fact are annexed hereto and collectively marked F . (emphasis supplied) However, it appears that the company did not reply to the letter dated 27th December 2018. This is stated in paragraph 12 of the plaint, as herein below - 12. Although the defendant no. 1 duly received and accepted the share scrips/certificates of the said lot of 81633 shares and their transfer deeds at its office at Middleton Street, Kolkata within the aforesaid jurisdiction on 28th December 2018, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same the defendant no. 2 and 3 accepted the fact that the plaintiffs had lent and advanced moneys to them and they had acknowledged such debts by signing statements and accounts confirmations. The said defendant further acknowledged the fact that the original share scrips of the equity shares held by them and their associates, namely, the defendant no. 3 and 4, had been made over to the plaintiffs along with the transfer deeds of the same. In the letter dated 16th January 2019, the defendant no. 2 and 3, however, attempted to allege that along with the shares only blank signed transfer deeds had been made over to the plaintiffs, and that the same had been made over only to give the plaintiffs comfort. It also alleged that such blank transfer deeds had been executed by the defendant no. 2 and 3 and their associates on 25th July 2018 and had been handed over to the plaintiffs in trust and good faith without any intention of actually transferring the shares to the plaintiffs. The letter further proceeded to allege that in breach of the understanding on the basis whereof the share scrips had been made over and the transfer deeds had been executed, the plaintiffs had forwarded th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re separate juristic entities. The letter dated 27th December 2018 was made to the company. The letter dated 10th January 2019 was, however, made to the shareholders of the company. Under section 58(1) of the Act, on receiving the letter dated 27th December 2018, the company had an obligation to send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal . This was required to have been done within a period of thirty days 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 . Section 58(1) is extracted herein below for convenience - 58. Refusal of registration and appeal against refusal (2) If a private company limited by shares refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days from the date on which the instrument of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59. Rectification of register of members (1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, or to a competent court outside India, specified by the Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the register. (2) The Tribunal may, after hearing the parties to the appeal under sub-section (1) by order, either dismiss the appeal or direct that the transfer or transmission shall be registered by the company within a period of ten days of the receipt of the order or direct rectification of the records of the depository or the register and in the latter case, direct the company to pay damages, if any, sustained by the party aggrieved. (emph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the transferee, who, if he so chooses, completes the transfer by entering his name and then applying to the company to register his name in place of the previous holder of the share. The company recognises no person except one whose name is on the register of members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of 'a blank transfer', and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee. These equities, however, do not touch the company, and no claim by the transferee whose name is not in the register of members can be made against the company, if the transferor retains the money in his own hands and fails to pay it to him.' It, therefore, follows that the equitable right of the transferee gets metamorphosed into the absolute right of a shareholder only when the names of the transferees after the recognition of the transfer, are entered on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of directors, which is distinct from the disputes involved in the present case. However, by applying the tests laid down therein, it is clear in the facts of this case that involve issues relating to registration of shares and oppression and mismanagement, the NCLT is 'empowered to determine' the issues - leading to the conclusion that this court has no jurisdiction. Mr. Saha's contention in favour of this court exercising jurisdiction rests on the argument of a trust relation. When the six month period envisaged under the supposed oral agreement of June 2018 ended in December 2018, the share scrips/certificate along with the supposedly signed transfer deeds that were furnished and made over to the appellants, in their understanding, as a security, stood enchased, so to say. Mr. Saha contends that at this point, the appellants became the beneficial owners of the shares even though they were not yet registered on the books of the company as a member. He contends that at this point a relationship of trustee and cestui que trust was established between the respondent no. 2 to 5 and the appellants. As the transferor of the said shares, the respondent nos. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by this court and where reliefs can be granted sans the petition already filed before the NCLT. With regard to the relationship between the trustee and the cestui que trust, Mr. Saha has relied on Mathalone (supra). In Mathalone (supra), one Sir Padampat Singhania had acquired certain shares in the Bombay Life Assurance Co. Ltd. and the shares belonged to one Mr. Reddy. Sir Padampat had however not made an application for registration of his name in the register of the company. Subsequently, the company approved a resolution for increasing the capital of the company and issued shares in a proportion to the shares already held by the shareholders. Mr. Reddy complied with the necessary formalities required for the additional shares owed to him but did not do so for the shares which he had sold to Sir Padampat and supposedly held in trust on behalf of him. Sir Padampat's agents called on Mr. Reddy to furnish details and asked him to purchase the additional shares on behalf of Sir Padampat, promising to