Madras High Court
Kothari Industrial Corporation Ltd. vs Lazor Detergents (P.) Ltd. And Others on 7 April, 1994
Equivalent citations: [1994]81COMPCAS669(MAD)
JUDGMENT Swamidurai, J.
1. These appeals are filed against the common order dated October 20, 1993, passed by the Company Law Board, Southern Region Bench at Madras, in C.P. Nos. 1 to 11/111/SRB of 1993. The first set of appeals, namely, C.M.A. Nos. 1245 to 1251 of 1993, have been filed by Kothari Industrial Corporation Limited being partly aggrieved by the decision of the Company Law Board. The appeals filed by the Kothari Industrial Corporation Limited are against (a) direction of the Company Law Board to the company to allot the debentures/shares to the first respondent in respect of shares covered in list A and C of annexure I of the order even though the Company Law Board has ordered rectification in respect of the said shares by removing the name of the first respondent in respect of those shares, and (b) the direction of the Company Law Board to the company to continue to have the name of the first respondent in its register of members and not in ordering rectification in respect of the shares covered by list "B" of the annexure to the Company Law Board order.
2. The second set of appeals, namely, C.M.As. Nos. 1412 to 1422 of 1993, have been filed by the 11 investment companies who are also partly aggrieved by the common order of the Company Law Board. All these appeals are directed against a common order of the Company Law Board, common arguments were made and, therefore, I propose to pass a common judgment in all these appeals. For the sake of convenience, Kothari Industrial Corporation Limited who have filed the first set of appeals, will be referred to as the appellants and the 11 investment companies, who have filed the second set of appeals and who are also the respondents before the Company Law Board, will be referred to as the 11 respondent companies.
3. The fact leading to the filing of the appeals are briefly stated as follows :
The 11 respondent companies are distinct corporate entities and they have acquired shares in the appellant-company. They lodged the shares with the appellant-company for registration during the month of June, 1991, June, 1992, and September, 1992, with necessary transfer documents. The total number of shares that are allotted for registration are 4,77,560 by the 11 respondent companies. All the shares were duly transferred in favour of the 11 respondent companies during July, 1991, June, 1992 and October, 1992. The number of shares acquired by each of the 11 respondent companies, which were duly transferred in their favour are furnished below :
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Sl Name of the company Number of shares No. transferred
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1. Mikantra Trading Pvt. Ltd. 61,030
2. Maxwell Dyes and Chemical Pvt. Ltd. 42,920
3. Swadee Chemicals Pvt. Ltd. 61,170
4. Lazor Detergents Pvt. Ltd. 64,430
5. Saki Agencies Pvt. Ltd. 26,710
6. Alkelite Intermediates Pvt. Ltd. 44,680
7. Skylab Detergents Pvt. Ltd. 37,750
8. Navketan Commercials Ltd. 40,700
9. Shruti Traders Ltd. 43,590
10. Prolab Synthetic and Detergents Pvt. Ltd. 22,480
11. Oscar Chemicals Pvt. Ltd. 32,100
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Total 4,77,560
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Subsequent to the transfer, all the 11 respondent companies have been receiving dividends and had been duly recognised as the members of the appellant-company.
4. On January 25, 1993, the appellant-company proceeded to institute 11 company petitions before the Company Law Board seeking the deletion of names of the 11 respondent companies from the register of members on the ground that it was subsequently found and discovered, just prior to the filing of petition that the instruments of transfer were defective under three categories in respect of all the shares as follows :
Category 1. - That some of the instruments were defective in as much as stamps though affixed were not cancelled.
Category 2. - That in some of the instruments even though stamps had been affixed and had been duly fully cancelled, it was alleged to have been done by the staff of the second respondent Kothari Oriental Finance Ltd.
Category 3. - In some of the instruments, stamps were partly cancelled by the staff of the second respondent, Kothari Orient Finance Ltd.
5. The case of the appellant is (i) rights debentures/shares can only be issued to members who are on the register as on a record date as per section 81 of the Act and when the names of the first respondent are deleted and are not there on the record date, how will they become entitled in law to right debentures/shares (Lists A and C). It will be relevant to note that the Company Law Board in its interim order dated February 5, 1993, observed that the entitlement to the rights flows to the first respondent being a member of the company. As per the interim order in case the decision in the main petition went in favour of the respondent rights debentures could be allotted to them. In other words, if the main petition is not in favour of the first respondent, no rights could be allotted to them even according to the Company Law Board's own interpretation as contained in its interim order dated February 5, 1993, The case of the appellant is that all the instruments which were transferred inasmuch as not having been duly stamped should not have been approved for transfer, but, however, were inadvertently and wrongly approved for registration at the instance of Mr. D. B. Saxena, director, who functioned as the one man committee pursuant to a resolution of the board of directors of the first-respondent passed on November 11, 1974. The appellant-company submitted in the company petition that even though some of the instruments pertaining to a few shares were sent back for rectification of defects/infirmities at the relevant point of time and some of the instruments so returned were again lodged for transfer after rectification, unfortunately all the instruments which had not been cancelled were not returned for rectification, but were approved for registration. So the case of the appellant is that the above instruments were not duly stamped as per the provisions of the Indian Stamp Act and inasmuch as the stamps were to be cancelled prior to or at the time of execution of the documents, the registration of transfer was ab initio void and illegal. The second contention of the appellant-company is that the provision of section 12 of the Indian Stamp Act had been violated and as the above instruments with stamps not cancelled were not placed before the one man committee though the particulars of these shares were included in the register of shares placed before the committee which inadvertently and wrongly approved those transfers. The action of the employees of the second respondent-company, Kothari Oriental Finance Ltd., in partly cancelling some stamps and fully cancelling some stamps did not bind the appellant-company and cannot make the documents proper and legal or valid. According to the appellant, the provisions of section 108(1) of the Companies Act, which are mandatory and which lay down that no company could register transfer of shares unless a proper instrument duly stamped and executed is lodged with the company as provided for in that section ought to be followed and as such there can be no transfer in the eyes of law. The names of the 11 respondent companies, therefore, have been entered in the register of members without sufficient cause and, therefore, this was a fit case where the register of members should be rectified in terms of section 111(4) of the Companies Act in order to set right the illegality which has taken place inasmuch as section 108(1) of the Companies Act has been violated read with section 2(11) and section 12 of the Indian Stamp Act. The appellant contended before the Company Law Board in its application that the appellant-company had resorted to a rights issue of partly convertible debentures (PCDs) by letter of offer dated October 15, 1992, to all the shareholders of the appellant-company which included the 11 respondent companies, which were registered in the register of members of the appellant-company and which had also received letters of offer. The 11 respondent companies responded by applying for both the rights as well as the additional rights prior to the closure of the rights issue on December 15, 1992. It was only at the time of allotment of the rights that the board of directors of the company noticed that the transfers which had taken place during June, 1991, June, 1992, and September 19, 1992, were void ab initio and illegal for the abovesaid contraventions and it is only thereafter that a decision was taken to lodge the company petition before the Company Law Board on November 25, 1992, for rectification of the register of members by deleting the names of the 11 respondent companies.
