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TMI Blog2013 (7) TMI 1152X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the question of the monies owed to the shareholders being paid to the company without any satisfactory explanation therefor, and which has not been given, does not arise. Similar is the plea of the plaintiff of the loan admittedly repayable by VIL to the defendant being squared off against the balance dividend which as per the case built by the plaintiff should have been repayable by the defendant to the plaintiff. The squaring off is sought to be done with VIL paying ₹ 16,50,000/- to the defendant as against ₹ 16,02,137/- which was due. The same is also contrary to all canons of accounting practices particularly corporate accounting which is subject matter of internal and external audits. What follows from such inconsistencies is that the present suit is an abuse of the process of the Court to ward off the claim of the defendant for recovery of the balance loan amount admittedly advanced by the defendant to VIL. The present suit dismissed as not disclosing a cause of action and / or being thoroughly vexatious and frivolous and in abuse of the process of this Court. Costs of ₹ 20,000/- are also imposed on the plaintiff payable to the defendant. - Mr. Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from MPS or VIL; (ix) that of the aforesaid 31,97,150 shares so transferred to the defendant, 9,97,150 shares were transferred from the holdings of the plaintiff through Omkam Developers Pvt. Ltd. (Omkam) and 22,00,000 shares were transferred from the holding of the plaintiff through BGR Finvest Pvt. Ltd. (BGR); (x) that the aforesaid transfer of shares was subsequently brought to the notice of the Board of Directors of MPS as it was mandatory to inform the Board of Directors of MPS as to why no stamp duty was being paid on the transfer; as the shares were only being parked with the defendant in-trust / as custodian, no consideration was paid to the plaintiff; (xi) that thereafter, on the suggestion of the defendant and after complying with the formalities, in or about July, 2005 MPS was merged with VIL and the defendant was issued 23,97,863 shares of VIL against the aforesaid 31,97,150 shares of MPS which were in his name, though under the arrangement aforesaid; (xii) that on 07.11.2005, the defendant gave an interest free loan of ₹ 34,50,000/- to VIL; (xiii) that VIL on 18.02.2006 issued dividend @10% and accordingly dividend of ₹ 23,97,863/- was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice of VIL and on 02.01.2009 the plaintiff received an e-mail from the defendant in which the defendant claimed that he had resigned from the position of MD/CEO since 24.07.2008; (xxii) that the plaintiff subsequently discovered that the defendant and the said Sh. Rajinder Singh Negi were trying to take over VIL and were manipulating the ownership of shares; (xxiii) that the plaintiff also learnt of possible involvement of the defendant in siphoning of GDR funds; (xxiv) that the defendant in or about April, 2010 also served a notice of winding up to VIL with respect to the loan of ₹ 40,00,000/- aforesaid; (xxv) that in April, 2010 an Annual General Meeting (AGM) of VIL was convened and notice thereof was also issued to the defendant as he was registered as shareholder in the records; and, (xxvi) that the defendant at this stage wanted the plaintiff to remove his name from the criminal complaints qua siphoning of GDR funds and to which the plaintiff did not agree. 2. On the aforesaid pleas, the plaintiff has instituted the present suit: (I) for declaration declaring that the plaintiff is the owner of 13,97,150 shares of VIL presently in the custody and name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut for the sake of completeness, it is deemed proper to also record in brief here the defence of the defendant. It is the plea of the defendant; (i) that the present suit is a counter blast to the notice of winding up got issued by him for recovery of the loan amount from VIL; (ii) that this is evident from the fact that even though the defendant has been dis-associated from VIL since 24.07.2008 but no demand with respect to the said shares was made for about two years and has been made only after he issued the notice of winding up; (iii) that whenever shares are held in-trust, the provisions of the Companies Act require declaration to be filed by the trustee as well as the beneficiary and the company is also required to disclose the said fact to the office of the Registrar of Companies but nothing of this sort was done in the present case; (iv) that the shares were transferred in the name of the defendant against lawful consideration and not in trust; (v) that the aforesaid shares of MPS were transferred to the defendant in consideration and exchange of his transferring 8,19,652 shares of Infotecnics India Ltd. (IIL) in favour of the plaintif; (vi) that the defendant was part and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to be in-trust with the shares being returnable on demand and the shares being so registered in the name of the defendant without payment of stamp duty on transfer as the same was without consideration and the beneficial interest in the shares to remain in the plaintiff only. The said MoM also records that the Omkam and BGR had sold the said shares to the plaintiff under blank transfer; (iv) Reference is made to: (I) Section 88 of the Indian Trust Act, 1882; (II) Ouseph Chacko Vs. Raman Nair Raghavan Nair AIR 1989 Kerala 317 laying down that where there is no transfer of property as in a sham document and when there is no consideration for transaction, the bar of benami does not apply; (III) Smt. Meeradevi @ Sheela Gajanan Jagtap Vs. Chandramohan Dattajirao Jadhav AIR 1995 Bombay 47 laying down that nominal transaction is not covered by Benami Act; (IV) Sh. Mahinder Singh Vs. Mr. Pardaman Singh AIR 1992 Delhi 357 laying down that burden of proof lies on a person who asserts benami and mere assertion that the property was purchased benami is not sufficient to dismiss the suit at a preliminary stage; (V) Bhargavy P. Sumathykutty Vs. Janaki Sathyabhama AIR 1995 Ker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies, M/s Omkam Developers Pvt. Limited and BGR Finvest Pvt. Ltd. under blank transfer and the same were being given by Mr. Peeyush Aggarwal to Mr. Bhavnani and Mr. jain as above mentioned to hold these shares in trust. Further Mr. Peeyush Aggarwal requested to register the aforesaid transfer without payment of stamp duty on share transfer as the said transfers were without consideration and beneficial interest in the shares would remain with Mr. Aggarwal. After