Delhi District Court
Rsg Share And Stock Brokers Limited vs Harsh Gupta And Ors on 18 March, 2025
IN THE COURT OF DISTRICT JUDGE-05,
CENTRAL DISTRICT, TIS HAZARI COURTS, DELHI
Presided by:-
Sh. Abhishek Srivastava, DHJS
RCA DJ no. 37/2019
CNR No:- DLCT01-004533-2019
RSG Share & Stock Brokers Ltd.,
Through Mr. Rajiv Gupta,
Office at 125, Rajendra Bhawan,
Rajendra Place, New Delhi-110008 .......Appellant
Vs.
1. Sh. Harsh Gupta,
74, Todermal Road,
New Delhi-110001
2. Exponential Financial Services Ltd.
AN-3A, Shalimar Bagh,
Delhi-110088
3. DCM Shriram Consolidated Ltd.,
5th Floor, Kanchenjunga Building,
18, Barakhamba Road,
New Delhi-110001
4. Sh. S.K. Singhal,
A-108, Gujrewalan Town,
New Delhi-110009 ......Respondents
Date of Institution:- 06.04.2019
Date of conclusion of
final arguments:- 03.01.2025
Date of Judgment:- 18.03.2025
RCA DJ 37/2019
RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors
Judgment dated 18.03.2025 Page No. 1 of 24
JUDGMENT
1. This is an appeal under Section 96 of CPC, 1908, challenging the judgment and decree dated 07.03.2019 (henceforth 'impugned judgment'), passed by the Court of Ld. Civil Judge- III, West District, Tis Hazari Courts, Delhi (henceforth 'Ld. Trial Court') in Suit No. 610567/2016, 'M/s RSG Share & Stock Brokers Ltd. V/s Harsha Gupta & Ors." (henceforth 'subject Suit'), whereby, the Suit of the plaintiff for permanent and mandatory injunction and declaration was dismissed.
2. Before the trial court proceedings, the appellant herein was the plaintiff and the respondents No. 1 to 4 were defendants No. 1 to 4. For convenience, parties are referred to as per their original rankings before the Learned Trial Court.
BRIEF FACTS OF THE CASE, AND THE PROCEEDINGS BEFORE THE LEARNED TRIAL COURT
3. The facts of the case, as pleaded by the plaintiff in the plaint, in brief, are as under:-
(a) That the plaintiff was/ is a company incorporated under the Companies Act, 1956. The Suit was filed on its behalf by its managing director Sh. Rajiv Gupta who was authorised to represent it vide a Board Resolution dated 24.02.2006. The plaintiff company was/ is a registered member of the National Stock Exchange of India Ltd. (NESIL), one of the recognised Stock Exchanges under the provisions of the Securities Contracts (Regulation) Act, 1956, vide NSE Code No. 23-08145-35 and carried on the business in "Securities" which includes shares, scripts, stocks, bonds, debentures, debenture stocks or any other securities of the like nature (as a stock broker).RCA DJ 37/2019
RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 2 of 24
(b) That on 4th and 5th of August, 1999, in the course of its usual business, the plaintiff company purchased 600 shares of the M/s DCM Shriram Consolidated Ltd. (defendant No. 3) at National Stock Exchange in Settlement No. N9931. Out of 600 shares, 200 shares existed in the name of Sh. Harsha Gupta (defendant No. 1) were received through a broker namely M/s Exponential Financial Services Pvt. Ltd. (defendant No. 2). The details of aforesaid shares bearing Folio No. DL12311 are as under;
Sr.No. Certificat Distinctive Nos. Quantity
e No.
From To
1. 197175 10311941 0010311990 50
2. 197176 10311991 0010312040 50
3. 281575 12895798 0012895847 50
4. 281576 12895848 0012895897 50
(c) These 200 shares were delivered to the plaintiff company in Settlement No. N9931 dated 16.08.1999. The plaintiff company paid a total sum of Rs. 40,867.50/- as sale consideration of the aforesaid 600 shares to NSEIL which included a sale consideration of Rs. 13771.10 of 200 shares of the defendant No. 1 (who received it through the defendant No. 2 from NSEIL).