6. Along with the 11 company petitions seeking rectification of the shares register by deleting the names of the 11 respondent companies, the appellant-company also prayed for interim orders directing the company not to do any act or deed pursuant to the letter of offer dated October 15, 1992, with regard to the 11 respondent companies and also to restrain the company from allotting any partly convertible debentures shares including bonus and rights to the 11 respondent companies in relation to their alleged entitlement to the shares in respect of the shares covered by these company petitions. The Company Law Board, due to the urgency of the matter, passed an interim order on February 5, 1993, wherein it is mentioned as follows :
"The entitlement to the rights issue/additional rights flows from their being the members of the company. Now as the status as member itself is under consideration, it would not be appropriate to bestow them with rights/additional rights till the issue regarding their membership is decided. So the best course of action would be to maintain the status quo as on today, i.e., while the respondents would be entitled to all the rights and privileges attached to the shares registered in their names as on today, allotment of rights partly convertible debentures and additional rights should be kept in abeyance till the disposal of the main petition. But, at the same time, the petitioner-company shall keep separately the "rights" entitlement of the respondents and also entitled additional rights without allotment to anybody else so that in case the decision in the main petitions goes in favour of the respondents they could be allotted all the partly convertible debentures that they would have been otherwise entitled."
7. The Company Law Board after passing the interim orders also gave liberty to the 11 respondent companies to inspect the original instrument of transfer and take copies thereof and also fix the time schedule for filling of replies by all the parties.
8. As per the directions of the Company Law Board, the 11 respondent companies proceeded to inspect the instrument of transfer and thereafter filed replies refuting each and every averment raised in the petition. The 11 respondent companies have raised a preliminary objection even in regard to the maintainability of the company petitions before the Company Law Board at the instance of the appellant-company on the ground that the appellant-company had failed to follow the mandatory provisions of section 22A of the Securities Contracts (Regulation) Act, 1956 (hereinafter called as "the SCRA"). According to the 11 respondent companies, if the defects, as pointed out, had been noticed, the appellant should have returned the instruments under section 22A of the SCRA. The appellant had not followed the prescribed time limit of two months and on the other hand it had presented the petitions for rectification after considerable delay. It was further contended that all these stamps have been cancelled and assuming that some of them were not cancelled properly, it did not make the instruments void ab initio and that the provisions of the Indian Stamp Act with regard to the cancellation of the stamps in cases where stamps have been affixed are only directory. In these cases all the instruments of transfer bore correct stamps and the revenue to the State had been duly and fully protected and accordingly inasmuch as there was substantial compliance with the provisions of the Stamp Act, the petitions are liable to be dismissed.
9. The appellant-company had raised another point before the Company Law Board that all the 11 respondent companies are satellite companies of the Reliance group and that these companies were acquiring shares in the appellant-company with the ulterior motive which would endanger the present management of the appellant-company and that had these facts been known to the appellant-company at that time when the instrument had been originally transferred, they would not given effect to the transfer and would have taken recourse to the remedies under section 22A of the SCRA at the relevant time. The Company Law Board passed its final order on October 20, 1993, after hearing all the parties and in the stay order the Company Law Board partly allowed the company petition filed by the appellant and also issued directions. From the final order passed by the Company Law Board, the following position would emerge :
(a) The registers of members were directed to be rectified by removing the names of the 11 respondent companies in respect of the names of the respondents in the first and third categories (Lists A and C) wherein stamps were not cancelled in the instruments though they had been affixed which is the first category (List A) and wherein stamps were partly cancelled by the staff of the second respondent, the Kothari Oriental Finance Ltd. which falls under the second category (List C) within ten days of the receipt of the order;
(b) In respect of the shares falling under categories I and III (Lists A and C respectively) the rights PCDs which were kept in abeyance in the light of the interim order passed on February 5, 1993, were directed to be allotted to the 11 respondent companies. However, in respect of the convertible portions as the dates of conversion were already over, the shares for the converted portion along with the non-convertible portion of the PCDs will be allotted within ten days of the receipt of the order.
(c) In respect of the additional rights PCDs applied for by the 11 respondent companies in respect of shares falling under categories I and III (Lists A and C) which were also kept in abeyance, they were to be allotted to all the existing members who had applied for additional rights in consultation with the Madras Stock Exchange.
(d) All the 11 respondent companies will be entitled to rights PCDs and additional rights PCDs kept in abeyance in respect of the shares covered by category II (List B) as the shares falling under this list do not require any rectification and were directed to be allotted to the respective respondent companies. The shares for the converted portion along with the non-convertible portion of the PCDs will also be allotted to the respective respondent companies within ten days from the date of the order.
(e) The 11 respondent companies shall not be entitled to any interest on the application moneys for PCDs and additional PCDs whether allotted or not inasmuch as the entire amount was remitted through stock exchange which have not been encashed by the appellant-company till the date of the order of the Company Law Board.
(f) The 11 respondent companies will retain the dividends they have received in the past in respect of the shares covered under the three categories, namely, A, B and C, and there is no need or obligation for the appellant to refund the same.
(g) With regard to the registration of transfers in respect of the shares falling under categories I and III (Lists A and C) the 11 respondent companies were given a discretion to lodge the instruments afresh in accordance with and after complying with the provisions of section 108 of the Companies Act for consideration by the first respondent-company.
