Madras High Court
M. Jeyaseelan vs M/S. Tamil Nadu Mercantile Bank Ltd on 29 November, 2024
Author: Sathi Kumar Sukumara Kurup
Bench: Sathi Kumar Sukumara Kurup
S.A.No.249 of 2018
IN THE HIGH Court OF JUDICATURE AT MADRAS
DATED : 29.11.2024
CORAM :
THE HON'BLE MR. JUSTICE SATHI KUMAR SUKUMARA KURUP
Second Appeal No. 249 of 2018
M. Jeyaseelan .. Appellant
Versus
1. M/s. Tamil Nadu Mercantile Bank Ltd.,
Having its Head Office/Registered Office,
No.57, V.E. Road, Thoothukudi – 625 002.
Represented by its
Deputy General Manager,
Secretarial Section.
2. Nadar Mahajana Bank Share Investors'
Association,
Rep. By its Secretary,
Having Office at No.246,
Anna Salai, Chennai.
3. M/s. Interpress Private Ltd.,
Rani Building,
No.86, EVR High Road,
Chennai – 600 007. .. Respondents
Second Appeal filed under Section 100 of Code of Civil Procedure to
set aside the judgment and decree dated 01.07.2016 in A.S.No.423 of 2014 on
the file of the learned XVII Additional Judge, City Civil Court, Chennai
confirming the decree and Judgment dated 10.02.2014 passed in O.S. No.
4778 of 2011 on the file of the learned XVII Assistant Judge, City Civil Court,
https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm )
Page 1 of 40
S.A.No.249 of 2018
Chennai.
For Appellant : Ms. K. Abhirame
for Ms. V. Srimathi
For Respondents : Mr. Purujit Nayanan
for Mr. M.V.Chandrasekar for R-1
Mr. K. Mohana Murali for R-2
Mr. N. Umapathy for R-3
JUDGMENT
This Second Appeal had been filed seeking to set aside the Judgment and decree dated 01.07.2016 passed in A.S. No. 423 of 2014 on the file of the learned XVII Additional Judge, City Civil Court, Chennai, confirming the decree and Judgment dated 10.02.2014 passed in O.S. No. 4778 of 2011 on the file of the learned XVII Assistant Judge, City Civil Court, Chennai.
2. For the sake of convenience, the parties to this Appeal shall hereinafter be referred to as “Plaintiff” and “Defendants” as per their rank in the suit before the trial Court.
3. The brief facts, which are necessary to resolve the dispute, are as follows:-
3.1. The Plaintiff in the suit in O.S. No. 4778 of 2011 on the file of the learned XVII Assistant Judge, Civil Court, Chennai, is the Appellant in this https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 2 of 40 S.A.No.249 of 2018 Appeal. The Plaintiff had filed the suit in O.S.No.4778 of 2011 for granting a permanent injunction restraining the Defendant No.1 from effecting any name transfer in favour of the third Defendant of his 10 shares of M/s.Tamil Nadu Mercantile Bank Ltd bearing Distinctive Nos. 240939 to 240948 vide registered folio No.17312.
3.2. As per the plaint averments, the Plaintiff is carrying on business of provisional stores under the name and style of M/s. Velmurugan Stores at No.35/85 Thandavaraya Gramani Street, Tondiarpet Market, Chennai. On 18.09.1997 the Plaintiff applied for allotment of 10 shares of M/s.Tamil Nadu Mercantile Bank Ltd at the rate of Rs.5,500/- per share vide Application No.070492. Such application was submitted by the Plaintiff through Nadar Mahajana Bank Share Investors' Association, the second Defendant in the suit.
Based on the application of the Plaintiff, 10 shares were allotted in his name on 24.09.2003 bearing Distinctive Nos.240939 to 240948 vide registered folio No.17312. However, the original Share Certificate bearing No.20933 was not delivered to the Plaintiff. According to the Plaintiff, he made repeated complaints about non-receipt of his original Share Certificate. In response to such complaints, the Defendant No.1 by its letter dated 02.04.2005 informed the Plaintiff that the original Share Certificate bearing No.20933 had been https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 3 of 40 S.A.No.249 of 2018 delivered to Nadar Mahajana Bank Share Investors' Forum, the second Defendant herein for onward submission to the Plaintiff. The first Defendant, in the letter dated 02.04.2005 also requested the Plaintiff to contact the second Defendant and collect the Share Certificate. Since Plaintiff was unable to get the original Share Certificate either from second Defendant or first Defendant, he requested the Defendant No.1 to issue duplicate Share Certificate in his name. The Plaintiff further stated that after following all procedures that are necessary to issue duplicate Certificate, the Plaintiff was alloted duplicate Share Certificate bearing No. 39521 for 10 shares in lieu of his lost Share Certificate No.20933. The lost/undelivered original Share Certificate bearing No.20933 was also cancelled by the first Defendant and the Plaintiff is in possession of the duplicate Share Certificate and he is being paid with periodical dividends by first Defendant.
3.3. The plaint further proceeds to state that while things stood thus, he was shocked and surprised to receive the communication from Defendant No.1 stating that the thid Defendant, who is a total stranger to the Plaintiff had raised a claim that they have purchased 10 shares from the Plaintiff. According to the Plaintiff, at no point of time, he sold those 10 shares to anyone and nobody can claim any right over the same. The Plaintiff therefore https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 4 of 40 S.A.No.249 of 2018 lodged a complaint dated 27.5.2011 to the Additional Commissioner of Police, Egmore, Chennai - 600 008 and the Inspector of Police (Crime), H.3 Tondiarpet Police Station, Chennai - 600 081. The Plaintiff also sought for investigation in this regard. The Plaintiff also, in his letter dated 08.06.2011 addressed to the first Defendant informed that he has already lodged a Police complaint dated 27.05.2011 and requested not to effect any name transfer in favour of the third Defendant. However, the first Defendant in their letter dated 31.05.2011 demanded prohibitory order from the competent authority restraining them from effecting the name transfer in favour of the third Defendant. The first Defendant also requested the Plaintiff to submit their duplicate Share Certificate.
3.4. According to the Plaintiff, his hard earned money had been invested in the shares of the first Defendant with the fond hope that his investment would be safe and secure. However, someone have played mischief with the Plaintiff's lost/undelivered/cancelled original Share Certificate. The third Defendant is fraudulently trying to enrich himself illegally based on the lost Share Certificate. The Plaintiff neither sold nor received any consideration from the third Defendant and he cannot claim any ownership over the Share Certificate. It is in those circumstances, the Plaintiff sought the relief of https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 5 of 40 S.A.No.249 of 2018 permanent injunction restraining the first Defendant not to effect any name transfer in favour of the third Defendant in respect of the shares of M/s.Tamil Nadu Mercantile Bank Ltd bearing distinctive Nos.240939 to 240948 vide registered folio No. 17312.
