Company Law Board
Jonas Hemant Bhutta vs Surgi Plast Limited And Ors. on 4 February, 1993
ORDER
1. This is a petition filed under Section 111 of the Companies Act, 1956, filed by Mr. Hemant Bhutta for and on behalf of minor, Jonas Hemant Bhutta, for restoration of the name of the petitioner in the register of members of the respondent-company as owner of 22,500 equity shares of Rs. 10 each of the respondent-company. In the petition it is stated that the petitioner was the owner of 22,500 shares of the respondent-company and this fact was also reflected in the annual return filed by respondent No. 1-company with the Registrar of Companies, Gujarat, Ahmedabad, for the years 1987-88 and 1988-89 respectively. The respondent-company had wrongfully and fraudulently without sufficient cause omitted from the register of members the name of the petitioner from July 30, 1990. According to the petitioner, the petitioner's father, Mr. Hemant Bhutta, is the natural guardian and he has not transferred or authorised the transfer of any of the shares held by the petitioner. It is further stated that in the register of members the name of the petitioner has been removed and the name of respondent No. 4, Mrs. Sunita B. Shah, director of the company and wife of the third respondent, Mr. Bipin Shah, the managing director of the first respondent-company, has been incorporated. It is further pointed out that the fourth respondent is an aunt of the petitioner and the third respondent is an uncle of the petitioner. According to the petitioner, the omission of the petitioner's name from the register of members of the respondent-company came to his knowledge for the first time in July, 1991, and immediately the petitioner took inspection of the records of the respondent-company. It is further submitted that the transfer of shares has taken place without the approval of the board of directors. It is submitted that the shares have not been sold or transferred to any person and no instrument of transfer has been executed by the petitioner's lawful natural guardian.
2. In the reply filed by respondent No. 1, it is stated that the petition is misconceived and not tenable and there is no genuine cause or justification to file this petition. It is pointed out that the petition involves highly disputed questions of fact and serious disputes about the title to the shares which cannot be resolved in summary proceedings and the proper course to adopt is to refer the parlies to a competent civil court. It is submitted that Mr. Hemant Bhutta is guilty of suppression of material facts and of making false and misleading statements and Mr. Hemant Bhutta has not come with clean hands and, therefore, the petition deserves to be dismissed. Further, the petition is, otherwise, also barred by delay, laches and acquiescence. It is further submitted that Mr. Hemant Bhutta was working as the executive director of the first respondent-company from 1986 to 1990 and he has made several unreasonable and arbitrary demands against the first respondent. It is also pointed out that Mr. Hemant Bhutta has not returned the first respondent-company's car and this petition appears to have been filed with a view to pressurise the management of the first respondent-company so that it may submit to his unreasonable demands. It is submitted that Mr. Hemant Bhutta has also made false complaints about the non-receipt of share certificates belonging to him and his family members and, ultimately, it was discovered that a large chunk of those shares are lying with the Canara Bank Mutual Fund as a collateral security for the equity buy-back arrangement. The respondent-company has also alleged that the inspection report, exhibit 'A', to the petition is false and fabricated and the company denies the contents of the said exhibit. Mrs. Vibha H. Bhutta, mother of the petitioner minor Jonas, has acted as a natural guardian for the petitioner and Mr. Hemant Bhutta, being aware of the same, has no locus standi to file this petition as Smt. Vibha H. Bhutta has been acting as natural guardian in respect of this folio. The company has also stated that when 32,000 shares were acquired for the first time by Jonas H. Bhutta, Smt. Vibha H. Bhutta has executed transfer deeds and produced the share transfer forms along with share certificates for effecting transfers of 32,000 equity shares and these shares were subsequently transferred to Vikas Finance Pvt. Ltd. All the transfer forms in connection with these transactions were signed by Smt. Vibha H. Bhutta as natural guardian and the petitioner has failed to disclose this in the petition. Regarding the second entry in the register of members, it is submitted that the company has made allotment of 10,000 equity shares on July 7, 1988, and the said application was submitted by Smt. Vibha H. Bhutta as guardian of the minor petitioner. As regards the third entry relating to acquisition of 12,500 equity shares in two lists of 2,500 and 10,000 shares, it is submitted that both the forms were signed by Smt. Vibha H. Bhutta in her capacity as the guardian of the petitioner. The company has further submitted that as an officer of the company, the petitioner was present in the board meeting held on November 10, 1990, when all the transfers effected during the year including the impugned shares were approved but it was not objected to by him.