10. The Company Law Board came to the above conclusions on the ground that in respect of the shares falling under categories I and III (Lists A and C) the instruments had not been duly cancelled in accordance with the provisions of section 108(1) of the Companies Act whereas in respect of shares falling under category II (List B), the Company Law Board found that the directions and provisions of section 108 had been complied with and that the first respondent cannot take advantage of its own wrong. No doubt both the contesting parties were not satisfied with the order of the Company Law Board and aggrieved with the order of the Company Law Board the appellants filed C.M.As. Nos. 1412 to 1422 of 1993 aggrieved by the direction and decision of the Company Law Board in directing the rectification of registration of shares in respect of shares falling under categories I and III (Lists A and C) whereas the appellant-company which has filed C.M.As. Nos. 1245 to 1251 of 1993, aggrieved with the decision of the Company Law Board in not rectifying the register in respect of the shares falling under category II (List B) and consequently the further direction issued by the Company Law Board with regard to the entitlement of the rights PCDs in respect of the shares falling under categories I and III (Lists A and C) and also by the further directions given in respect of shares under category II (List B). Mr. Vedantham Srinivasan, learned counsel for the appellant raised several grounds highlighting the grounds of attack against the decisions of the Company Law Board and Mr. K. Parasaran, senior advocate for the 11 respondent companies, raised various grounds in support of the stand taken by the 11 respondent companies. The appellant companies' Appeals Nos. 1245 to 1251 of 1993 had come up for hearing before this court and by order dated October 30, 1993, this court directed that status quo which prevailed prior to the passing of the order by the Company Law Board on October 20, 1993, should be maintained and further directed the appeals to be listed for final disposal on January 3, 1994, by consent of both parties. Subsequent to this order, the 11 respondent companies herein also filed C.M.As. Nos. 1412 to 1422 of 1993 and again by order dated December 10, 1993, in C.M.P. Nos. 17439 to 17449 of 1993 this court passed the same orders to maintain the status quo prevailing prior to the order of the Company Law Board dated October 20, 1993.
11. By consent of both sides, the appeals were taken up for final disposal. The following points would arise for consideration in these appeals :
(i) whether the petitions filed by the appellant-company Kothari Industrial Corporation Limited before the Company Law Board are maintainable in the light of section 22A of the SCRA;
(ii) whether the appellant, Kothari Industrial Corporation Limited, is entitled to the reliefs of rectification of register of companies by deleting the names of the 11 respondent companies from its register of members from the respective original dates on which their names were entered in the register;
(iii) whether the appellant-company is entitled to recover from the 11 respondent companies all dividends paid to them and restore such dividends to the original members from whom they got shares in the event of rectification being ordered; and
(iv) to what reliefs the parties are entitled.
12. Point No. 1. - Thiru K. Parasaran, learned senior counsel appearing for the 11 respondent companies commenced the arguments first and has put forth the following propositions to contend that the petitions filed by the appellant-company before the Company Law Board were not maintainable in law and on fact or on equity and that the appellants are not entitled to rectification of their shares register by deleting the names of the 11 respondent companies.
(i) Any question relating to the transferability and registration of transfer of listed securities of the companies that is listed companies are only governed by section 22A of the SCRA, which was inserted by amendments made in 1985 with effect from January 17, 1986.
(ii) The company can have a discretion to refuse the registration only on the ground mentioned under section 22A(3) of the SCRA and it cannot resort to any other grounds not mentioned therein;
(iii) Section 22A(3) of the SCRA does not mandate but, on the other hand gives discretion to the company to refuse the register the transfer of any of the securities on the ground that the instruments of transfer were not proper or have not been duly stamped and executed in contravention of section 108(1) of the Companies Act which mandate that a company shall not register a transfer of shares in or debentures of the company unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor of equity shares has been delivered to the company along with the certificates relating to the shares or debentures.
(iv) The petition filed before the Company Law Board seeking for rectification is barred by limitation in terms of section 22A(4) of the Act.
(v) The petition filed before the Company Law Board was also defective inasmuch as the transferors were not made parties and the Company Law Board did not choose to hear the transferors as well.
(vi) Even in equity a company court or a Company Law Board should not exercise its discretion in favour of a wrongdoer and in this case inasmuch as the company itself has had transfers effected long back and the stamps had been sufficiently affixed, merely because they were not cancelled that should not automatically entitle the Company Law Board or the company court to straightaway pass orders for rectification and in its discretion the court ought to have refused to exercise the discretion and more particularly the interest of the revenue is not at all going to be affected and no party will be prejudiced.
13. In so far as the companies whose securities are listed are concerned the provisions of sections 108 and 111 of the Companies Act have substantially been incorporated under the SCRA which expressly overrides the provisions of section 111 of the Companies Act and the question as to whether the party is entitled to the relief of rectification of share register on the ground that the instrument was not duly signed should be decided only based on the provisions contained in section 22A of the SCRA.
14. Mr. Vedantham Srinivasan, learned counsel appearing for the appellant company and the petitioners before the Company Law Board has put for the following proposition in support of the fact that the petitions before the Company Law Board for rectification of the register of members was maintainable and the appellant is entitled to the relief which it has prayed for before the Company Law Board.
15. Section 22A of the SCRA cannot be invoked in the present case and the said section cannot override the provisions in respect of rectification of register as contained in section 111 of the Companies Act, nor can the said section override the provisions of the Companies Act which has been held to be mandatory. Any violation of section 108 of the Companies Act, and the provisions of section 12 of the Stamp Act are ab initio illegal and are void ab initio.
16. There is sufficient cause for rectification of the share register for non-compliance with the provisions of section 108 of the Companies Act read with section 12 of the Stamp Act in the facts and circumstances of the case.
17. The Company Law Board which rectified the register in respect of A and C shares should also rectify the shares falling under list C.
18. The provisions of the Companies Act and the SCRA should be hormoniously construed in respect of rectification of the list of members who held securities in "C" listed companies. There is no equity in favour of the 11 respondent companies inasmuch as they have violated the mandatory requirements of law and as such they are not entitled to continue as members of the appellant company.
19. Before proceeding to hear the rival contentions, it is necessary to consider the legislative background both prior to the coming into force of the section 22A of the SCRA and the position thereafter in view of the amendment brought into the Companies Act by deletion of section 155 and by an amendment made to section 111 of the Companies Act brought into force with effect from May 31, 1991, as this will have a vital bearing on the facts and circumstances of the case.