3.5. The suit was resisted by the first Defendant by filing his written statement contending inter alia that the first Defendant-Bank, through various letters asked the Plaintiff to surrender the duplicate Share Certificate inasmuch as the Bank has already received the original Share Certificate. The first Defendant also stated that they have also informed the third Defendant by letter dated 07.07.2010 that a duplicate Certificate was issued by the Plaintiff and asked them to make arrangements to get the duplicate Certificate issued and surrender the same for effecting transfer. The third Defendant in turn had written a letter dated 01.09.2010 stating that under the Companies Act once the original Certificate is submitted for share transfer duly signed, witnessed and stamped, transfer should be effected, irrespective of the fact that whether a duplicate Certificate is issued. In the meantime the first Defendant-Bank received a letter from the Plaintiff on 08.06.2011 stating that he had lodged a Police complaint and moving an injunction suit and requested not to effect the transfer of share. Therefore, the first Defendant Bank returned the Share https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 6 of 40 S.A.No.249 of 2018 Transfer Deed along with the Share Certificate No.20933 on 23.06.2011 to the third Defendant stating that the Bank had issued duplicate Share Certificate No.39521 in lieu of the original Share Certificate and also received a letter dated 08.06.2011 from the Plaintiff that he had lodged a Police complaint dated 27.05.2011 to Additional Commissioner of Police (crime), Chennai and also filing a civil suit before the competent Court for getting an order of injunction.
3.6. The first Defendant also submitted in the written statement that the Bank issued duplicate Certificate to the Plaintiff after obtaining an indemnity bond executed by him. As per the indemnity bond, the Plaintiff agrees and undertake to deliver or cause to be delivered to the Bank the original Share Certificate when it is found. While issuing the duplicate Share Certificate it was mentioned that “issued in lieu of Share Certificate No.20933 cancelled”. As such when the duplicate Share Certificate is issued the original Certificate will automatically stands cancelled. In such circumstances, the first Defendant prayed for dismissal of the suit.
3.7. The second Defendant did not file his written statement, denying the plaint averments.
https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 7 of 40 S.A.No.249 of 2018 3.8. The contesting third Defendant filed his written statement stating that the first Defendant Bank had delivered the Share Certificate bearing Registration No.20933 to the second Defendant and further requested the Plaintiff to collect the same from the second Defendant. From the contentions of the Plaintiff, it would be evident that the second Defendant had received the Share Certificates from the first Defendant and in turn would issue the same to the Plaintiff. Further, it has been alleged in the plaint that the Plaintiff had not received the Share Certificate bearing Registration No.20933 from the second Defendant and subsequently claimed for issuance of duplicate Certificate pertaining to the Share Certificate bearing Registration No.20933. However, the first Defendant had issued it without verifying with the second Defendant. Further, the first Defendant Bank issued the duplicate Certificate deliberately to the Plaintiff without confirming with the second Defendant.
3.9. In the written statement, the third Defendant further stated that the third Defendant was a bona fide purchaser of Share Certificate bearing Registration No.20933. The third Defendant further submits that one Mr.M.Prabakar witnessed the Share Transfer Deed in the name of the third Defendant. It is noteworthy to mention that Mr.M.Prabkar was the erstwhile https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 8 of 40 S.A.No.249 of 2018 office bearer of the second Defendant and M.G.Maran was the erstwhile Chairman of the first Defendant Bank. Further, M.G.Maran Group of Companies purchased the above said share from the Plaintiff and Mr.M.Prabkar acted as intermediary-cum-broker in the said transaction. Further, it has to be noted that the Plaintiff had not made any complaint against the missing Share Certificate bearings Registration No 20933 and the first Defendant also did not make any inquiry against the missing Share Certificate. The Share Certificate-bearing Registration No. 20933 has been delivered by the first Defendant to the second Defendant. However, the Plaintiff had not taken any steps for tracing the missing Share Certificate bearing Registration No.20933. In any event, the third Defendant Company purchased the Share Certificate bearing Registration No.20933 among other shares from M/s. Indo Asia Agencies which is a sister concern of M/s M.G.M Group of Companies. The said fact would be evident from the consideration paid by the third Defendant to the above said Company by way of cheques. On 25.09.2007 the share transfer pertaining to the original Share Certificate bearing Registration No.20933 had been duly executed by the third Defendant and Mr. M. Prabakar had signed as witness and as such, the sale of share pertaining to Certificate bearing Registration No. 20933 had been concluded. Further, on 26.06.2010 the third Defendant lodged the Share Certificate for https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 9 of 40 S.A.No.249 of 2018 transfer of share bearing Registration No.20933 among other shares. As the matter stood thus, the first Defendant issued letter dated 07.07.2010 to the third Defendant stating that the Plaintiff had been issued with duplicate Certificate and requested the third Defendant to get back the same from the Plaintiff and surrender the same to the first Defendant. Further, the first Defendant accepted the specimen signature of transferor in the Share Certificate. Aggrieved by that, the third Defendant duly replied to the first Defendant on 01.09.2010 requesting to effect the name transfer. In such circumstances, there is no merit in the claim of the Plaintiff. The suit is misconceived and devoid of any merits. Accordingly, the third Defendant prayed for dismissal of the suit.
3.10. On considering the above rival pleadings, the learned XVII Assistant Judge, City Civil Court, Chennai, framed the following three issues for consideration in the suit and they are:-
1. Whether the Civil Court has jurisdiction to try the suit?
2. Whether the Plaintiff is entitled to injunction relief?
3. To What other relief?
3.11. During trial, on side of the Plaintiff, he examined himself as P.W-
https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 10 of 40 S.A.No.249 of 2018 1 and marked 18 documents as Ex.A-1 to Ex.A-18. On the side of the Defendants, the Senior Manager of the Tamil Nadu Mercantile Bank Ltd was examined as D.W-1 and marked 5 documents as Ex.D-1 to Ex.D-5. The Defendants 2 and 3 did not examine any witnesses.
3.12. On consideration of the pleadings of the parties and on assessment of the evidence of Plaintiff as P.W-1 and documents under Ex.A-1 to Ex.A-18 as well as the evidence of the Senior Manager of the Tamil Nadu Mercantile Bank Ltd as D.W-1 and documents Ex.B-1 to Ex.B-5, the learned XVII Assistant Judge, City Civil Court, Chennai, had answered the Issue-1 in favour of the Plaintiff by holding that the Civil Court has jurisdiction to try the suit. The Issue Nos. 2 and 3 were, however, answered against the Plaintiff and dismissed the suit vide judgment dated 10.02.2014.
3.13. Aggrieved by the judgment of dismissal in O.S. No. 4778 of 2011, dated 10.02.2014, the Plaintiff in O.S. No. 4778 of 2011 preferred an Appeal in A.S. No.432 of 2014. The learned XVII Additional Judge, Civil Court, Chennai, by judgment dated 01.07.2016, after hearing the arguments of both sides, dismissed the Appeal, confirming the judgment of dismissal recorded by the learned XVII Assistant Judge, City Civil Court, Chennai. https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 11 of 40 S.A.No.249 of 2018 3.14. Challenging the concurrent decisions of the Courts below, the Plaintiff had preferred this Second Appeal. Pending Appeal, the Plaintiff- Appellant also sought to grant injunction restraining the first and second Defendants from effecting name transfer either in favour of the third Defendant or any other person.