(d) Thereafter the plaintiff Company sold the aforesaid 200 shares to one Sh. Saileswar Ganguli through M/s Shubham Securities. When Sh. Saileswar Gnguli sent the said shares for transfer in his name to the defendant No. 3, they were returned by the defendant No. 3 without executing transfer in his name RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 3 of 24 with an objection that the signatures of the defendant No. 1 did not match with the specimen signature recorded with the defendant No. 3 company.
(e) The plaintiff company then asked the defendant No. 2 to rectify the defect on the aforesaid transfer deed or to furnish a new transfer deed in respect thereof. The defendant No. 2 finally submitted a new transfer deed in respect of the said shares which was duly signed by the defendant No. 1.
(f) However, since the defendant No. 1 had failed to rectify the aforesaid defect or, in alternative, to furnish a new transfer deed within prescribed period, the plaintiff company, as per rules and market practice, had to give credits of the shares in question to M/s Shubham Securities, the broker of Sh. Saileshwar Ganguli vide a document dated 15.05.2000.
(g) As such, in February 2003, after receiving the new transfer deed, the plaintiff company lodged the aforesaid shares with the defendant No. 1 for transfer in the name of its managing director. However, the said shares were once again returned as bad delivery due to signature difference. In this regard, a letter dated 23.03.2003 was sent by M/s MCS Ltd., the share transfer agent of the defendant No. 3.
(h) That in the year 2005, the defendant No. 3 had declared sub- division of shares and also bonus shares. Therefore, on 01.09.2005 and 07.09.2005, the plaintiff company wrote letters to the registrar and company secretary of the defendant No. 3 requesting them to withhold the bonus shares and dividend till the shares were transferred in the name of the managing director RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 4 of 24 of the plaintiff company. In reply to aforesaid request of the plaintiff company, the defendant No. 3 sent a letter dated 18.09.2005 expressing its inability to accede to the request of the plaintiff company and advised the plaintiff to get the fresh transfer deed signed from the defendant No. 1.
(i) That accordingly on 14.10.2005, plaintiff company submitted share certificates along with fresh transfer deed bearing latest signatures of the defendant No. 1 and thereafter, on 22.10.2005, the plaintiff company submitted the signature up-gradation form signed by the defendant No. 1 and duly attested by his banker for transfer of his shares.
(j) However, instead of receiving duly transferred certificates of the aforesaid shares from the defendant No. 3, the plaintiff company received copies of letters dated 11.11.2005 and 28.12.2005 which were addressed to the defendant No. 1. In the said letters the defendant No. 3 requested the defendant No. 1 to either send back Certificate No. 5050 of 2000 shares which had been wrongly mailed to the defendant No. 1 or to hand over the same to the plaintiff company. A perusal of said letters shows that the same were sent to the defendant No. 1 after the defendant No. 3 had affected the transfer of the shares in the name of plaintiff company but instead of sending the shares to the plaintiff, the defendant No. 3 illegally sent the same to the defendant No. 1. That the managing director of the plaintiff company vide his letter dated 31.01.2006 raised a strong objection with the defendant No. 3 regarding this.
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(k) On 10.02.2006, the Managing director of the plaintiff company received three letters from the defendant No. 3. In one of the said letters addressed to the defendant No. 1, it was alleged that new share certificates had been lodged by the defendant No. 4 for transfer. In the said letter, the defendant No. 3 had requested the defendant No. 1 to settle the matter with the plaintiff company.
(l) Under these circumstances, the plaintiff company filed the present Suit for permanent and mandatory injunction and declaration.
4. The defendant No. 1 was proceeded ex-parte vide Order dated 30.04.2007. Defendant No. 2 was proceeded ex-parte vide Order dated 30.07.2006. Separate written statements were filed on behalf of the defendant Nos. 3 and 4. The plaintiff filed the replications to the written statements of the defendant Nos. 3 and 4. However, the defence of the defendant No. 4 was subsequently struck off vide Order dated 13.07.2012. So, in essence, the defendant No. 3 was the only one which contested the Suit of the plaintiff.