20. Prior to the introduction of section 22A of the SCRA which came into force with effect from January 17, 1986, the transfer of shares and debentures be it of a public company or a deemed public company or a private company whether the securities were listed or unlisted were to be governed only by section 108 of the Companies Act. By amendment of the Companies Act by the Companies (Amendment) Act, 1974, sections 108A to 108H were introduced which imposed restrictions on the question of transfer of shares in companies covered by Part A of the Chapter III of the Monopolies and Restrictive Trade Practices Act, 1969, shortly called MRTP Act. This was done mainly to prevent the take over bids of various types of companies be it a public company, private company and subsidiary company of public companies. Wide powers were also available to every type of company to refuse to register the transfer of shares or securities under section 111 of the Companies Act as it then stood. As regards the rectification of registers of members, power was given to the company court to rectify the register of members if the name of any person was entered without sufficient cause or omitted without sufficient cause and discretion was vested with the court to pass orders with regard to rectification. But, however, sections 108A to 108H were omitted by the MRTP (Amendment) Act, 1984, with effect from August 1, 1984, and were substantially incorporated under sections 30A to 30G of the MRTP Act. Subsequent to these amendments by which sections 108A to 108H were omitted in the Companies Act in 1985 and an important amendment was brought in the form of section 22A of the SCRA to ensure free transfer and registration of shares of listed securities of companies. The object of the amendment was stated in the Statement of Objects and Reasons appended to the Bill asunder. "At present sections 82 and 111 of the Companies Act, 1956, permit the boards of directors of companies to assume powers under the articles of association to refuse registration of transfers of securities without assigning any reason. Though there is a provision for appeal to the Company Law Board against such refusal, it placed an undue burden on an aggrieved person who often happens to be a mere investor. The present position is also not conductive to the feel marketability of listed securities and healthy growth of the capital market. Unrestricted transferability is particularly necessary for securities of public limited companies which are listed on the stock exchanges.
21. It is proposed to incorporate a new section namely, section 22A in the SCRA in 1956, and also make necessary consequential amendments in the Act to provide for free transferability of the listed security with adequate safeguards against undesirable take over bids or destabilisation of managements. Under the proposed provision, companies would be entitled to refuse registration of transfer in certain circumstances only, namely, where the instrument of transfer is not proper or has not been duly stamped and executed or the transfer is in contravention of any law or is likely to result in change in the composition of the board of directors in such a way that it would be prejudicial to the interest of the company or to the public interest. In case a company wishes to refuse a transfer of security on the ground that any requirement under law has not been complied with, it has to notify the transferor and the transferee of the same within two months from the lodgement of the instruments of transfer. In other cases the company will have to make a reference to the Company Law Board and act according to the directions of the Board. The Bill seeks to achieve the above objective keeping the above object of ensuring free transferability and registration of securities of listed companies, stringent provisions have been made in section 22A to ensure that objective." In terms of section 22A(3) a company could refuse to register the transfer if its securities in the name of the transferee only on the following four grounds :
(i) that the instrument of transfer is not proper or has not been duly stamped and executed or that the certificate relating to the security has not been delivered to the company or that any other requirement under law relating to registration of the transfer has not been complied with.
(ii) that the transfer of the securities is in contravention of any law or rules made thereunder or any administrative instructions or conditions of listing agreements laid down in pursuance of such laws or rules;
(iii) that the transfer of the securities is likely to result in such change in the composition of the board of directors as would be prejudicial to the interest of the company or to the public interest; and
(iv) that the transfer of the security is prohibited by any order of any court, Tribunal, or any or other authority under any law for the time being in force. That apart a further restriction is put in sub-section (4) of section 22A, that in respect of the four grounds mentioned in sub-section (3) of section 22A a company shall before the expiry of two months from the date on which the instrument of transfer of any of its securities is lodged with it for the purpose of registration of such transfer has to form in good faith its opinion as to whether such registration ought not or ought to be refused on any of the grounds mentioned in sub-section (3) above and if registration is to be refused it should intimate the transferor and the transferee by notice in the prescribed form about the requirements of law which have to be complied with for securing registration and in any other case should make a reference with the Company Law Board and forward copies of such references to the transferor and transferee. In other cases mentioned in section 22(4)(c) could only mean the three conditions in sub-section 22A(3)v namely, clauses (b), (c) and (d). Clause (b) of section 22A(3) deals with the power to refuse registration of the transfer on the ground that the transfer of the securities is in contravention of any law or rules made thereunder or any administrative instructions. In any of these cases, it is mandatorily required to intimate the transferor and the transferee and even the Company Law Board in terms of section 22A(6) is obliged to hear the reference only after giving reasonable notice to the company and also the transferor and the transferee concerned and giving them a reasonable opportunity to make their representations.
22. Mr. K. Parasaran, learned senior counsel for the 11 respondent companies, submitted that the SCRA of 1956 being a special statute governing the free transferability and registration of transfer of listed securities of companies should be given the widest amplitude in respect of the transfer of securities of listed companies and should obviously be applicable to all types of transfer deeds and transfers of listed securities. He relies upon the expression "may" occurring in section 22A(3) to highlight that even where one of the grounds mentioned in section 22A(3) is attracted, still the company is not obliged in law to refuse registration, but has the discretion to refuse and may also register securities but where it exercises its discretion and does not decide to register the securities, it has to mandatorily before the expiry of two months from the date of lodgement of the security form an opinion in good faith and intimate to the transferor and the transferee in respect of any of the requirements of law which have to be complied with in regard to the instrument of transfer which is not proper or has not been duly stamped and executed or the certificate relating to the security has not been delivered to the company or that the requirement under the law relating to registration has not been complied with. Within the said period of two months, the grounds on which the registration was to be refused, should be intimated to the transferor and the transferee to enable them to comply with the requirement for securing registration. In any other case that is where the transfer of security was in contravention of any law or other grounds it has to make a reference to the Company Law Board in the prescribed form and mode laid down under the SCRA. The time limits and other requirements laid down in section 22A are very vital and are intended only to subserve both the free transferability and registration of transfers of listed securities of companies. According to Mr. K. Parasaran, learned senior counsel for the 11 respondent companies, where the company has proceeded to register the securities then such transfers would only be deemed to have been made after taking into account all the conditions laid down in section 22A(3) and the company cannot at a later point of time seek to impeach the transfers which would endanger the very object of free transferability of securities which would create panic even in the stock exchange and would defeat the very purpose of section 22A of the SCRA.
