Company Law Board
Kamadhenu Commercials (P.) Ltd. vs Advent Computer Services Ltd. on 31 July, 2006
Equivalent citations: [2007]75SCL142(CLB)
ORDER
K.K. Balu, Vice Chairman
1. This application is filed by M/s. Kamadhenu Commercials Private Limited ('the applicants') under Section 634A of the Companies Act, 1956 ("the Act") for enforcement of the order dated 22-9-2004 of the Bench, wherein M/s. Advent Computer Services Limited ("the Company") has been directed to clear the entire dues by 31-12-2004, failing which the 1st respondent shall transfer the 4 lakhs pledged shares to the applicant. However, the Company failed to comply with the order dated 22-9-2004. Hence, the applicant has come out with the present application for enforcement of the subject order.
2. According to the applicant, a petition under Section 111A of the Act was filed in CP No. 4/111 /SRB/1999 against the respondents for a direction to transfer 4 lakh shares of the Company in the name of the applicant. The petition was taken up for hearing from time to time and finally this Bench by an order dated 11-7-2000 directed the Company to effect the transfer of 4 lakhs pledged shares in favour of the applicant within 30 days, and to rectify the register of members. However, the Company failed to comply with the order dated 11-7-2000 and did not transfer the impugned shares in favour of the applicant. Hence, the applicant was compelled to file an application under Section 634A of the Act in CA. No. 31 of 2001. When the application in CA. No. 31 of 2001 was taken up for hearing, the Company made payment of Rs. 2 lakhs on 12-12-2001, Rs. 1 lakh on 20-5-2002. This Bench by order dated 22-9-2004 directed the respondent to clear entire outstanding amount by 31-12-2004 failing which the respondent shall transfer the shares in favour of applicant. The respondent neither paid the balance amount nor transferred the shares. Hence this application. During the hearings the respondent paid Rs. 1 lakh on 19-10-2005 and Rs. 2 lakhs on 9-11-2005 in part compliance of the order. However, the Company failed to pay the remaining dues to the applicant, in spite of the opportunities afforded to the Company. The principal amount at the time of pledge of shares in the year 1996 due to the applicant under the transaction in question stood at Rs. 27,76,469. As on July 2005, the amount due to the applicant works out to Rs. 1,02,71,669. As the shares of the Company are traded only around Rs. 3 per share, even if the Company transfers the entire 4 lakh shares, that would not cover the debt which the Company owes to the applicant. In these circumstances, the applicant prays for directions against the respondents to comply with the order dated 22-9-2004.
3. According to the Company, it is facing severe financial crisis and is not able to comply with the order dated 22-9-2004. To show their bona fide, the Company has so far paid an amount of Rs. 6 lakhs on various dates to the applicant. The Company is willing to transfer the 4 lakh shares in favour of the applicant after appropriating the amounts already paid.
4. I have considered the arguments advanced and memos filed by both the parties in the present application. It is on record that the applicant filed a petition under Section 111A of the Act and it came to be disposed of on 11-7-2000 with a direction to the Company to transfer the impugned shares to the applicant. It is also on record that the Company did not comply with the order dated 11-7-2000. Consequently the applicant filed an application in CA. No. 31 of 2001 under Section 634A of the Act and on the said application the Bench made an order dated 22-9-2004 directing the Company either to pay the entire dues by 31-12-2004 or transfer the 4 lakh shares to the applicant. The Company again failed to comply with the order dated 22-9-2004 and consequently the applicant filed the present application under Section 634A of the Act to enforce the order dated 22-9-2004. The Company has filed a memo dated 4-4-2006 wherein it submitted that it is willing to transfer the 4 lakh shares to the applicant less equivalent amount of shares for the amount already paid to the applicant, whereas the same is not acceptable to the applicant as the amount due to the applicant is Rs. 1,02,72,669 as on July 2005 and even if the entire 4 lakh shares are transferred that would not be suffice to cover the debt which the Company owes to the applicant especially when the shares are traded only for Rs. 3. There is no doubt that the Company failed to comply with the order made by the Bench on 11-7-2000 in CP. No. 4/1 11/SRB/1999 and order dated 22-9-2004 made in C.A. No. 31 of 2001. Hence the plea that the company would transfer 4 lakh shares less the shares equivalent to the amount paid by the Company does not merit any consideration. I have no doubt that this Bench is in a position to execute the order made on 22-9-2004 against the Company. For these reasons, I direct as under:
(A) The Company shall transfer the 4 lakh shares in favour of the applicant and rectify the register of members accordingly within twenty one days of receipt of this order and file an affidavit of compliance within seven days thereafter, (B) If the Company fails to act strictly in terms of directions stipulated hereinabove, Shri A.M. Sridharan, Bench Officer, Company Law Board, Southern Region Bench, Chennai shall:
(i) endorse the transfer entries on the reverse of the share certificates in respect of the 4 lakh shares of the Company pledged in favour of the applicant; and
(ii) make appropriate entries in the Share Transfer Register and the Register of Members of the Company recording the transfer of the 4 lakh shares in the name of the applicant. Towards which the Company shall make available the concerned registers to the Bench Officer at the registered office.
(C) A copy of this order shall be forwarded to the Registrar of Companies, Tamil Nadu, Chennai who shall take it on record in the Company's record file.
With these directions the application stands disposed of.