detail discussion and deliberation on the matter, following resolution was passed unanimously. Resolved That the consent of the Board be and is hereby accorded to the following transfers without consideration by way of trust and returnable on demand basis. Date of Transfer Number of Shares Transferred Folio of Transferor Transferors name Folio of Transferee's ransferee Name 27-04-2004 3,197,150 246 Mr. Peeyush 308 Mr. Sanjiv Aggarwal Bhavnani 27-04-2004 93,970 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the affirmative, whether any cognizance thereof can be taken by the Court. I must confess that my research shows a Division Bench of Kerala High Court in Damien Subsidies Kuries Ltd. Vs. Jose Pulicken [2007] 137 CompCas 288 to have held to the contrary. It was held that a company can take note of or recognize the trust which has been brought to its notice otherwise than by entry in the Register. The dicta laid down by Lord Coleridge, C.J. and Lord Esher M. R. in In re Perkins [1889] 24 QBD 613 (CA) and in Fender Vs. Lushington [1877] 6 Ch D 70 to the contrary laying down that companies have nothing whatsoever to do with the relations between trustees and their cestuis que trust in respect of the shares of the company were not followed and rather the earlier dicta in S. Parameswari Vs. Kamadhenu Metal Rolling Mills P. Ltd AIR 1971 Mad 293 laying down that a company can take notice of or recognize any trust brought to its notice otherwise than by entry in the Register was followed. However, what cannot be lost sight of is that both the said judgments of Madras and Kerala High Courts are of the time when Section 153B and 187C supra were applicable. The said provisions, prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cannot be taken. 20. I am therefore of the view that even if the part of the MoM where notice is sought to be taken of the plaintiff retaining the beneficial interest in the shares while recording transfer thereof in the name of a defendant was sanctioned, were to be ultimately proved to be a part of the MoM, the said part is in the teeth of Section 153 and the Court cannot take cognizance of things which the law prohibits from being done. The said part of the MoM/resolution of the Board of Directors is thus but to be ignored. 21. Once the aforesaid part of the MoM/resolution dated 27.04.2004 is ignored, there is no other document of trust. 22. That nevertheless brings me to the aspect of Benami. 23. The transaction as borne out from the pleadings of the plaintiff and the MoM/resolution dated 27.04.2004 recording the aforesaid shares were sold / transferred to Mr. Peeyush Aggarwal by his following companies, M/s Omkam Developers Pvt. Ltd. and BGR Finvest Pvt. Ltd. under blank transfer and the same were being given by Mr. Peeyush Aggarwal to Mr. Bhavnani..... to hold the shares in trust is of transfer of the shares of / by Omkam and BGR in favour of the defendant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust is thus made out. 27. The defendant as Managing Director of VIL cannot be said to have been standing in a fiduciary capacity to the plaintiff who was the Chairman of the said company and could at best be said to be standing in a fiduciary capacity to the company i.e. VIL. Similarly, I am unable to see as to how the defendant can be said to be a trustee of the plaintiff. I may notice that the bar / prohibition of the Benami Act is being avoided in all cases where the claim or the defence is clearly hit by the said legislation merely by paying lip service and pleading the opposite party to be the trustee or standing in a fiduciary capacity. Putting such claim or defences merely with the said plea to trial tantamounts to permitting the so called Benami owner‟ to be harassed by litigation at the instance of the person claiming to be the real owner‟; litigation cannot be permitted to be used as a tool of oppression, often forcing the Benami owner‟ though having a valid defence of the Benami Act, for the reason of the property coming under cloud owing to the mere pendency of litigation and he being thus deprived from beneficial use thereof, to settle with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other family members, was held to be not tenable in view of the Benami Act and the exception contained in Section 4(3)(b) held to be not available. 31. I yet further find another Single Judge in Pushpa Kanwar Vs. Urmil Wadhawan MANU/DE/2993/2009 to have also followed the dicta aforesaid in Anil Bhasin and held that upon repeal by the Benami Act of Sections 81 and 82 of the Trusts Act, the concept of trusteeship or relationship of fiduciary capacity as understood in trust law or that of the transferee being deemed to be holding for the benefit of the person buying or providing the consideration as was the position prior to the Benami Act, does not exist. It was further held that the term fiduciary is not restricted to technical or express trusts but includes even such offices or relations as those of an attorney at law, a guardian, executor, broker, a director of a Corporation, and a public officer. Finding no such office or relationship in the facts of that case, mere plea of the Benami holding the property in a fiduciary capacity was held to be insufficient to escape the bar of the Benami Act. 32. As far as reliance by the counsel for the plaintiff on Canbank supra is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the beneficial owner of the shares, with the shares in the name of Omkam and BGR being transferred in the name of the defendant for consideration paid by the plaintiff and on which plea it should be the plaintiff who should have been entitled to the dividend with respect to the said shares, but the plea of the plaintiff in para 17 of the plaint is of the defendant having agreed to deposit the said dividend with VIL and in pursuance to the said agreement having deposited ₹ 5,50,000/- out of the dividend received of ₹ 23,97,863/- with VIL. Even if the plaintiff were to be a majority shareholder of VIL, VIL remains a distinct legal entity from its shareholders and the question of the monies owed to the shareholders being paid to the company without any satisfactory explanation therefor, and which has not been given, does not arise. Similar is the plea of the plaintiff of the loan admittedly repayable by VIL to the defendant being squared off against the balance dividend which as per the case built by the plaintiff should have been repayable by the defendant to the plaintiff. The squaring off is sought to be done with VIL paying ₹ 16,50,000/- to the defendant as a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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