23. Once a company has registered the shares at its discretion and when section 22A(3) also uses the expression "may" as opposed to the expression "shall" and when the company has exercised its discretion it cannot subsequently impeach its decision and seek to nullify the transfer of shares which it had effected which would defeat the very concept of the object of free transferability of securities of listed companies. It is further contended that even if a company has proceeded to register and recognise the transfer it could still seek to impeach them only by making a reference under section 24A(4)(c) of the Act and that should also be made within a period of two months from the date on which the instruments of transfer were lodged and that could also be done only by giving notice to the transferor or transferee. On the other hand, Mr. Vedantham Srinivasan, learned counsel for the appellant company, contended that section 108 of the Companies Act alone should be the guiding factor and that the company has got every discretion and listed companies like other companies have no discretion to effect registration if the instrument of transfer does not comply with the requirement of section 108 of the Companies Act and even if the instruments have been accepted and the shares transferred (or) registered quite contrary to section 108 then the company would be entitled to automatic removal of names of members whose names were entered contrary to section 108 automatically by seeking for rectification under section 111 of the Act. Mr. Vedantham Srinivasan, learned counsel, further argued that section 22A of the SCRA is not at all applicable to the facts of the present case and also strongly relied upon the judgment of the Supreme Court in Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp Cas 185. In this case it is indisputable that all the 11 respondent companies had lodged their instruments of transfers, some of them in June, 1991, some of them in June, 1992, and some in September, 1992. The appellant company through its one man committee comprising Mr. D. B. Saxena, full time director, proceeded to register the transfers and in most cases, pursuant to the transfers having been given effect to dividends have also been issued to the 11 respondent companies. The appellant-company did not even seem to have noticed its defect when it resorted to the rights issue of partly convertible debentures which opened on October 15, 1992 and did not even notice the defects at the time when the issue was closed on December 15, 1992. It proceeded to receive applications for allotment made by the 11 respondent companies along with the payment money for the rights issue of PCDs and additional as well as rights PCDs, and it was only after the closure that the appellant-company proceeded to file applications before the Company Law Board for rectification of its shares register on January 25, 1993. The appellant-company has also categorically alleged before the Company Law Board that the 11 respondent companies were satellite companies of the Reliance group. Therefore, it appears that the main reason behind the action before the Company Law Board seems to be the apprehension of the appellant-company that the 11 respondent companies have links with the Reliance group and it was on that basis that the appellant-company has sought now to impeach the transfers which have been given effect to long back on the ground that the instruments of transfer were not duly stamped. The question for consideration is whether the appellant companies are entitled to rectification of transfers which were given effect to after considerable time has elapsed and whether it will be in consonance with the object of free transferability as embodied under the SCRA in respect of securities of listed companies.
24. On a proper construction of the provisions of section 22A(3) of the SCRA along with sections 108 and 111 of the Companies Act and also the various decisions rendered by the Supreme Court and the High Court, I am of the opinion that the appellant-company is not entitled to the relief of rectification of register of its shares both in the light of section 22A of the SCRA and based on the principles of equity, justice and fairness. If transactions like in the present case are allowed to be impeached, then that would lead to a nebulous situation which would defeat or affect the very object behind the SCRA and would create instability and disturbances in the stock market which would not be conducive to the free transferability of listed securities. Mr. K. Parasaran, learned senior counsel, pointed out that there is a vital distinction between section 22A(3) of the SCRA and section 108 of the Companies Act, even though both the provisions deal with the same subject. Section 22A(3) confers a discretion to the company in the matter of registration of transfer of securities on any of the grounds mentioned therein including the ground namely, that the instrument of transfer is not proper or has not been duly stamped and executed or that the certificate relating to the security has not been delivered to the company or that any other requirement under law relating to the registration of such transfer has not been complied with. Section 22A(3) thus modifies the scope of section 108 of the Companies Act which does not give any discretion to the company under section 108(1) of the Act. The company in terms of the Companies Act even at the threshold shall not register a transfer of shares or debentures of the company unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee specifying the name, address and occupation, if any of the transferee has been delivered to the company along with the certificates relating to the shares or debentures or if no such certificate is in existence, along with the letter of allotment of shares or debentures. Thus once a company whose securities are listed has exercised its discretion and has not refused registration but has effected registration, it cannot then seek to impeach that registration on the ground that section 108 is mandatory and that it had failed to comply with section 108 of the Companies Act.
25. Section 108 of the Companies Act, in my opinion, is not applicable to securities of listed companies to render non-compliance with section 108 void ab initio in respect of transfers of shares effected. A transaction cannot be said to be void only if the mandatory requirement is violated. But inasmuch as in respect of listed companies unlike under section 108, there is a mandatory requirement in section 22A(3) of the SCRA imposing positive obligations in a company to refuse registration and in such cases where a company which could have refused registration, has effected registration and when considerable time has lapsed, which would also involve rights of third parties, it would not be open to the company to impeach or question their own action when they themselves were the wrongdoers responsible for the situation. If such a power is conceded, then every company which has been a wrongdoer can successfully impeach any transfers even after any number of years which would affect the subsequent rights created in favour of third parties and render the subsequent transactions invalid. It would also vitally affect the true object behind the free transferability and registration of transfers of listed securities of companies which is the object behind the introduction of section 22A. Such a thing will also create instability and disastrous result in the stock market which would not be conducive to public interest.
26. However Mr. Vedantham Srinivasan, learned counsel for the appellant companies, strongly relied upon the decision of the Supreme Court in Mannalal Khetan's case [1977] 47 Comp Cas 185 to argue that section 108 of the Companies Act has been held to be mandatory. As I have already found, section 108 of the Companies Act which imposes a mandatory requirement obliging the company not to register a transfer of shares by using the expression "shall" will not apply in respect of shares of listed companies because for the very same grounds which are mentioned in section 108 in respect of transfer of shares or securities of listed companies instead of the expression "shall" the word "may" has been used in the SCRA. Secondly, the decision of the apex court in Mannalal Khetan's case [1977] 47 Comp Cas 185 (SC) was rendered on November 25, 1976, long prior to the coming into force of section 22A of the SCRA at least nine years before it was done and is, therefore, distinguishable as not applicable in the light of the subsequent statutory changes in respect of transfer of shares of listed companies, Mr. Vedantham Srinivasan, learned counsel for the appellant-company, has also invited my attention to a judgment in Muniyamma v. Arathi Cine Enterprises (P.) Ltd. [1993] 77 Comp Cas 97; [1993] 2 Comp LJ 327 of the Karnataka High Court. I am of the considered opinion and with much respect that the said judgment rendered by My Lord, the Chief Justice, K. A. Swami, as he then was in the Karnataka High Court, will not apply to the facts of the present case. That was a case concerning the validity of share transfers in a private limited company and not of a transfer of securities or shares of a listed company and section 22A of the SCRA is not applicable to the said situation and it was only section 108 which was held applicable. In terms of section 108 of the Companies Act, as stated already, the company has no discretion whatsoever if the instrument was not duly stamped. Further, on the facts of that case, the Division Bench has held that even on the facts of that case the petitioners had not taken steps and there was no proof that such share transfers were also approved. On the facts and circumstances which were established, there was no transfer of shares and even in the said judgment the Division Bench has made a very important observation while interpreting section 155 of the Companies Act which are to the following effect :
"Whether in a particular case relief should be granted or not because jurisdiction is discretionary as the word used is "may" in section 155 would depend upon the facts and circumstances of the case, but the exercise of jurisdiction cannot be refused on the ground that it involves complicated questions of law and facts. Of course the propriety of the petitioners and their conduct having a bearing on the subject-matter would be relevant to the decision as to whether discretion should or should not be exercised."