5. In the written statement of the defendant No. 3 it was inter-alia pleaded that the plaintiff company had no locus standi to file the present Suit in as much as either Sh. Saileshwar Ganguli (original transferee) or Sh. Rajiv Gupta (subsequent transferee) only had the cause of action, if any, to file the present Suit; that the Suit of the plaintiff was a time barred; that the defendant No. 1 vide a letter dated 24.02.2006 informed the defendant No. 3 that he was the rightful legal owner of the shares in question and had transferred the shares in favour of the defendant No. 4 only and not to any one else; that it was correct that the defendant No. 3 company, in wake of controversy/ dispute regarding the transfer of shares in question, wrote letters dated 11.11.2005 and 28.12.2005 to RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 6 of 24 the defendant No. 1 for returning back of share certificate Nos. 5050 of 2000 shares, however, it was denied that defendant No. 3 ever affected the transfer in favour of Sh. Rajiv Gupta; and as the plaintiff company had no cause of action, Suit was liable to be rejected with costs.
6. On the basis of the pleadings of the parties, the following issues were settled by the Ld. Trial Court vide order dated 15.04.2013:-
(i) Whether the plaintiff has no locus standi to file the present Suit ?
OPD3
(ii) Whether the Suit of the plaintiff is barred by limitation ? OPD3
(iii) Whether the plaintiff is entitled for a decree of declaration, as prayed for ? OPP
(iv) Whether the plaintiff is entitled for the decree of permanent injunction, as prayed for ? OPP
(v) Whether the plaintiff is entitled for the decree of mandatory injunction, as prayed for ? OPP
(vi) Relief.
7. In order to substantiate its case, the plaintiff company examined three witnesses. Plaintiff company examined its managing director Sh. Rajiv Gupta as PW1, Sh. Gautam Gupta, Manager, National Stock Exchange, Delhi as PW2, and Sh. Priya Darsan, director of MCS Limited as PW3. The defendant No. 3 examined Sh. Y. K. Gupta, Additional Manager (Company Law) as its authorised representative as D3W1.
FINDINGS OF LEARNED TRIAL COURT
8. After hearing arguments and upon appreciation of evidence led, the Ld. Trial Court vide impugned judgment dated 07.03.2019, while deciding all the issues against the plaintiff, dismissed the Suit of the plaintiff. Findings of Ld. Trial Court may be summarised as follows:-
RCA DJ 37/2019RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 7 of 24
(a) PW1 failed to prove on record by documentary evidence that on 01.07.1995 he was the managing director of the plaintiff company. PW1 stated that there was no resolution passed in his favour by the plaintiff company to sign Ex.PW1/12 (new transfer deed in respect of 200 shares in question in his favour duly signed by the defendant No. 1) and Ex.PW1/18A (fresh transfer deed in respect of 2000 shares in question in his favour duly signed by the defendant No. 1) on behalf of the plaintiff company. A bare perusal of these documents shows that these documents were executed by the PW1 in his personal capacity and not on behalf of the plaintiff company.
(b) PW1 categorically stated that he is the owner of shares in question. Originally these shares were purchased by the plaintiff company which later on transferred to PW1 by the defendant No.
1. PW1 could not substantiate as to how these shares which were originally purchased by the plaintiff company were transferred to him and if at all, they were transferred to him, then why the plaintiff company is suing the defendants.
(c) PW1 had deposed that he had written letter dated 01.09.2005 Ex.PW1/15 and letter dated 07.09.2005 Ex.PW 1/16 to the defendant No. 3 because the plaintiff company had delegated the powers to him to write the said letters, however, PW1 could not file any document to substantiate that he has been delegated with such powers by the plaintiff company.
(d) Sh. Rajiv Gupta failed to prove that he had been authorised by the plaintiff company to file the present Suit on behalf of the RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 8 of 24 plaintiff company in the capacity of managing director of the plaintiff company.
(e) Any communication made by a Managing Director without the authority and express authentication of the company can not be treated as a communication on behalf of the company and it has to be shown specifically by him that he acted on behalf of the company.