4. At the time of admission of the second Appeal, the following Substantial Questions of Law were raised:
1. Whether the Courts below were right in holding that the suit filed by the Appellant for permanent injunction is not maintainable before Civil Court?
2. Whether the Appellant is entitled for relief of permanent Injunction on account of the original allotment of shares in his favour?
5. The learned Counsel for the Plaintiff submitted that the original Share Certificate was not handed over to the Appellant, but was handed over to the intervenor, second Defendant. On receipt of the original Share Certificate, the second Defendant did not handover it to the Plaintiff. Even before institution of the suit, the Plaintiff preferred complaint regarding the withholding of the original Share Certificate by the second Defendant and the receipt of duplicate Certificate from the first Defendant. The first Defendant https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 12 of 40 S.A.No.249 of 2018 Bank, in the communication, had only expressed their readiness to hand over the original Share Certificate after following procedures. The usual procedure is that the shareholder has to give an indemnity bond and upon receipt of the same, the validity of the original Share Certificate will be automatically cancelled. In this case, at the request of the Plaintiff, the first Defendant issued a duplicate Share Certificate and cancelled the original Share Certificate. In this context, the learned Counsel for the Plaintiff invited the attention of this Court to Section 46 and 84 of the Companies Act, 1956, which reads as follows:-
“46. Certificate of shares.—(1) A Certificate, [issued under the common seal, if any, of the Company or signed by two directors or by a director and the Company Secretary, wherever the Company has appointed a Company Secretary], specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.
(2) A duplicate Certificate of shares may be issued, if such Certificate —
(a) is proved to have been lost or destroyed; or
(b) has been defaced, mutilated or torn and is surrendered to the Company.
(3) Notwithstanding anything contained in the articles of a Company, the manner of issue of a Certificate of shares or the duplicate thereof, the form of such Certificate, the particulars to be entered in the register of members and other matters shall be such as may be prescribed.
(4) Where a share is held in depository form, the record of the depository is the prima facie evidence of the interest of the beneficial owner.
(5) If a Company with intent to defraud issues a duplicate Certificate of shares,( the https://www.mhc.tn.gov.in/judis Company shall be punishable with fine which Uploaded on: 21/03/2025 08:40:37 pm ) Page 13 of 40 S.A.No.249 of 2018 shall not be less than five times the face value of the shares involved in the issue of the duplicate Certificate but which may extend to ten times the face value of such shares or rupees ten crores whichever is higher and every officer of the Company who is in default shall be liable for action under section 447.
84. Certificate of shares .- (1) A Certificate, under the common seal of the Company, specifying any shares held by any member, shall be prima facie evidence of the title of the member to such shares. (2) A Certificate may be renewed or a duplicate of a Certificate may be issued if such Certificate-
(a)is proved to have been lost or destroyed, or
(b)having been defaced or mutilated or torn is surrendered to the Company.
(3)If a Company with intent to defraud renews a Certificate or issues a duplicate thereof, the Company shall be punishable with fine which may extend to ten thousand rupees and every officer of the Company who is in default shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to [one lakh rupees] or with both.
(4)Notwithstanding anything contained in the articles of association of a Company, the manner of issue or renewal of a Certificate or issue of a duplicate thereof, the form of a Certificate (original or renewed) or of a duplicate thereof, the particulars to be entered in the register of members or in the register of renewed or duplicate certificates, the form of such registers, the fee on payment of which, the terms and conditions, if any (including terms and conditions as to evidence and indemnity and the payment of out-of-pocket expenses incurred by a Company in investigating evidence) on which a Certificate may be renewed or a duplicate thereof may be issued, shall be such as may be prescribed.]
6. The learned Counsel for the Plaintiff also invited the attention of this Court to the Companies (Issue of Share Certificates) Rules, 1960 regarding the issue of Share Certificates, which reads as under:-
“4. Issue of Share Certificates. - (1) When a Company issues any https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 14 of 40 S.A.No.249 of 2018 capital, no Certificate of any share or shares in the Company shall be issued except:
(i) in pursuance of a resolution passed by the Board; and
(ii) on surrender to the Company of its letter of allotment or of its fractional coupons of requisite value, save in cases of issues against letters of acceptance or of renunciation, or in cases of issue of bonus shares:
Provided that if the letter of allotment is lost or destroyed, the Board may impose such reasonable terms, if any, as to evidence and indemnity and the payment of out of pocket expenses incurred by the Company in investigating evidence, as the Board thinks fit.
(2) No Certificate of any share or shares shall be issued either in exchange for those which are sub-divided or consolidated or in replacement of those which are defaced, torn or old decrepit, worn-out, or where the cases in the reverse for recording transfers have been duly utilized, unless the Certificate in lieu of which it is issued is surrendered to the Company:
Provided that the Company may charge such fee, if any, not exceeding Rs. 2 per Certificate issued on splitting or consolidation of Share Certificates or replacement of Share Certificates that are defaced of torn, us the Board thinks fit.
(3) No duplicate share, Certificate shall be issued in lieu of those that are lost of destroyed without the prior consent of the Board of without payment of such fees, if any, not exceeding Rs. 2 and on such reasonable terms if any, an to evidence and indemnity and the payment of out-of-pocket expenses incurred by the Company in investigating evidence as the Board thinks fit.
(4) The companies listed with OTC Exchange of India, a Company registered under section 25 of the Companies Act, 1956, may issue a jumbo Share Certificate in favour of Custodian and issue counter receipts to every allottee with respect to their holding.
Explanation.- For purposes of sub-rule (4), "Custodian" means an entity carrying on post-trade activities such as, settlement of purchases and sales, information reporting, safe keeping of securities and/or participating in any clearing system for and on behalf of the client to effect deliveries of the securities.”
7. By pointing out the above Rules, it is submitted that whenever it https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 15 of 40 S.A.No.249 of 2018 is complained that the original Share Certificate is lost or destroyed, a duplicate Share Certificate will be issued in lieu of the original Share Certificate and on issuing the duplicate Share Certificate, the original Certificate will be automatically cancelled to avoid duplication. This is provided in Gazette of India : Extraordinary [Part II – Sec.3(i)] dated 31.03.2014 and it reads as follows:
“6. Issue of renewed or duplicate Share Certificate.
(1) the Certificate of any share or shares shall not be issued either in exchange for those which are sub-divided or consolidated or in replacement of those which are defaced, mutilated, torn or old, decrepit, worn out, or where the pages on the reverse for recording transfers have been duly utilised, unless the Certificate in lieu of which it is issued is surrendered to the Company Provided that the Company may charge such fee as the Board thinks fit, not exceeding fifty rupees per Certificate issued on splitting or consolidation of Share Certificate(s) or in replacement of Share Certificate(s) that are defaced, mutilated, torn or old, decrepit or worn out.