27. The above observations are quite vital to find out whether on the facts and circumstances of the present case, discretionary power should be exercised by the Company Law Board or this court in favour of the appellant-company. It is undoubtedly the appellant-company which is responsible for the situation in having proceeded to register the share transfers through its authorised one man committee Mr. D. B. Saxena. It is not as if the appellant-company had stopped with this. It had also proceeded to return some defective instruments even during the relevant period prior to the registration and after the defects had been corrected the instruments were accepted and shares were transferred. If that is so it is not clear as to how the appellant-company could not have noticed these mistakes and in spite of them, proceeded to register and now considerable time having been lapsed and when even dividends have been paid in respect of shares would it be justifiable for it to seek for rectification merely on an allegation that the 11 respondent companies have acquired the shares at the instance of the Reliance group. If such a twist is given, the complexion itself changes and it would go to show that the appellant-company under the guise of rectification has come with some other purpose. It has also filed the petitions after having received monies in respect of the rights PCDs and additional rights PCDs the issue of which closed on December 15, 1992, and ultimately after the closure of the issue, after having received the monies from 11 respondent companies for allotment, which has come before the Company Law Board seeking rectification. It would have been totally a different story, had the appellant-company found those defects even prior to registration and in such a situation the 11 respondent companies would not at all have been prejudiced and they could have complied with the requirements of law. But coming before the Company Law Board after being responsible for the wrong doing and also with different objects in mind, in my opinion will not warrant the exercise of discretion in favour of the appellant-company and definitely the equities will not lie in favour of the appellant-company even assuming that section 22A of the SCRA is not attracted and that it is only section 111(4) read with section 108 of the Companies Act that should be applied as contended by learned counsel, Mr. Vedantham Srinivasan.
28. This is like a situation where a document which is compulsorily registrable is admitted in evidence without any objection being raised by the aggrieved party and if once such document is admitted in evidence even though it was not capable of being admitted for want of registration, the aggrieved party cannot raise any objection regarding admissibility at a later point of time. This analogy will be very much applicable to the facts of the case and in the light of the amendment brought in by section 22A of the SCRA. The company after having registered the instruments of transfer which were sufficiently stamped though not cancelled, cannot with an oblique motive and after long lapse of time, seek rectification and definitely the discretionary relief would be refused by the Company Law Board in such a situation particularly when securities of listed companies are involved.
29. Mr. Vedantham Srinivasan, learned counsel for the appellant-company also referred the decision of the Kerala High Court in Mathrubhumi Printing and Publishing Company Ltd. v. Vardhaman Publishers Ltd. [1992] 73 Comp Cas 80. That was a case where the company at its meeting of the board of directors declined to register the transfers even at the threshold for non-compliance with various statutory provisions and the board of directors declined to register the instrument of transfer because the adhesive stamps had not been cancelled at the time of execution. Therefore, the Division Bench on the facts upheld that inasmuch as the defect of the instrument of transfer not having been duly stamped, was a ground for rejection of a register at the threshold. The decision of the board of directors were valid as the instruments were not duly stamped. But it is a case where the company has given effect to the transfers and not a case where the board of directors had refused to act on the ground that the instruments of transfers were not duly stamped even at the time when the board was taking up for consideration the question of transferability of the shares. It was held on the facts that there was no proper lodgement of the documents relating to the transfer of shares and the transfers had not become effective as against the company, to enable the transferees to question the proposed amendment to the articles of association. Here is a case where the transfers have become effective and where the company which was a wrongdoer is seeking to take advantage of its own wrong to greatly prejudice the rights of third parties. Secondly, the Kerala decision has also not taken into account the effect of the amendment brought about by section 22A of the SCRA and in terms of section 22A itself the board of directors of the company could refuse to register the transfers if the instruments are not duly stamped and should inform the transferor and the transferee its opinion, formed in good faith and the requirements of law which have to be complied with to secure such registration. Therefore, on the facts of this case the decision of the Division Bench of the Kerala High Court is not applicable. Had the facts been similar like the Kerala High Court case, even in the case and the appellant-company refused to register even at the threshold things would have been very much different as held by the Division Bench of the Karnataka High Court in Muniyamma v. Arathi Cine Enterprises P. Ltd. [1993] 77 Comp Cas 97; [1993] 2 Comp LJ 327. The exercise of jurisdiction by the company court under section 155 now incorporated in section 111(4) would depend upon the facts and circumstances of each case and also the propriety of the petitioners and their conduct having a bearing on the subject-matter would be relevant to the decision as to whether the discretion should be or should not be exercised. The said Division Bench has held as follows (at page 126 of 77 Comp Cas) :
"It is true that section 155 of the Companies Act, 1956, is widely worded, and it is possible in a given case to grant relief covering persons other than the petitioners who invoke jurisdiction under section 155 of the Act. In the instant case, all those persons who have transferred their shares as long back as in the year 1986, have not chosen to make any grievance even to this day. In such a situation rectification of the register of members of the company sought for by the petitioners in respect of the persons other than the petitioners, as stated in the petition, cannot be granted in this petition, as, if it is to be done, it would amount to forcing a contract upon all those persons who are not before the court to continue to be the shareholders of the company."
30. In the present case, it is significant to mention that none of the transferors who has transferred their shares long back in June, 1991, and June, 1992, have made any grievance and they are also not parities to the proceedings before the Company Law Board and in their absence if a relief to restore their absence if a relief to restore their names in the register is allowed, it would amount to forcing a contract for creation of rights in their favour without even hearing them.
31. I am of the opinion that section 22A(3) read with section 22A(3)(a) does not warrant mandatory or a pre-condition that a company shall only register if the instrument is proper and shall not do so otherwise as like instruments in section 108 of the Companies Act. It is also pertinent to note that while construing the statutes, to find out whether the expressions used are mandatory or directory, one has to examine the statute in its entirety and make a careful comparison. Some times the expression "shall" could even be construed as directory and sometimes the expressions "may" could also be construed as mandatory. But where the statute uses both the expression "may" and "shall" the Supreme Court has held that the expression "may" can only be construed to mean "may" and "shall" can be construed as "shall". Section 22A(3) uses the expression only "may" whereas section 22A(4) uses the expression "shall". Even though a company has discretion to refuse transfer of any of its securities on any one of the grounds mentioned above in sub-section (3) of section 22A, the Company Law Board should in such a case be moved before the expiry of two months from the date on which the instrument of transfer was lodged as would be evident from section 22A(4). In this connection reference may also be made to the judgment of the Supreme Court in Labour Commissioner v. Burhanpur Tapti Mills Ltd. , wherein in para 9, the Supreme Court has held that "it has to be noticed that while on a reference by the State Government, the State Industrial Court or a District Industrial Court shall decide the question of legality of the strike or lock-out, it 'may' decide the question on an application by the employer or employee or any other person mentioned in the section. The use of the word 'shall' in connection with the action to be taken on a reference by the State Government and 'may' in connection with the action on an application by others in the same section compels the conclusion that on an application by anybody other than the State Government, the State Industrial Court or a District Industrial Court may also refuse to take action."
