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TMI Blog2020 (3) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... peration of law. It is the right of retention of goods - in the absence of delineated process to exercise paramount lien, the Respondent Company can exercise lien to the extent of retention of goods; in this case shares which can be extendable payable to the shareholder - thus respondent have no right to unilaterally sell the shares which are in possession of the shareholder, without the consent. Whether the action of 1st Respondent Company is backed up by any contractual agreement to recover the rental dues by auctioning the shares? - HELD THAT:- Any of the unilateral action by one party, will not bind the others and will be set aside. Further the contention that the shops are under benami holding and not conforming to the Income Tax Act is not supported by any valid notice from income Tax authorities or any credible report to support this argument. Even if we go by submissions of learned PCS for respondents, we have not come across any steps taken by the respondent company to regularise the position in respect of the shops which are the property of respondent Company. During the arguments the bench asked to the PCS representing the company whether the company has taken any steps ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as a Private Limited Company on 04th December, 1986 under the provisions of the Companies Act, 1956 with an authorized share capital of ₹20,00,000/- divided into 20,000 equity shares of ₹100/- each. The paid-up capital of the company is ₹3,90,000/- divided into 3900 equity shares of ₹100/- each. The object of the company as per the Memorandum of Association is to carry on the business of acquiring land by purchase, lease or otherwise and constructing structures such as shopping complexes, hotel complexes or housing complexes and let out, lease or sell. The Registered Office of the Respondent Company is situated at Palarivattom, Cochin, Ernakulam 682 025. 3. The Petitioner had filed the above said petition under Section 59(1) of the Companies Act, 2013 for seeking an interim relief to restrain the Respondent Company from holding the Annual General Meeting or Extraordinary General meeting along with the main relief i.e. Rectification of the Register of Members of the Respondent Company. The averments made by the Petitioners counsel are as follows: 4. The counsel for the Petitioner submitted that the Petitioner is entitled to hold 200 equity shares of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the Company s lien shall extend to dividend only. No procedure has been mentioned in the Articles for exercising lien and the 1st Respondent Company through 2nd Respondent issued illegal tender for sale notice of 1650 fully paid up shares including Petitioner s 200 shares. 6. The counsel for the Petitioner submitted that the 1st Respondent company have no power or legal right to issue new shares to third parties. The Company has no right to issue new duplicate share certificate in the place of original share certificate held and kept by the Petitioner in her custody. If the Company ventures to issues duplicate share certificate while, the original ones are in the custody of the Petitioner, it will also amount to an act of fraud committed on the Petitioner by the delinquent directors of the 1st Respondent for which the Petitioner can take appropriate action against acts of fraud under Section 447 of the act, 2013.The counsel for the Petitioner stated that the Petitioner undertakes to take out advertisement of the hearing of the petition 14 days prior to the date of hearing as provided in and required by Rule 35 r/w Rule 70 of the National Company Law Tribunal Rules, 2016. The ave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation to exercise paramount lien on the shares of the Respondent Company. The power of lien on dues to the Company by the shareholder as per Article 6(2)(b) is the first step to recover the dues and it is only natural that subject shares are vested for the purpose of recovery of dues which are within the powers of the Board. 10. The counsel for the Respondent stated that the Petitioner is aware of the circumstances of the subject matter as the relevant issue of transfer of shops either through sale deed or through Rental Agreement was topics of discussion among the shareholders for the past 3 years on account of change in the circumstances on account of elapse of 33 years. Further due notices were sent to the Petitioner before the subject event matter was put into effect. There is no fraud in the procedure adopted by the company as alleged by the Petitioner as the sale was affected after due deliberations in a Board meeting in the interest of the Company. 11. The counsel for the Respondent further submitted that the shares are already disposed of and transferred to another person on payment of tender amount. The Respondents have acted within its powers given by the Articles of Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting for the year 2018-2019 will have to be conducted afresh in accordance with Section 26 of the Companies Act,2013. It is submitted that the 1st Respondent and the 2nd Respondent admitted that service charge only collected from time to time and no rent was collected, therefore, the Kerala Building (Lease and Rent Control) Act, 1956 is not applicable in the present case. According to Section 107 of the Transfer of Property Act, 1882 the lessor cannot make any claim for rental arrears in the absence of a registered instrument. The company does not have any document to show even trace of an agreement of lease, much less a registered lease deed. 14. Further the counsel submitted that there is no violation of the provisions of Income Tax Act,1961 as alleged by the Respondent. The Benami Property Transactions Act, 2016 is not attracted in the present case as alleged by the 1st and 2nd Respondents. Hence, pleaded to grant the prayers as mentioned in the petition. Arguments Notes submitted by the petitioner: 15. The learned counsel quoted that at in Albert Judah Judah Vs Rampada Gupta Anr (AIR 1959 Calcutta 715) (para 42 and 43), Calcutta High Court held that the company will have the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... backed up by any contractual agreement to recover the rental dues by auctioning the shares? iii. Whether due process is followed by the Company in auctioning and allotting the shares to a 3rd party? 19. As regard to point No.(i): To arrive at a definitive conclusion as regard to the Issue (i) we have gone through the Articles of Association of 1st Respondent Company and the Model Articles of Association given in Schedule I Table F of the Companies Act, 2013. The respondent submitted that Table F is the replica of Table A in the earlier Companies Act, 1956. As per Clause 6(1) of the Articles of Association of the Company which is as under: i. 6. (1) Regulation 9 of Table A shall not apply 20. The Articles of Association 6(1) clearly mention that Regulation 9 of Table A of the 1956 Act shall not apply, which means Clause 9 of Table F is not applicable to the 1st Respondent Company. As per Clause 6(2)(b) of Articles of Association of Respondent Company paramount lien can be exercised by the Respondent Company for recovery of dues. The paramount lien is extendable to dividends payable by 1st Respondent also. 21. However, the Articles of Association of the 1st Respondent Company doesn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law- (a) a lien on the goods for the price while he is in possession of them; (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them; (c) a right of re-sale as limited by this Act. (2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transit where the property has passed to the buyer. 26. In our view the Respondent Company in the instant petition will fall under the category of unpaid seller who can exercise the above rights only. Nothing more. It is settled law as decided by the Hon ble Supreme Court of India in its judgement in Triveni Shankar Saxena Vs State of UP and Ors. (in para 17 to para 22) a lien is only a right to retain which is rightfully and continuously in possession belonging to another until the claims are satisfied. It can be acquired either by contract or by operation of law. It is the right of retention of goods. 27. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no power of sale or disposition of the goods, whereas in the latter case there is power to sell on default. A lien is merely a personal right of retention. One who has a lien has only a right of detaming the res until the money owning is paid:a lien disappears if possession is lost, and there is no right of sale. Sale on default is an incident of pledge. A pledge is assignable. A lien cannot be taken in execution, as the lien is merely a personal right: 32. In the instant petition, the Respondent auctioned the shares without the consent of shareholders and without original shre certificate and transfer form in their possession. The earlier action appears to the illegal and not as per the Companies Act 2013. As such the answer to the third point is also negative. 33. Accordingly, the company has no right to auction and allot the shares to the third parties ignoring the right of fully paid up shareholders. The rental dues claimed by the respondent company is not supported by rental/lease agreement which is agreed by shareholder. We therefore go with the averments made by the petitioner that the entire acts of the company to auction the shares appears to be malfide and with ulterior ..... X X X X Extracts X X X X X X X X Extracts X X X X
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