(b) Where a Certificate is issued in any of the circumstances specified in this sub-rule, it shall be stated on the face of it and be recorded in the Register maintained for the purpose, that it is "Issued in lieu of Share Certificate No sub-divided/replaced on consolidation" and also that no fee shall be payable pursuant to scheme of arrangement sanctioned by the High Court or Central Government
(c) A Company may replace all the existing certificates by new certificates upon sub-division or consolidation of shares or merger or demerger or any reconstitution without requiring old certificates to be surrendered subject to compliance with clause (a) of sub-rule (1) rule 5, sub-rule (2) of rule 5 and sub-rule (3) of rule 5.
(2) (a) The duplicate Share Certificate shall be not issued in lieu of those that are lost or destroyed, without the prior consent of the Board and without payment of such fees as the Board thinks fit, not exceeding rupees fifty per Certificate and on such reasonable terms, https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 16 of 40 S.A.No.249 of 2018 such as furnishing supporting evidence and indemnity and the payment of out-of-pocket expenses incurred by the Company in investigating the evidence produced:”
8. The learned Counsel for the Plaintiff also invited the attention of this Court to Page 96 of the additional typedset in which reference was made to P. Ramanatha Aiyar : The major Law Lexicon to submit that the word 'In lieu of' signifies 'instead of', 'in place of', and, as used in a bill of sale reciting that it is given 'in lieu of' a certain chattel mortgage. It shows that it was intended simply as security for the debt due to him, and was intended to take the place of the chattel mortgage. It was also stated in a decision in Crowder v. Clowes, (1794), 2 Ves. Jun. 449 30 ER 719 that a legacy given “in lieu of” a previous gift to the same legatee is to be raised out of the same fund and is subject to the same conditions as the original gift. The learned Counsel for the Plaintiff also placed reliance on the decision in Stubbs v.
Director of Public Prosecutions, 24 QBD 577 wherein it has been stated as follows:-
“Where a liability had to be discharged by A in lieu of B, there had to be a binding obligation on B to do it before A could be charged with it; e.g. when the Director of Public Prosecutions undertook a prosecution the person who might have been bound over to prosecute was released and the Director shall be liable to costs in lieu of such person (Prosecution of Offences Act, 1879 (c. 22), S. 7) but if such person had given no security for costs, the Director could not be made to pay them because there was nobody in whose stead that liability could be imposed.
In place of; instead of.
https://www.mhc.tn.gov.in/judis [S.87 Cr.PC 1973 (2 of 1974)].” ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 17 of 40 S.A.No.249 of 2018
9. The learned Counsel for the Plaintiff further submitted that now the original Share Certificate in question was cancelled in lieu of the duplicate Certificate issued by the first Defendant as contemplated under the above Rules. However, the third Defendant had produced the original Share Certificate. In this context, the learned Counsel for the Plaintiff made a reference to the pleadings in paragraph Nos. 3 to 10 of the plaint, which reads as follows:-
“3. The Plaintiff states that he is carrying on business of provisional stores under the name and style of M/s Velmurugan Stores at No.35/85, Thandavaraga Gramani Street. Tondiarpet Market, Chennai. The Plaintiff further state that on 18.09.1997 by application No.070492, the Plaintiff applied for allotment of 10 shares of M/s. Tamil Nadu Mercantile Bank Ltd, at the rate of Rs.5,500/- per share and the same was applied through M/s. Nadar Mahajan Bank Share Investors Association, the second Defendant herein.
4. The Plaintiff states that based on his application 10 shares were allotted in his name on 24.9.2003 bearing Distinctive Nos:
240939-240948 vide registered folio No. 17312. However the original Share Certificate bearing No.20933 was not delivered to the Plaintiff and hence the Plaintiff made repeated complaints about the non receipt of his original Share Certificate
5. The Plaintiff states that the 1 Defendant by its letter dated 2.4.2005 informed the Plaintiff that the original Share Certificate bearing. No.20933 has been delivered to Nadar Mahajana Bank Share Investors forum, the 2ind Defendant herein for onward submission to the Plaintiff. The Plaintiff was also further requested to contact the 2 Defendant and collect the Share Certificate. It was also informed in the said letter that the 2nd Defendant has been forwarded with the said letter 6 The Plaintiff states that since the Plaintiff was not able to get the original Share Certificate either from the 21nd Defendant for Defendant, he informed https://www.mhc.tn.gov.in/judis the 1 Defendant and requested them to Issue ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 18 of 40 S.A.No.249 of 2018 duplicate Share Certificate in his favour. The Plaintiff states that after following all the procedure that where necessary to issue the duplicate Share Certificate, the Plaintiff was allotted a duplicate Share Certificates bearing No. 39521 for ten shares to in lieu of his lost Share Certificate No.20933.
7. The lost/undelivered original Share Certificate bearing No. 20933 was cancelled by the 1 Defendant and Plaintiff is in possession of the duplicate Share Certificate and he is being paid with periodical dividends by the first Defendant.
8. The Plaintiff states that while things stood thus he was shocked and surprised to receive the communication from the 1 Defendant that 3d Defendant who is a total stranger to the Plaintiff is now claiming that based on the lost/ undelivered/ cancelled share Certificate bearing No. 20933 they have purchased those ten shares from the Plaintiff The Plaintiff at no point of time has sold these ten shares to anyone and nobody can claim any right over the same:
9. The Plaintiff further state that he lodged complaint dated 27.5.2011 to the Additional Commissioner of Police, Egmore, Chennai 600 008 and Inspector of Police (Crime H.3 Tondiarpet Police Station, Chennai 600 081) and sought for an investigation in this regard.
Further the Plaintiff in his letter dated 8.6.2011 addressed to the 1 Defendant informed the 1 Defendant that he has already lodged the Police complaint dated 27.5.2011 and requested not to effect any name transfer in favour of the 3 Defendant. However the 1 Defendant in their letter dated 31.5.2011 have demanded a prohibitory order from the competent authority restraining them not to effect any name transfer in favour of the 3rt Defendant and also they have requested the Plaintiff to submit their duplicate Share Certificate.
10. The Plaintiff states that he has invested his hard earned money in the shares of the 1 Defendant on the fond hope that his investment would be safe and secure. However someone have played mischief with the Plaintiff's lost/undelivered/cancelled original Share Certificate and the 3rd Defendant is now fraudulently trying to enrich himself illegally. The Plaintiff neither sold nor received any consideration from the 3rd Defendant so as to claim any ownership. The Plaintiff will be put to grave loss extreme hardship and irretrievable injustice if the Plaintiff shares are transferred in the name of the 3rd Defendant. The Plaintiff has made out a prima facie case in his favour for an order of injunction.” 10. https://www.mhc.tn.gov.in/judis The learned Counsel ( Uploaded on:for the Plaintiff 21/03/2025 08:40:37 pm also ) invited the attention of Page 19 of 40 S.A.No.249 of 2018 this Court to paragraph Nos. 4 and 5 of the written statement of the first Defendant Bank, which is enclosed in page No. 10 of the typed set. The written statement reads as follows:-
“4) The Defendant Bank had returned the Share Transfer Deed along with the Share Certificate No.20933 on 23.06.2011 stating that the Bank had issued duplicate Share Certificate No 39527 In lieu of the original Share Certificate and also received a letter dated 08.06.2011 from Shri M Jeyaseelan reporting that he had lodged a Police complaint dated 27.05.2011 to Additional Commissioner of Police (crime), Chennai and also filing a civil suit before the competent Court for getting an order of injunction.