32. Here also the expressions "may" and "shall" have been used in the same section, namely, section 22A, and they will have to be given their natural meanings.
33. In my opinion the same is the effect of two other judgments rendered by the Supreme Court in Jamatraj Kewalji Govani v. State of Maharashtra, , and T. R. Sharma v. Prithvi Singh, .
34. It is also to be noticed that section 22A(3) has overriding effect over section 111 of the Companies Act. Section 111 of the Companies Act is the main basis for remedy for infraction of section 108 of the Companies Act. It has been laid down by the Supreme Court that whenever a non-obstante clause is used in a statute, this is only used as a legislative device employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid operation and the effect of contrary provisions. Thus, in my opinion, the non-obstante clause used in the special enactment, namely, the SCRA, which is applicable only to securities of listed companies will have overriding effect over the provisions of section 111 of the Act and on a proper reading of section 22A, it is clear that both sections 108 and 111 and the contingencies stipulated therein have been merged into one in the form of section 22A in respect of securities of listed companies and to that extent the question with regard to free transferability and/or validity of transfer including rectification are to be only governed by the provisions of section 22A of the SCRA in respect of companies whose securities are listed. However, in view of my finding above, a question may still arise that the view which I have taken would result in transfer of shares without even the instrument of transfer being duly stamped. Therefore, I am of the opinion that the provisions contained in the Stamp Act should not be used to see through or interpret the provisions of the SCRA. This is a case where the company itself has proceeded to act upon and register through its one man committee. This is also not a case where there have been no stamps affixed at all. Stamps have in fact been affixed and the instruments of transfer are in the possession of the company. There is no question of loss of revenue to the State. The Supreme Court in the case of Hindustan Steel Ltd. v. Dilip Construction Co., AIR 1969 SC 1238, has taken the view that the Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of technicality to meet the case of the appellants. The stringent provisions are conceived to secure the interest of the revenue. Once the object of revenue is secured according to law, parties basing claim on the instruments will not be defeated on the grounds of initial defects in the instrument. Here the object of securing revenue to the Government has been achieved and now the appellant-company wants to defeat the right of the 11 respondent companies on the technical plea like inequity. Once the company had proceeded to exercise its discretion under section 22A(3) and has proceeded to register the share transfers, when there is no prejudice that has been causes to the Government, it will be whole inequitable to order rectification of the share register. In the present case, there is also no scope for the share transfer forms being capable of being misused. In such a situation, the observation made by the Supreme Court in the case of Hindustan Steel Ltd., AIR 1969 SC 1238, would be very relevant.
35. The scope and effect of section 22A has been considered in some decisions rendered by the Company Law Board and it may be useful to refer to three decisions in this regard, namely, Bajaj Tempo Ltd. v. Bajaj Auto Ltd. [1991] 2 Cop LJ 393; [1994] 80 Comp Cas 618. That case arose out of a reference filed by Bajaj Tempo Limited under section 22A of the SCRA for confirming the opinion of its board of directors to refuse registration of shares in favour of Bajaj Auto Limited and others on the ground that the transfer was likely to result in changes in the composition of the board of directors that would be prejudicial to the interest of the company and to the public interest. Various other factual submissions were made in support of the allegations and the Company Law Board held that after the introduction of section 22 of the SCRA in January, 1986, irrespective of the powers given in the articles of association of the company whose securities are listed on a recognised stock exchange, the company has now powers to refuse registration of transfer of shares only on the grounds stated in sub-section (3) of section 22A of the SCRA. It is further laid down that there is a special duty cast upon such companies that in cases were the board of directors form an opinion that the registration of transfer of shares should be refused on any of the grounds mentioned in clauses (b), (c) and (d) of sub-section (3) of section 22A, reference should be made to the Company Law Board before the expiry of two months from the date on which the instrument of transfer was lodged for confirming or otherwise of the opinion formed by the board of directors which supports the opinion as stated above, that in the present case reference was liable to be rejected as it has been filed after the expiry of two months after registration. It is further held in the said decision that the main purpose of section 22A was to ensure free transferability of shares of listed companies and for that purpose the unlimited powers of the company to refuse registration were circumscribed only to four grounds. In Jagatjit Industries Ltd. v. Mohan Meakin Ltd. [1991] 2 Comp LJ 288 : [1994] 80 Comp Cas 411 (CLB), it was held that a decision to convey refusal of registration did not require a reference to the Company Law Board as violation or relating to registration of transfer which are capable of being rectified as prescribed in various related statutes. But, however, in this case the company did not give any opportunity to the transferor and the transferee to rectify the defects to ensure free transferability of securities which was the object behind section 22A. But it is clear from the said decision that distinction will have to be made in respect of proceedings initiated under section 111 of the Companies Act and section 22A of the SCRA which would apply to listed companies. In Diamant Carbon and Graphite Products Ltd. v. Paresh J. Shah [1992] 1 Comp LJ 194, the Company Law Board considered the decision of the board of directors of the petitioner-company which confirmed the decision of the share transfer committee to refuse registration and transfer of the shares in question. An application was filed in the prescribed format by the board of directors seeking confirmation of the decision taken by it and it was found as a matter of fact that the application was made beyond the prescribed period of two months from the date on which the instruments of transfer were lodged with it. There was no application filed for condonation of delay. Accordingly the petition was held to be not maintainable and the board further issued directions to register the transfer of shares within a period of ten days from the date of its orders.