(f) Sh. Rajiv Gupta acted in his personal capacity with respect to transfer of shares in question and the plaintiff company had no transactions with the defendants, as such, the plaintiff company has no locus standi to file the present suit.
(g) The plaintiff company in course of usual business purchased 600 shares on 4th and 5th August, 1999 vide Settlement No. N9931. The copy of settlement obligation for the period 04.08.1999 to 10.08.1999 (showing the payment for the purchase of shares) and the statement of account of the defendant No. 1 with the defendant No. 2 are Ex.PW1/9 and Ex.PW1/10. The plaintiff company subsequently sold these shares to Saileshwar Ganguli, however said shares were received as bad delivery on account of a defect and the defendant No. 3 company objected vide objection memo dated 05.10.1999 Ex.PW1/11. The plaintiff did not mention the event after 05.10.1999 in the plaint and thereafter mentioned the events from February 2003 when the plaintiff received a new transfer deed from the defendant No. 1. The present Suit was filed on 13.03.2006. The cause of action for filing the suit commenced from 05.10.1999, however, the RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 9 of 24 plaintiff filed the Suit beyond the period of three years. The suit of the plaintiff is beyond the period of limitation.
(h) Since the plaintiff company has no locus standi, no relief can be granted to the plaintiff company.
GROUNDS OF APPEAL
9. The aforesaid judgment has been challenged by the appellant/ plaintiff in the present appeal inter alia on the following grounds :-
(A) Ld. Trial Court while deciding the issue of locus standi emphasised that the plaintiff company is seeking transfer of shares in its favour on the strength of transfer deeds which were lodged by Sh. Rajiv Gupta (director of the plaintiff company) in his own personal name. Ld. Trial court failed to appreciate that the suit for declaration and injunction was filed by the plaintiff company and even though the plaintiff company had been seeking transfer of shares in the name of its director Sh. Rajiv Gupta, the decree could have very well been passed in favour of the plaintiff company as the plaintiff company was able to prove the transaction of sale purchase of shares with the help of PW2 Sh. Gautam Gupta, Manager, NSE. Ld. Counsel for the plaintiff relied on a decision of Hon'ble Supreme Court in Ayaaubkhan Noorkhan Pathan V/s The State of Maharashtra and others (decided on 08.11.2012); MANU/SC/0939/2012.
(B) Further, it can be appreciated that Sh. Rajiv Gupta, being the director of the plaintiff company since 1994 is not a person wholly disconnected with the affairs of the plaintiff company.
It is not that he has any remote connection with the plaintiff RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 10 of 24 company. Rather, being its director, he is involved in day to day affairs of the company and holds a position of trust in the company. It is settled law that directors can act as trustees of the company.
(C) That as far as the issue of limitation is concerned, it is a settled law that a suit for declaration needs to be filed when there is a contrary claim to the title of a person and that is when cause of action arises to file a suit for declaration (refer Articles 58 and 69 of the Limitation Act, 1963). In the present case, the cause of action arose from Ex.PW1/24A to Ex.PW1/24C when the plaintiff for the first time discovered that there is a contrary claim to the shares in the question lodged by the defendant No. 4 and all these documents are of dated 10.02.2006. Cause of action may be considered to have arisen even earlier when the shares were wrongly sent by the defendant No. 3 to the defendant No. 1 and the plaintiff company received copies of letters dated 11.11.2005 (Ex.PW1/21) and 28.12.2005 (Ex.PW1/22) which were addressed to the defendant No. 1. So, the first objection regarding signature mismatch can not be considered as arising of a cause of action. Ld. Counsel for the plaintiff relied on C. Mohammed Yunus V/s Syed Unissa; 1961 AIR 808 (SC); Daya Singh & Anr. V/s Gurdev Singh (dead) by LRs & Ors.; AIR 2010 SC 3240.
REPLY
10. Notices were served upon all the respondents. No reply was filed on behalf of respondent Nos. 2 and 3. Two separate applications were filed on behalf of respondent Nos. 1 and 4 for issuance of directions to the appellant to RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 11 of 24 pay ad valorem court fees. It was submitted on their behalf that the applications filed by them be treated as a reply to the appeal.