5. It is submitted that the Bank issued duplicate Certificate to the Plaintiff after obtaining an Indemnity bond executed by him. As per the indemnity bond the Plaintiff agrees and undertake to deliver or cause to be delivered to the Bank the original Share Certificate when it is found. While issuing the duplicate Share Certificate it is mentioned that “issued in lieu of Share Certificate No.20933 cancelled”. As such when the duplicate Share Certificate is issued the original Certificate automatically stands cancelled.”
11. The learned Counsel for the Plaintiff also invited the attention of this Court to the contents of written statement filed by third Defendant wherein the third Defendant admits that the Certificate is not with the Plaintiff. The third Defendant had not entered into the witness box and had not marked any document to prove the averments in the written statement. If the contention made by the third Defendant had been proved, the Bank statement corresponding to the date of issue of the Certificate or payment made thereof ought to have been marked. However, no such Bank statement was furnished by third Defendant. Therefore, the Court has to necessarily draw an adverse https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 20 of 40 S.A.No.249 of 2018 interference against the third Defendant under Section 114 of the Indian Evidence Act.
12. That apart, the learned Counsel for the Plaintiff also invited the attention of this Court to the evidence of Plaintiff and the Defendants to contend that the share transfer was attested by one Mr.M.Prabakar. second Defendant had not filed any written statement. The trial Court failed to consider the exercise of jurisdiction between National Company Law Tribunal and the Civil Court. As per the provisions of the Company Law for grant of injunction and for adjudicating the disputed facts or where there is fraud made by any one of the parties to the lis, only Civil Court has jurisdiction. The judgment of the trial Judge without considering the same is liable to be interfered with by this Honourable Court. The learned Counsel for the Plaintiff also submitted that the conclusion reached by the learned Appellate Judge, XVII Additional Judge, City Civil Court, Chennai, is also perverse inasmuch as it ignored the provisions of the Companies Act, 1956. In paragraph Nos. 15 to 17, the Appellate Court held as follows:-
“15. In the mean time, the 3rd Defendant submitted Share Transfer Form to the Defendant as per Ex.B-4, dated 26-06-2010. The 1st Defendant on receipt of the same, given reply as per Ex.B-2, dated 07-07-2010 to the 3rd Defendant regarding the issue of duplicate Certificate in the name of the Plaintiff, for which, 3rd Defendant raised objection to the 1st Defendant as per Ex.B-3, dated 01-09-2010. It is pertinent to note that the 2nd Defendant who received the Share st Certificate from the (1Uploaded https://www.mhc.tn.gov.in/judis Defendant as per on: 21/03/2025 thepmdirection 08:40:37 ) of the Hon'ble Page 21 of 40 S.A.No.249 of 2018 Company Law Board, for onward submission to the shareholders, set ex parte. The 3rd Defendant in his written statement contends that they purchased the Share Certificate bearing Registration No.20933 from M/s Indo Asia Agencies, which is sister concern of M/s M.G.Maran Group of Companies. The said Company purchased the disputed share from the Plaintiff. Mr.M.G.Maran was the erstwhile Chairman of the 1st Defendant. Further, one Mr. Prabakar, who was the erstwhile office bearer of the 2nd Defendant, acted as intermediary cum broker to the 3rd Defendant for purchase of the disputed share. The 3rd Defendant has not adduced any oral evidence, at the same time cross examined P.W-1 and D.W-1, but nothing put any suggestion with regard to the above said contention raised in the written statement.
16. Any how, when the Plaintiff approached this Court for the relief of Permanent injunction, he should establish the prima facie case, balance of convenience and the relative hardship caused to him, while, injunction has not been granted. In this case, 2nd Defendant as per Ex.A-2, crystal clear mentioned that the Share Certificate No.20933 registered in the name of the Plaintiff handed over to the 2nd Defendant as per the direction of the Hon'ble Company Las Board.
While so, it is the duty of the Plaintiff to approach the 2nd Defendant to get his original Share Certificate. Whereas, he didn't so, instead approach the 1st Defendant and obtained duplicate Certificate, the 1st Defendant also without complying the formalities as per section 84(2) of the Companies Act, verified with the 2nd Defendant regarding the status of the original Share Certificate of the Plaintiff, handed over to the 2nd Defendant, issued duplicate Share Certificate and acted like catching fish in the cloud water. The conduct of the 1st Defendant is the sole reason for this dispute.
17 Further as per section 108(1A) of the Companies (Amendment) Act 1965, w.e.f. 01-04-1966, when once the Share Transfer Form filed along with original Share Certificate, duly stamped and witnessed, it shall be accepted by the 1st Defendant Company as per the provision of Section 108 (1A) and (1B). In this case, the 3rd Defendant submitted Ex.B4. Share Transfer Form on 26-06-2010. Whether the 1st Defendant accepted the Ex.B4 or not is the point for consideration in this suit. When the 1st Defendant request the Plaintiff to surrender the duplicate Share Certificate in view of the share Transfer Form given by the 3rd Defendant, the Plaintiff ought to have raised this issue with Registrar of Companies, without doing so, he has no right to invoke the jurisdiction of Civil Court to grant the relief of Permanent Injunction against the 1st Defendant banking Company, purely conducted business according to the provision of the https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 22 of 40 S.A.No.249 of 2018 Companies Act. Hence this Court is of view that the Company Law Board or the Registrar of the Companies alone has got jurisdiction to decide the dispute between the parties and held that the Plaintiff failed to establish the prima facie case, balance of convenience and the relative hardship caused to him, as such the plaintiff is not entitled for the relief of Permanent injunction as prayed for. In this regard, the trial Court properly appreciated the oral and documentary evidence available in hand and given a correct finding. The said finding cannot be deemed patently erroneous which would result in miscarriage of justice. The Appellant has not made out valid reasons in the grounds of Appeal to interfere with findings of the Trial Court and held that the Appellant/Plaintiff is not entitled for the relief of Appeal and answered the Point No. 1 accordingly.”
13. In support of the above submissions, the learned Counsel for the Plaintiff had relied on the following rulings and statutes:
(i) (1998) 7 SCC 105 in the case of Ammonia Supplies Corporation (P) Ltd Vs. Modern Plastic Containers Pvt. Ltd and others.
(ii) (2023) 4 SCC 209 in the case of IFB Agro Industries Ltd. Vs. SICGIL India Ltd.,
(iii) (2002) 51 CLA 4 in the case of Mahesh Batra Vs. Gajaraj Beverages (P) Ltd.,
(iv) 2022 SCC Online Cal 3957 in the case of Mukesh Jaiswal Vs. Phool Chand Gupta and others.