36. In the present case, the appellant failed to comply with even the period of limitation. It ought to have at the threshold itself found out any requirement of law to be complied with regard to the transfer and should have intimated them to the transferor and the transferee. The above requirement not being complied with, the appellant should have in any event approached the Company Law Board within two months from the date on which the instrument of transfer was lodged if it wanted to refuse registration by seeking a resolution of the Company Law Board. Having failed to do so they cannot now try to do some other thing indirectly which they cannot do directly. Further, the appellant-company as well as the Company Law Board have failed to give notice to the transferor and the transferee who are also vitally interested in the matter in view of the relief sought for by the appellant-company and this would also be very vital going to the root of the matter rendering the very petitions filed before the Company Law Board being not at all maintainable. In this Connection reference may be made to the decision of this court in Jawahar Mills Ltd. v. Official Receiver, Sha Mulchand and Co. Ltd. [1949] 19 Comp Cas 138 (Mad), where the court observed (at page 156) that "the court cannot order rectification of the register in respect of the particular shares claimed by the applicant in the absence of third parties whose rights will be affected by rectification". It is also important to add that the transferors are parties not only in the light of the SCRA, but also in the light of the Stamp Act because under the provisions of the Stamp Act the liability for payment of stamp duty on the instrument transferred would fall on the transferors and this principle has been accepted in the case of Jainarain Ram Lundia v. Surajmull Sagarmull, AIR 1949 FC 211, wherein the court has held that as a matter of law in cases of transfer of shares of a company, it is the vendor by whom the stamp duty is payable. The same is the effect of the decision of the Punjab High Court in the case of G. R. Parry v. Union of India [1962] 32 Comp Cas 145. Therefore, I am of the view that equitably the matter does not warrant a discretion to be exercised in favour of the appellant-company, because if at this stage rectification is done, that would amount to unsettling various transfers that had taken place long back and that would also create confusion and instability in the stock market. In this connection, it is pertinent to note the observation of this court in the case of T. V. Somasundaram Pillai v. Official Liquidator [1967] 37 Comp Cas 440 wherein the court has held that unless an applicant establishes a just case or equity, the company court would not exercise its discretion to rectify the register. In considering an application for rectification the court has always had regard to the lapse of time and to any facts and circumstances indicating acquiescence in the existing state of things and on whose behalf the application is made to the establishment. The applicant may not take advantage of his own laches. A claim to rectify laches cannot be asked for ex debito justitiae. It must be based on certain accept principles, and great care must be taken to find whether the applicant who is seeking such a discretionary and equitable relief is guilty or not guilty of laches.
37. The aforesaid doctrine of laches is of very great significance as otherwise such laches would be there for every application for rectification. Where there has been no fault on either side, the right remains as it was and where there is fault on both sides, the right also remains as it was. The above mentioned paragraph is, therefore, significant and in the present case fault has been committed on both sides. Therefore, equity will also demand the register to remain as it was. Buckley in his Companies Acts, 13th edition, at pages 810 and 811, has stated as follows :
"Lapse of time coupled with recognition of the transferee as a shareholder may render the transfer incapable of being impeached."
38. It is stated therein that the registration of the defective transfer of share may be regarded as irregular after a long lapse of time and not a nullity. In the present case not only the application had been filed beyond the period of two months, but also there have been laches and that there is no doubt or dispute that the appellant alone is primarily responsible for the situation. Taking all this into consideration and even equitably the appellant would not be entitled to the relief of rectification. I am of the view that the action of the company in the present case seeking now to rectify the register particularly after closure of the rights and issue and for the very first time having disclosed before the Company Law Board that the 11 respondent companies have links with the Reliance group would clearly go to show and the appellant-company was acting on extraneous considerations and not on the basis of good faith. It is also in this connection, significant to point out that it was Mr. D. B. Saxena, who is acting as one man committee to supervise the issue and approve the transfer of shares in the favour of the 11 respondent companies. It was only the very same Mr. Saxena, who had filed the petition before the Company Law Board pleading ignorance, inadvertence and mistake in permitting such transfer deeds. The conduct of the appellant-company and Mr. Saxena in the present case appear to be mala fide. Reliance upon section 108 of the Companies Act appears to be only a clear after-thought which is done only to protect the present management at the cost of the respondent companies. Having failed to approach the Company Law Board by seeking to make a reference and having failed to intimate the transferor and the transferee and not making the transferors parties before the Company Law Board, it appears that the appellant-company have violated and have not complied with the provisions of section 22A of the Act and they could justify their action which could be done only in appropriate proceedings, but, however, they cannot take advantage of their own wrongs or defaults and seek to impeach the transactions which could affect the very free transferability of securities as embodied under the SCRA.
39. Point No. 2. - The above point has already been answered and in the light of the above mentioned reasons, the appellant-company is not entitled to the relief of rectification of its register of members for the deletion of the 11 respondent companies in view of their conduct and in the light of section 22A of the SCRA and on equitable considerations as referred to.
40. Point No. 3. - In view of the decision on point No. 1, this point also has been virtually covered and does not arise for consideration and so I hold that it would not arise for consideration.
41. During the pendency of the above appeals, the 11 respondent companies had also filed Civil Miscellaneous Petitions Nos. 4829 and 5558 to 5567 of 1994 seeking for directions to the appellant to issue the necessary no objection to the 11 respondent companies to enable them to withdraw the amount in respect of 15,329 PCDs which were lying through stock exchange in Dena Bank, Bombay, on the ground that they had applied in excess of their entitlement, and whatever may be the outcome of the appeals the respondent companies in any event, are entitled to the refund of the amount in respect of the above PCDs and in view of the judgment which I have rendered it becomes unnecessary for me to pass any order in the said civil miscellaneous petitions and in the light of the judgment, as a matter of course if the 11 respondent companies had made any excess payment they would obviously be entitled to the refund from the appellant-company and could accordingly work out their rights with the appellant-company. In view of the above discussion, I think to proceed to pass the final judgment :
(a) the orders of the Company Law Board dated October 20, 1993, directing the rectification of the share register of the appellant-company in respect of the shares falling under Lists A and C (categories I and III) are hereby set aside and the appeal filed by the 11 respondent companies against the directions of the Company Law Board directing rectification of the share registers with regard to the shares falling under Lists A and C, namely, C.M.A. Nos. 1412 to 1422 of 1993 are allowed;
(b) the appeals preferred by the appellant-company namely, C.M.A. Nos. 1245 to 1251 of 1993 challenging the decision of the Company Law Board refusing to rectify the register in respect of the shares falling under list B are dismissed;
(c) the appellant-company Kothari Industrial Corporation Limited shall proceed to finalise and allot rights PCDs and additional rights PCDs to the extent of the entitlement of the 11 respondent companies pursuant to their applications in terms of the letter of offer dated October 15, 1993, within two weeks from today; and
(d) the other directions of the Company Law Board shall stand vacated. In the circumstances of the case, each party will bear their own costs.