Company Law Board
Hero Honda Motors Ltd. vs Unit Trust Of India, Mr. Rakesh ... on 26 July, 2004
Equivalent citations: [2005]127COMPCAS700(CLB), [2005]61SCL64(CLB)
ORDER
K.C. Ganjwal, Member
1. M/s Hero Honda Motor s Ltd, New Delhi have filed a petition under Section 111(4) of the Companies Act 1956. against M/s Unit Trust of India and Ors. The petitioner is a public limited company registered under the Companies Act, 1956.
2. The present petition has been filed in respect of 750 shares of Rs. 10 each. Each share of the face value of Rs. 10 each has since been sub-divided into five shares of the face value of Rs. 2 each effective from 26.3.2001 and consequently the present petition relates to 3,750 shares of Rs. 2 each. M/s SBI Capital Markets Ltd. R-3 had purchased the said shares and sent the same leather with relative transfer deeds in March. 1991 for transfer the shares in their name to the share transfer agents M/s MCS Ltd. of the petitioner company. The petitioners have prayed for rectification of the register of members of the company under Section 111(4) of the Companies Act 1956 by placing on the register of members the name of SBI Capital Markets Ltd. in place of the names of Unit Trust of India and Mr. Rakesh Jhunjhunwala R-1 and 2 respectively in respect of these shares in question.
3. The learned counsel; for the Respondent placed a preliminary objection that the petition is not maintainable under Section 111(4) of the Companies Act, 1956 as the applicant company is a public limited company registered under the Companies act. The company can either file a petition under Section 111 or under Section 111A of the Companies Act, 1956 company cannot take shelter under both these sections.
4. The learned counsel for the petitioner submitted that Section 111A cannot be read in isolation and it is to be read in conjunction with Section 111. The perusal of Section 111(5) together with Section 111A(7) make it clear that transmission of shares by operation of law is also governed by Section 111A provided the transmission of shares relates to shares of a public company. Section 111(A)(2) of the Companies Act enables public limited company to approach Company Law Board and Section 111(4) provides the remedy of an application for rectification of register of members. The Learned Counsel for petitioner further submitted that the provisions contained in Sub-sections (2) and (4) of Section 111 would be applicable while considering the petitions under Section 111A of the Act. The law before the enactment of the depositories Act 1996 and Section 111 before amendment, stood as under;-
- Was a very comprehensive Section, dealing with rights, remedies and jurisdiction;
- Applicable to both private and public limited companies;
- Section 111(4) provides for an application of rectification of the register of members at the instance of a person aggrieved, member of the company or the company.
- There is neither any time limit within which the company has to rectify the register nor any limitation within which an application for rectification is to be made to Company Law Board.
5. The Learned Counsel for the petitioner further submitted that the close scrutiny of the depositories act reveals that the depositories related laws arc to be in addition to the laws which arc in existence. The intention of the legislature to preserve all the remedies which existed for the shares held in (he public limited company is evident from Section 28 of the Depository Act stating that "the provisions of this shall be in addition to, not in derogation of, any other law for the time being enforce relating to the holding and transfer securities". It was further submitted that Section 111A(1) and Section 111(14) of Companies Act, makes it clear that Section 111 is now limited in its operation to private companies as were originally drafted. Section 111A (2) indicates that no remedy of appeal has been provided to any kind of shares held in public limited company. Similarly, Section 111A(3) shows that no remedy of rectification is available if the register remains in accurate by the contravening the provisions of the Companies Act. This means (hat the provisions of Companies Act instead of providing additional benefits, have actually taken away, either completely or partially, the rights and remedies already available. This would not be the intention of the legislature as expressed in Section 22 of the Depositories Act, 1956.
6. The learned counsel for petitioner further submitted that the interpretation would have to be such that Section 111A provides additional benefits to the shareholders which they have already enjoyed and continue to enjoy under Section 111 of the Act. Remedy provided in Section 111(3) is in addition to the remedy provided in Section 111(4). The remedies of appeal and rectification are available to all kinds of shares held in a public company under the proviso to Section 111A(2) and (3) read with Section 7(7) Section 111A of the Act which would make applicable the provisions of Section 111(1), (2) and (4) by virtue of Section 111(5) of the Act. Therefore, it cannot be held by virtue of Section 111(14) the provisions of Sub-Section (1), (2) and (4) of Section 111 are not applicable to public companies. The Learned Counsel relied on the judgement of Bombay High Court in Finolex Industries Ltd. v. Anil Kamchand Chhabria (2000)3 Comp LJ -330(Bom). wherein it is held in para 18 of the judgement;
"Para 18 ......By virtue of provisions of Section 28 of the Act, it cannot be held that Section 111 A(3) is restricted to rectification of the register only in transfer mailers. This would mean that no remedy of rectification is available in case of loss of shares, bad deliveries, theft and forgery. This would be in derogation of the law for the lime being in force. Remedy provided in Section 111A(3) is in addition to the remedy provided in Section 111(4). It is, therefore, held that the remedies of appeal and rectification are available to all kinds of shares held in a public company under the proviso to Section 111 A(2) and 111A(3) read with Sub-section (7) of Section 111A of the Act which would make applicable the provisions of Section 111(1), (2) and (4) by virtue of Section 111(5) of the Act."
7. The Learned Counsel for respondent .submitted that the company cannot take shelter under both Sections 111 and 111A of the Companies Act, 1956. The judgement of Finolex Cables Ltd, relied by the Learned Counsel for petitioner is about transmission of shares and not for transfer of shares. More so. the High Court of Bombay was mainly looking into the provisions of depositories act and by virtue of that they have commented on Section 111 and 111A of the Companies Act. Accordingly, this judgement is not applicable in this case.
8. I have gone through the records of this case and the submissions made by both the Counsels. 1 am inclined to accept the arguments of Learned Counsel for petitioner that the ruling given by High Court of Bombay is binding in as much as they have held that the conclusions arrived by the Company Law Board in the case of Shashi Prakash Khemka (1997) (4) Comp.LJ 265 (CLB) is erroneous. The conclusion, was therefore, overruled and it was held that the remedies under the proviso to Section 111 A(2) and 111 A(3) are available to transfer as well as transmission matters. The High Court has conic to the conclusion and held that the remedies of appeal and rectification arc available to all kinds of shares held in a public company under the proviso to Section 111 A(2) and 111A(3) read with Sub-Section (7) of 111 A of the Act which would make applicable the provisions of Section 111(1), (2) and (4) by virtue of Section 111(5) of the Act.
9. In view of the above, the applicant is allowed to file petition under both the Sections 111 and 111A of the Companies Act. 1956.
10. The main petition will be heard on 12.10.2004 at 2.30 p.m.