(v) 2023 SCC Online Cal 1812, (2023) 175 CLA 185 in the case of Phool Chand Gupta Vs. Mukesh Jaiswal
(vi) (2017) 203 Comp Cas 574 : (2017) 5 Mad LJ 447 in the case of N.Ramji Vs. Ashwath Narayanan Ramji & Ors.
(vii) Companies (Issue of Share Certificates) Rules, 1960.
(viii) The Companies (Share Capital & Debentures) Rules, 2014
(ix) Definition of the term “in lieu of”
14. The learned Counsel for the Plaintiff also invited the attention of this Court to Section 155 of the Companies Act, 1956 and Section 111 & https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 23 of 40 S.A.No.249 of 2018 Section 115 of the Old Act, Section 59 of the new Act, The Companies Act, 2013 to contend that the jurisdiction of the National Company Law Tribunal is narrow whereas the Civil Court has wide jurisdiction. In this regard, the learned Counsel for the Plaintiff relied on the reported ruling in the case of IFB Agro Industries Ltd -vs- SICGIL India Ltd reported in (2023) 4 SCC
209. It would be apposite to refer to the relevant portion of the said decision and it reads as follows:-
“21. The scope and ambit of Section 155 of the 1956 Act, as it then existed, fell for consideration in a decision of this Court in Ammonia Supplies, the application was filed under Section 155, and it was submitted that the scope for rectification under Section 155 is enlarged in comparison with the position as it were under Section 38 of the 1913 Act. Rejecting the argument, this Court held that the jurisdiction exercised by the Court for rectification of the register of members is essentially limited. The comparative analysis assumes importance as a similar submission is made before us by Mr. Chidambaram that the scope and jurisdiction of the Tribunal under Section 59 of the 2013 Act is wide when compared with Section 111-A of the 1956 Act as amended in 1996.
23. It is evident from the above that while interpreting section 155, this Court has held that the power of CB is narrow and can only consider questions of rectification. If a petition seeks an adjudication under the garb of rectification, then CLB would not have jurisdiction, and it would be duty-bound to re-direct the parties to approach the relevant forum. The Court also held that the words “sufficient cause' cannot be interpreted in a manner which would enlarge the scope of the provision.
24. The decision in Ammonia Supplies Corporation (P) Ltd -vs-
Modern Plastic Containers (P) Ltd in (1998) 7 SCC 105 was followed by this Court even after the deletion of Section 155 and insertion of Section 111-A. This Court in Standard Chartered Bank -vs- Devraj Singh, held that even though Section 111(7) of the 1956 Act seemingly enlarges the power of CLB, the power of rectification continues to remain summary in nature and if any seriously disputed questions arise, the Company Court https://www.mhc.tn.gov.in/judis should ( Uploaded relegate on: 21/03/2025 thepmparties 08:40:37 ) to a forum which Page 24 of 40 S.A.No.249 of 2018 is more appropriate for investigation and adjudication of such disputed questions.
..............
27. The principle enunciated in Ammonia Supplies Corporation (P) Ltd -vs- Modern Plastic Containers (P) Ltd in (1998) 7 SCC 105 relating to the jurisdiction of a Tribunal with respect to the rectification of the register is well recognised and consistently followed. Sub-section (3) of Section 59 recognises the overarching right to hold and transfer securities with the concomitant entitlement of voting. This is a precious right, and that is the reason why Parliament found it necessary to caution that the provision of this section shall not restrict the right of a holder of securities, to transfer such securities. This is a another feature which is indicative of the limited scope and extent of the power of rectification of the register.
28. for the reason stated above, we are of the opinion that the Company petition under section 111-A of the 1956 Act for a declaration that the acquisition of shares by the respondents as null and void is misconceived. The Tribunal should have directed the Appellant to seek such a declaration before the appropriate forum. The appellate tribunal, is therefore, justified in allowing the Appeal and setting aside the order of the Tribunal.”
15. By placing reliance on the above decision, the learned Counsel for the Plaintiff submitted that the suit filed for granting an injunction against first Defendant to third Defendant from effecting name transfer of the Share Certificate is liable to be decreed in favour of the Plaintiff and accordingly, she prayed for setting aside the judgments of the Courts below and to allow the present Second Appeal.
16. Per contra, Mr. Purujit Narayanan, learned Counsel for the first Defendant Bank submitted that after more than one and half years of issuance of duplicate Certificate of shares, the second Defendant did not handover the https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 25 of 40 S.A.No.249 of 2018 shares to the Plaintiff. Therefore, the Plaintiff was constrained to obtain duplicate Share Certificate from the first Defendant Bank. The first Defendant Bank also issued a duplicate Certificate by following the due procedures inter alia cancelling the original Share Certificate. In such circumstances, the learned Counsel only prayed for adjudicating the Second Appeal on merits.
17. The learned Counsel for the contesting third Defendant submitted that the first Defendant Bank delivered the original Share Certificate bearing Registration No.20933 to the second Defendant and requested the Plaintiff to collect it from the second Defendant. But the Plaintiff had not received the Share Certificate from the second Defendant for the reasons best known. However, much later, the Plaintiff sought for issuance of duplicate Certificate from the first Defendant Bank. However, the first Defendant without any verification, issued duplicate Certificate to the Plaintiff without causing any enquiry with the second Defendant. In any event, the third Defendant was a bona fide purchaser of Share Certificate bearing Registration No.20933. The learned Counsel further submitted that the transaction relating to purchase of the Share Certificate was also witnessed by one Mr. M. Prabakar, who was the erstwhile office bearer of the second Defendant and M.G. Maran who was the erstwhile Chairman of the first Defendant Bank. According to the learned https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 26 of 40 S.A.No.249 of 2018 Counsel, M.G. Maran Group of Companies purchased the above said Share Certificate from the Plaintiff and for such transaction, Mr. M.Prabakar acted as intermediary cum broker. Thus, it is clear that the Plaintiff, on the one hand, sold the Share Certificate to M.G. Maran Group of Companies for a valuable consideration, on the other hand, feigned ignorance that the Share Certificate had not been handed over to him by the second Defendant. In any event, the Plaintiff had not taken any action to trace the missing Share Certificate bearing Registration No.20933. The learned Counsel also submitted that it is the third Defendant Company which has purchased the Share Certificate bearing Registration No.20933 among other shares from M/s. Indo Asia Agencies which is a sister concern of M/s. M.G.M Group of Companies. The said fact would be evident from the consideration paid by the third Defendant to the above said Company by way of cheques. On 25.09.2007 the share transfer pertaining to the original Share Certificate bearing Registration No.20933 had been duly executed by the third Defendant and Mr. M. Prabakar has signed as witness. It is in those circumstance, the first Defendant Bank issued letter dated 07.07.2010 indicating that the Plaintiff had been issued with duplicate Certificate. Further, the first Defendant without any basis accepted the specimen signature of transferor in the Share Certificate, which is contrary to banking norms. This was also duly pointed out by the third Defendant in the https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 27 of 40 S.A.No.249 of 2018 reply dated 01.09.2010. Thus, the suit was filed by suppressing the factum of sale in favour of the third Defendant. The third Defendant, being the owner of the Share Certificate, cannot be restrained by an order of injunction. In other words, an injunction cannot be granted against a true and lawful owner. Accordingly, the learned Counsel for the third Defendant prayed for dismissal of the Appeal.