indemnify him for any liability he incurred. Mr. Reddy refused to do so for a number of reasons. The question before the court was whether Mr. Reddy was under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the transferee. This may be relevant in the modern day since a large number of shares of various persons are today held collectively by various kinds of asset management firms who may be holding these shares as trustees and various actions like invoking the provisions of the Insolvency and Bankruptcy Code 2016 could only be performed by the trustee. For convenience, the relevant paragraph of Killick Nixon (supra) is reproduced below - 14. The company, however, recognises only the person who is its member as a shareholder. In other words, the rights that may exist between the company and its members or shareholders can be exercised only by members. Similarly the company can only look to its members for the discharge of their obligations to the company as its shareholders. The only person, therefore, who is entitled to exercise these rights and privileges or discharge these obligations is the transferor. The transferee is an outsider as far as the company is concerned and his only right is to have the transfer registered and thus to get himself accepted as a member and shareholder of the company. If the transferee is denied this right, he has a remedy un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficiary unreasonable, e.g., if a trustee is required to spend a large amount of money out of his own pocket in order to carry out the directions of the beneficiary. Broadly speaking, however, all the rights which are given to a member under the companies Act are rights given to him in his capacity an a shareholder of the company. These rights enable him to participate in the worming of the company as its shareholder. It is possible to say that the trustee can be asked by the beneficiary to exercise on his behalf not merely all rights and privileges attached to the shares but also conferred on the trustee by virtue of his being a shareholder so long as a trustee is not thereby asked to assume additional obligations or burdens, to spend any money from his own pocked or is put to any hardship. In the present case, the constructive trustee has not been put to any loss or hardship in filing the present petition because everything in connection with the filing of the petition has been cone by the transferees who hold a power of attorney from the transferors. Anyway, in view of the facts in the present case, we are not required to consider for the purpose of this present petition whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1077 CA, it was held that the fact that the agreement is subject to fulfilment of a condition beyond the control of the parties will not prevent it from being specifically enforceable, notwithstanding that the condition has not been fulfilled, if the party for whose benefit the condition was inserted is prepared to waive it. It has been held in Hardoon v. Belilios [1901] AC 118 PC, that where the beneficial interest has passed, in terms of what has been discussed hereinabove, without the transferee's name being registered, the seller/transferor then becomes a trustee for the buyer and must account to him for any dividends he receives and vote in accordance with his instructions. This principle has also been taken note of and approved by our Supreme Court in Howrah Trading (supra). The relationship between a trustee and cestui que trust as recognized in Mathalone (supra) is quite well established today. Killick Nixon (supra) has also recognized it. However, there are several distinguishing features and differences between Killick Nixon (supra) and the present case. Significantly, the proceeding in the instant case is initiated by filing a suit. The proceeding in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rant those reliefs would be the NCLT. This is another reason, in addition to the reason given in the paragraph above, for the suit to not be maintainable. Additionally, Mr. Banerjee was quick to point out that if the suit were to be entertained by this court, an anomalous situation could possibly arise. The rights of the appellants as the supposed transferees of shares are predicated on them being able to prove that there was an oral agreement in June 2018 and that signed transfer deeds had been made over to them as security. The respondent no. 2 and 3 had contended first that the transfer deeds were merely for comfort and later that they were not signed. From the records herein, it appears that these were the reasons, amongst others, that weighed with the respondent no. 1 in its refusal to register the shares when called upon by the appellants to do so. Under section 58(5) or 59(2) of the 2013 Act, the NCLT could either dismiss the appeal or it could direct the respondent no. 1 to register the shares. The NCLT would do this after following the procedures and making an inquiry into matters of fact. Towards this end, an application has already been filed by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been in place. However, in the present case, the respondent no. 2 and 3 deny that such a relationship exists. This is another reason why it is difficult to adjudicate the issues in the suit in light of the reliefs claimed. If, however, the NCLT does return a positive finding in favour of the appellants in their application under section 58 and 59 of the 2013 Act and directs the company to register them as members of the company, the NCLT could then also adjudicate and decide on the reliefs sought in this suit on the grounds of oppression and mismanagement. For the aforesaid reasons, no reliefs as prayed for by the appellant can be granted at this stage since the court is of the prima facie view that if does not have the jurisdiction to try, receive and entertain the suit. During the hearing of the appeal, Mr. Saha submitted that after the filing of the civil suit, the appellants discovered that the respondent nos. 2 to 5 had caused the respondent no. 1 company to execute a deed of sub-lease and to enter into two several development agreements in respect of the Middleton Chambers property, which is the sole asset of the respondent no. 1 company. Mr. Saha submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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