3. Respondent No. 4 in her reply has stated that her brother, Hemant Bhutta, and her sister-in-law, Smt. Vibha H. Bhutta, have chosen to give a distorted version of the share transfer in her favour and made false and baseless allegations against her personally. It is further submitted that Mr. Hemant Bhutta, after the death of her mother in the year 1971, was staying with her and in the year 1976, Mr. Hemant Bhutta started living separately but mostly they dined together. In the year 1979, Mr. Hemant Bhutta got married and since then he is staying with his family. Mr. Hemant Bhutta was working with respondent No. 1 since 1981. It is submitted that initially the company was a private limited company and in the year 1988, the company became a public limited company. Mr. Hemant Bhutta expressed a desire that he would like to actively participate in the business operations of respondent No. 1 and since he had no adequate funds to contribute towards the public issue, Mr. Hemant Bhutta requested respondent No. 4 for a loan in the form of shares out of her holdings so as to enable him to raise finances on the strength of those shares. It is further submitted by respondent No. 4 that placing reliance on the representation made and assurance given by Mr. Hemant Bhutta, respondent No. 4 transferred 32,000 equity shares in the name of Jonas Bhutta and he being a minor, his mother has acted as a natural guardian and signed the transfer deed executed on November 10, 1987. Further, it is submitted that as those shares were transferred by way of loan, no consideration has been paid to respondent No. 4 by the transferee or on his behalf. It is submitted that with the aid of those shares Mr. Hemant Bhutta and Smt. Vibha H. Bhutta appear to have raised finances for their investment activities through a company called Vikas Finance Pvt. Ltd. In the year 1989-90, respondent No. 1 was in financial crisis and Mr. Hemant Bhutta became apprehensive about the safety of his investment. The liquidity crunch called for financial discipline in the working of the company and was not to the liking of Mr. Hemant Bhutta. It is further pointed out that respondent No. 4 inducted her son into the management of the company which was also another factor which strained their relationship. In the year 1990, the petitioner expressed his desire to leave the company and on July 6, 1990, the petitioner returned 22,500 equity shares of Rs. 10 each to respondent No. 4 as against the total loan of 32,000 equity shares of respondent No. 1-company. It is further pointed out that the allegation that Smt. Vibha H. Bhutta signed some blank transfer forms and handed them over to respondent No. 4 and respondent No. 4 got transferred 22,500 equity shares standing in the name of minor Jonas is totally false.
4. Smt. Vibha H. Bhutta has also filed an affidavit dated July 12, 1992, wherein it is submitted that according to Hindu law, Hemant Bhutta, father of Jonas, is the only natural guardian who has the necessary power to deal with his property. In this connection, she has invited attention to Sections 6 and 11 of the Hindu Minority and Guardianship Act, 1956. She has further submitted that she has no right or authority to deal with or transfer the said 22,500 shares or any shares belonging to or which stood in the name of Jonas in the register of members or any other property of Jonas and that the alleged transfer of 22,500 shares belonging to Jonas is illegal, null and void and is not binding on Jonas or Hemant Bhutta or on anyone else. She has further pointed out that the first respondent-company should not have accepted/approved the transfer form signed by her. She has submitted that since she was related to respondent No. 4 and they were holding jointly some shares of companies other than respondent No. 1, on the request of respondent No. 4 she gave a few blank transfer forms to respondents Nos. 3 and 4 which have been misutilised by them.
5. In the rejoinder of Shri Hemant P. Bhutta, it is submitted that the company had given a limited inspection of the register of members and he alleges that some entries in the register of members were tampered with and some papers were stapled to the register of members. He has further submitted that according to Sections 6 and 11 of the Hindu Minority and Guardianship Act, 1956, he alone is the natural and lawful guardian of his son, Jonas, and of his property and no person other than himself had any right to deal with or transfer his shares to any person or party and, therefore, transfer of shares of Jonas by Mrs. Vibha H. Bhutta in favour of Mrs, Sunita B. Shah is illegal, null and void. He has also pointed out that he was working as executive director of the first respondent-company and he has resigned from the services with effect from January 1, 1991, and moreover this fact is not at all relevant to the subject-matter of the petition. He has further submitted that the transfer form was not filled up by hiis wife, Mrs. Vibha H. Bhutta, and according to him it is a bad delivery of shares.
6. Mr. Dilip Dalai, advocate for the petitioner, referred to the provisions of Sections 6 and 11 of the Hindu Minority and Guardianship Act, 1956, and submitted that the father alone is the natural and lawful guardian to deal with or transfer any of the minor's property and nobody else can exercise this power. In support of his contention he also referred to a decision in P. T. Chathu Chettiar v. Kariat Kunnummal Kanaran, AIR 1984 Ker 118, in which it was held that alienation of the minor's shares by his mother, acting as guardian when the father of the minor son is alive and not disqualified is void. Reliance is also placed on the following three judgments in support of their plea that there cannot be any estoppel against a statutory right :
1. Rishabh Kumar and Sons v. State of U.P., AIR 1987 SC 1576.
2. Nookala Setharamaiah v. Kotaiah Naidu, AIR 1970 SC 1359,
3. A C. Jose v. Sivan Pillai, AIR 1984 SC 921, 929.
7. The advocate for the petitioner also submitted that the respondent-company being a listed company, in terms of listing guidelines the impugned transfer cannot be registered as the transaction has taken place between two individuals without the intervention of a broker and is not on the floor of the stock exchange. He also pointed out that dividend on 32,000 shares was paid on January 1, 1988, and the dividend warrant was issued by the company in favour of Master Jonas Bhutta. The learned advocate pointed out that considering all the circumstances, it was wrong on the part of the respondent-company to accept the transfer form signed by Mrs. Vibha H. Bhutta.