18. Heard the learned Counsel for the Plaintiff, the learned Counsel for the first Defendant Bank, the learned Counsel for the second as well as the third Defendant and perused the materials placed.
19. The undisputed fact is that on 18.09.1997 the Plaintiff applied for allotment of 10 shares of M/s.Tamil Nadu Mercantile Bank Ltd., at the rate of Rs.5,500/- per share vide Application No.070492. The Application was submitted by the Plaintiff through M/s. Nadar Mahajana Bank Share Investors' Association, the second Defendant. Based on the Application of the Plaintiff, 10 shares were allotted in his name on 24.09.2003 bearing Distinctive Nos.240939 to 240948 vide registered folio No.17312. Further, it is the definite case of the Plaintiff that the original Share Certificate bearing No.20933 was not delivered to him by the second Defendant but the second https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 28 of 40 S.A.No.249 of 2018 Defendant had unceremoniously retained the Share Certificate with him. Despite demands made, the second Defendant did not deliver the Share Certificate to the Plaintiff. The Plaintiff also made repeated complaints about non-receipt of his original Share Certificate. On the basis of one such complaints, the first Defendant Bank, through a letter dated 02.04.2005 informed the Plaintiff that the original Share Certificate bearing No.20933 had been delivered to Nadar Mahajana Bank Share Investors' forum, the second Defendant herein for onward submission to the Plaintiff. This is not specifically disputed by the third Defendant in his written statement. The second Defendant conveniently did not file any written statement at all.
20. It is also to be seen that the first Defendant, in the letter dated 02.04.2005 requested the Plaintiff to contact the second Defendant and collect the Share Certificate. Since Plaintiff was unable to get the original Share Certificate either from second Defendant, he requested the Defendant No.1 to issue duplicate Share Certificate in his name. For the purpose of issuing such duplicate Share Certificate, the first Defendant Bank followed the procedures contemplated thereof including obtaining an indemnity bond from the Plaintiff. Thereafter, the Plaintiff was alloted duplicate Share Certificate bearing No. 39521 for 10 shares in lieu of his lost Share Certificate No.20933. https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 29 of 40 S.A.No.249 of 2018 The lost/undelivered original Share Certificate bearing No.20933 was also cancelled by the first Defendant and the Plaintiff is in possession of the duplicate Share Certificate and he is being paid with periodical dividends by the first Defendant Bank.
21. As regards the second Defendant, he did not file written statement. The specific case of the Plaintiff is that he submitted the Application for allotment of share through the second Defendant and the Share Certificate was entrusted to the second Defendant. While so, it is the second Defendant who is competent to depose about the same. However, the second Defendant conveniently did not participate in the trial, either by filing written statement or examining any witness to disprove the same. It is only the third Defendant who participated in the trial.
22. The Plaintiff, pleading that there is fraudulent act on the part of the Defendants 2 and 3, approached the National Company Law Board for redressal. According to the first Defendant, the National Company Law Tribunal does not have jurisdiction to entertain such a plea, rather, in the given facts and circumstances, the Plaintiff has to approach only the Civil Court. It is true that The National Company Law Tribunal exercises jurisdiction over https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 30 of 40 S.A.No.249 of 2018 affairs of the registered Companies. The proceedings before the Company Law Board are summary in nature. The Company Law Board is empowered to deal with the disputes arising out of allotment of shares, debentures, rectification etc. Here in this case the Plaintiff had specifically pleaded that the Defendants 2 and 3 had indulged in acts of treachery. When fraud has been specifically pleaded by the Plaintiff against the Defendants 2 and 3, this Court is of the view that The National Company Law Board ought to have ventured to adjudicate such dispute by resorting to fraud. At the same time, it must be stated that The National Company Law Tribunal conducts only summary proceedings and cannot record evidence and a detailed trial subjecting the witness to cross examination. Such a course can be gone into only by the Civil Court. Therefore, it is only the Civil Court, which is competent to adjudicate upon the dispute in the present case.
23. The collusion between the second Defendant and third Defendant is apparent in this case. There is no explanation forthcoming as to how the third Defendant came into possession of the original Share Certificate in the name of the Plaintiff. The third Defendant failed to clear the air of controversy in this regard in his written statement. According to the Plaintiff, the original Share Certificate was unceremoniously withheld by the second Defendant and https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 31 of 40 S.A.No.249 of 2018 later it was transferred and/or conveyed to the third Defendant. Even in the written statement of third Defendant, certain material particulars were suppressed as to how the Share Certificate came into the hands of third Defendant. The third Defendant ought to have obtained it by fraud. The third Defendant also did not enter into the witness box and let in evidence. Therefore, the Courts below ought to have drawn an adverse inference against the third Defendant under Section 114 of the Indian Evidence Act. It is also noteworthy to mention that till date the Share Certificate in the name of the Plaintiff had not been transferred. The first Defendant had sent a letter denying that they had issued original Share Certificate to the third Defendant under Ex.A-9 and Ex.A-10. It is also in evidence that the first Defendant Bank sought for filing affidavit by the Plaintiff and execution of an indemnity bond. Based on the execution of the affidavit as demanded by the first Defendant and execution of an indemnity bond, the Plaintiff was issued with duplicate Share Certificate for the 10 shares and also the Bank had cancelled the original Share Certificate. The first Defendant also produced the letter to the Plaintiff seeking surrender of the duplicate Share Certificate. Therefore, the contents of the written statement filed by the third Defendant in paragraph Nos.6 to 8 are contradictory to the documents filed by the third Defendant. https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 32 of 40 S.A.No.249 of 2018
24. Before the trial Court, the Senior Manager of the first Defendant Bank had entered into the witness box and let in evidence. As per the Companies Act and the Rules made thereunder, transfer of shares is to be effected within 60 days but in this case, the shares were issued to the Plaintiff in the year 2007. When the second Defendant refused to part with the original Share Certificate, the Plaintiff, after making all out efforts, including giving complaints, had filed the suit for an injunction. In such circumstances, this Court is of the view that the suit is very much maintainable against the Defendants and the first substantial question of law is answered in favour of the Plaintiff and against the Defendants.