8. Mr. S. N, Soparkar, advocate for respondent No. 4, argued that the Company Law Board has no jurisdiction to decide the matter in summary proceedings, as in the present appeal complicated issues are involved. It is further submitted that in all earlier transactions, the mother has acted as a guardian for her minor son and at no point of time has this issue been agitated and the petitioner was fully aware of this fact when the shares were allotted and transferred to and from the minor's account. As regards listing guidelines referred to by the petitioner, he submitted that they are not applicable to this transaction as the same is applicable only to the transaction transacted on the floor of the tock exchange. It is further submitted that the petitioner has not disclosed all the facts to the Bench and is not entitled to agitate this case under Section 111 of the Companies Act, 1956, and the proper forum for the petitioner to agitate the case is the civil court as the principle of guardianship cannot be agitated before this forum. Hence, it was submitted by the advocate for respondent No. 4 that the petition deserves to be dismissed in limine.
9. We have carefully considered the various averments made in the petition, the replies and counter-replies and affidavits filed before us and arguments advanced by the advocates of both the parties. It is an admitted fact that the signature of Mrs. Vibha H. Bhutta on the transfer forms is not disputed by the petitioner or by Mrs. Bhutta. It is also a fact that so far as the company is concerned all transactions in connection with the shares registered under the portfolio No. 28 were under the signature of Mrs. Vibha H. Bhutta, the mother acting as natural guardian for the minor son, Jonas Bhutta. It is noted that Mrs. Vibha H. Bhutta has written letters to the stock exchange and Securities Exchange Board of India agitating against the transfer, but no complaint has been made by Shri Hemant Bhutta, who claims to be the natural guardian who alone can act on behalf of the minor. It is also a fact that the impugned shares were transferred at the meeting of the share transfer committee of the company held on July 30, 1990, and the same was subsequently approved by the board at its meeting held on November 10, 1990, and at that board meeting the petitioner, Mr. H. P. Bhutta, was present in his capacity as officer of respondent No. 1 but it was not objected to by him. It appears that subsequent to the transfer of shares differences arose between the transferor and the transferee and, therefore, the petitioner wants to challenge the transfer. It is relevant to note that earlier, 32,000 shares held by Jonas H. Bhutta were transferred to Vikas Finance Private Ltd. by transfer deed dated January 16, 1988, under the signature of Smt. Vibha H. Bhutta acting as guardian of minor Jonas but in the present petition rectification of register of members is only sought for 22,500 shares later on transferred under the signature of Smt. Vibha H. Bhutta on the ground that she could not act as natural guardian for the minor as under the Hindu law only the father can act as the guardian for a minor, but no such relief is sought in respect of the earlier transfer of 32,000 shares held by Jonas and later on transferred under the signature of Smt. Vibha H. Bhutta. While the petitioner has stated that Jonas has applied for and was allotted 22,500 shares, the fact is that Mrs. Bhutta applied for allotment of 10,000 shares only on behalf of Jonas and the balance 12,500 shares were acquired by way of transfer in his favour on the basis of properly executed transfer deeds which were again signed by Mrs. Vibha H. Bhutta. Thus, all along, Mrs. Vibha H. Bhutta was acting and dealing with the company as natural guardian of Jonas Bhutta. The petitioner, Hemant Bhutta, was acting as executive director of the company and was aware of the fact that Master Jonas Bhutta's shares are being dealt with by Mrs. Vibha H. Bhutta acting as natural guardian and he did not object. It is also clear that the petitioner is selective in challenging the transfers effected under the signature of Mrs. Bhutta. In regard to the allegation that blank transfer form duly signed by Mrs. Vibha H. Bhutta was misused by respondent No. 4, it is well-settled law that when a person signs a blank transfer form, he cannot subsequently challenge any entries made in the transfer form. It is observed that the transfer has taken place in the month of July, 1990, and the petitioner was aware of the transfer of the impugned shares since November, 1990, whereas he has filed the petition under Section 111 of the Companies Act, 1956, in February, 1992. Inordinate delay has taken place in filing the petition and for which no adequate explanation has come forth from the petitioner.
10. Taking into consideration all the above facts, it is clear that the dispute relates to the question whether Mr. Hemant Bhutta or his wife has the right to act as natural guardian and Mr. Bhutta can seek his remedy against his wife in the appropriate court. As far as the record of the respondent-company is concerned, Mrs. Vibha H. Bhutta was acting as natural guardian of Master Jonas Bhutta and only her signature was on record. Under the circumstances, when properly executed transfer deeds under her signature were submitted to the company and the transfer is effected, it cannot be said that the entries made in the register of members are without sufficient cause. No case for rectification of the register of members is accordingly made out. Thus, the petition is dismissed.