25. The third Defendant had not approached the first Defendant within 60 days as per the Rule 11 of the Companies Act and rules, as per Section 108 of the Companies Act, 1956 and Section 46 of the Companies Act, 2013. The instrument of transfer was not produced as document before the trial Court by the third Defendant. This also exposes the conduct of the third Defendant. Section 108 of the Companies Act, 1956 relating to transfer of shares and debentures reads thus:-
“Transfer of shares and debentures
108. Transfer not to be registered except on production of instrument of transfer – (1) A Company shall not register a transfer of shares in, https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 33 of 40 S.A.No.249 of 2018 or debentures of, the Company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor or by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the Company along with the Certificate relating to the shares or debentures, or if no such Certificate is in existence, along with the letter of allotment of the shares or debentures:
Provided that where, on an application in writing made to the Company by the transferee and bearing the stamp required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the Company may register the transfer on such terms as to indemnify as the Board may think fit:
Provided further that nothing in this section shall prejudice any power of the Company to register as shareholder or debenture holder any person to whom the right to any shares in, or debentures of, the Company has been transmitted by operation of law.”
26. In the present case, the signature of the Plaintiff was forged in the form for effecting name transfer. It was marked as Ex.B-5 which is the only form available with the first Defendant Bank. How was it prepared was not known. The Signature of the Plaintiff in the share transfer application is disputed by the Plaintiff. The original signature of the Plaintiff is available in the plaint and vakalat before the trial Court. Therefore, Section 108 of the Companies Act, 1956 is attracted to the facts of this case.
27. On appreciation of the documents made available, it is clear that the second Defendant and third Defendant in collusion, had committed fraud on the Plaintiff. As per the communication received by the Plaintiff from the https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 34 of 40 S.A.No.249 of 2018 first Defendant, the Share Certificate for 10 shares/share value of Rs.5,500/- was handed over to second Defendant by first Defendant. The second Defendant did not hand it over to the Plaintiff till the filing of the suit. Before the filing of the suit, the Plaintiff had preferred a complaint for non-receipt of the original Share Certificate. Such dispute between Plaintiff and Defendants 1 and 3 is clear from the evidence recorded before the trial Court, which was lost sight of by both the courts below. However, the trial Court as well as the first Appellate Court committed an error in taking note of the evidence made available. The Courts below also failed to take note of the provisions of Section 108 of the Companies Act, 1956 in relation to transfer of share.
28. The Plaintiff sought for a precautionary and prohibitory order to restrain the Defendants 2 and 3 from effecting transfer of the Share Certificate in question. Admittedly, the Share Certificate had not been transferred till date. When it is an admitted fact that the Plaintiff had purchased the share in question for a valuable consideration and it was not rebutted by the Defendants 2 and 3, this Court is of the view that the Plaintiff is justified in filing the suit and he had also proved that he is entitled to the suit claim.
29. As rightly contended by the learned Counsel for the Plaintiff only https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 35 of 40 S.A.No.249 of 2018 Civil Court has jurisdiction to record evidence and subject the witness to cross-examination. Here, the Plaintiff had made a prima facie case regarding fraud committed by the second Defendant before the trial Court. The Second Defendant remained ex parte. The Plaintiff, who is a trader dealing in Provision Store in Tondiarpet having purchased 10 shares of the first Defendant Company M/s. Tamil Nadu Mercantile Bank Ltd., was granted 10 shares through the second Defendant/Nadar Mahajana Bank Share Investors' Association. As an ordinary citizen, the Plaintiff can only make enquiries. Since his enquiry did not result in getting the desired result, the Plaintiff lodged complaint with the Tondiarpet Police Station as per Ex.A-16 marked and Ex.A-15 complaint to the Additional Commissioner of Police. Since non- receipt of a Share Certificate of 10 shares is not a major offence, as per the Police, they had not proceeded with the investigation but relegated the Plaintiff to work out his remedy in a manner known to law. Therefore, it is natural for the Plaintiff to communicate with the first Defendant who had issued the Share Certificate for 10 shares of the Company. Accordingly, as a prudent man, he had protected his right to hold shares by addressing the Bank under Ex.A-8, Ex.A-9, etc., The Manager of the first Defendant Company had examined himself as D.W-1 and he had stated that the dispute regarding this nature has to be adjudicated only before the Civil Court. https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 36 of 40 S.A.No.249 of 2018
30. It is to be noted that the second Defendant with whom the first Defendant had handed over the Share Certificate had played fraud which is evident from the fact that the second Defendant had not filed written statement or the third Defendant had purchased from the Former Office Bearers of the second Defendant viz., M.Prabakar and former Chairman of the first Defendant Company viz., M.G.Maran. Therefore, the Civil Court has discretion to consider the evidence before the trial Court. The second Defendant with whom first Defendant had handed over 10 shares of the first Defendant Company was informed to the Plaintiff. Thus, it is evident that the former Chairman of the first Defendant Company/M.G.Maran and Office Bearers of the second Defendant Company had colluded with each other and that is the reason why the second Defendant had not filed written statement either admitting the fact pleaded in the plaint by the Plaintiff or disputing the fact. Under those circumstances, the burden to disprove the plaint averment is on the second Defendant but he failed to prove it. In all the facts gathered from the record, the second Defendant had not filed a written statement disputing the claim of the Plaintiff in the Suit and had remained ex parte. It gives an impression that the second Defendant does not want to dispute the claim of the Plaintiff and therefore remained ex parte. The third Defendant https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 37 of 40 S.A.No.249 of 2018 having claimed that he had purchased 10 shares with the original Share Certificate Registration No.20933 is duty bound to prove his contention as per Sections 102 and 103 of Indian Evidence Act by adducing evidence by summoning the persons who sold the Share Certificate. However, the trial Judge as well as the Appellate Judge erred in assessing the evidence as per the Provisions of the Code of Civil Procedure and as per the Provisions of the Indian Evidence Act.
31. In the light of the above discussion, the first substantial question of law regarding the maintainability of the suit is answered in favour of the Plaintiff. Consequently, the second question of law is also answered in favour of the Plaintiff. There will be a decree of injunction restraining the Defendants 2 and 3 from dealing with the shares in question. They are also restrained from either alienating or selling the shares in question to any third party.
In the result, this Second Appeal is allowed. The judgment and decree dated 01.07.2016 in A.S.No.423 of 2014 on the file of the learned XVII Additional Judge, City Civil Court, Chennai confirming the decree and Judgment dated 10.02.2014 passed in O.S. No. 4778 of 2011 on the file of the learned XVII Assistant Judge, City Civil Court, Chennai, is set aside. There https://www.mhc.tn.gov.in/judis ( Uploaded on: 21/03/2025 08:40:37 pm ) Page 38 of 40 S.A.No.249 of 2018 will be a decree as prayed for in the suit in O.S. No. 4778 of 2011. However, there shall be no order as to costs.
29.11.2024
Index :Yes/No
Internet : Yes/No
Speaking Order/Non-speaking Order
shl/dh
To
1.The XVII Additional Judge,
City Civil Court, Chennai.
2.The XVII Assistant Judge,
City Civil Court, Chennai.
3.The Section Officer,
V.R. Section,
High Court Madras.
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Page 39 of 40
S.A.No.249 of 2018
SATHI KUMAR SUKUMARA KURUP, J
shl/dh
Judgment made in
SA No. 249 of 2018
29.11.2024
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