ARGUMENTS
11. Arguments were heard on behalf of the appellant and the respondent No.
4. Ld. counsel for the appellant during arguments questioned the judgment of the Ld. Trial Court on the grounds referred above and prayed for its setting aside. Ld. Counsel for the appellant in support of his arguments filed a written synopsis as well.
12. Per Contra, ld. Counsel for the respondent No. 4 submitted that the Ld. Trial Court has rightly dismissed the Suit of the plaintiff and prayed for the dismissal of the present appeal with costs. Despite seeking time, respondent No. 4 did not file any written submissions. He made following oral submissions:-
(i) The plaintiff being a share broker company is governed by the provisions of SEBI regulations and as per SEBI guidelines, a share broker company can not purchase shares in its own name.
(ii) The defendant No. 3 had declared sub-division of original shares (200 shares) and also offered bonus shares, the defendant No. 3, as such, after cancelling the old certificates, issued fresh share certificates (2000 shares). The defendant No. 4 is a bonafide purchaser of 2000 shares and is exclusive and absolute owner thereof. Original shares are in possession of the defendant No. 4.
Each share certificate is having a distinctive number and as the newly issued share certificates are different than the ones allegedly purchased by the plaintiff, no relief can be granted to the plaintiff qua newly issued 2000 shares.
(iii) That copy of letter dated 14.10.2005 (Ex.PW1/18) and alleged fresh transfer deed (Ex.PW1/18A) are false and forged documents.
RCA DJ 37/2019RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 12 of 24 REASONING
13. The issue before this court in the present appeal is whether the Ld. Trial Court was right in dismissing the Suit of the plaintiff company by holding that the plaintiff company had no locus standi to file the present Suit and that the present Suit was barred by limitation.
14. At the outset I want to put on record that I have dealt with issues keeping in mind that there is no written statement of the defendant No. 1, 2 and 4, and that the defendant No. 1, 2 and 4 failed to step into the witness box and support their case and stand the test of the cross-examination.
15. I will first deal with the aspect of limitation- whether the present Suit is barred by limitation ?
16. On 4th and 5th August 1999, the plaintiff, while acting as a share broker company, had purchased, on behalf of Shubham Securities for one Sh. Saileswar Ganguli, the shares in question (200 shares) held in the name of the defendant No. 1 (through the defendant No. 2). These 200 shares were delivered to the plaintiff company in settlement No. N9931 dated 16.08.1999.
17. When Sh. Saileswar Gnguli sent the said shares for transfer in his name to the defendant No. 3, they were returned by the defendant No. 3 without executing transfer in his name with an objection (vide company objection memo dated 04/05-10-99; Ex.PW1/11) that the signatures of the defendant No. 1 did not match with the specimen signature recorded with the defendant No. 3 company.
18. On receiving back the aforesaid bad delivery of shares along with transfer deeds from Sh. Saileswar Ganguli through M/s Shubham Securities, the plaintiff company asked the defendant No. 2 to rectify the defect on the aforesaid transfer deed or to furnish a new transfer deed in respect thereof. The defendant No. 2 finally submitted a new transfer deed in respect of the said shares which was RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 13 of 24 duly signed by the defendant No. 1. However, since the defendant No. 1 had failed to rectify the aforesaid defect or, in alternative, to furnish a new transfer deed within prescribed period, the plaintiff company, as per rules and market practice, had to give credits of the shares in question to M/s Shubham Securities, the broker of Sh. Saileshwar Ganguli vide a document dated 15.05.2000 Ex.PW1/13.
19. Case of the plaintiff is that by making payment to M/s Shubham Securities (the broker of Sh. Saileshwar Ganguli), the plaintiff company became entitled to lodge the said 200 shares in its own name. As such, in February 2003, the plaintiff company lodged those shares with the defendant No. 1 for transfer in the name of its managing director vide transfer deed Ex.PW1/12. It may be noted that no suggestion was given to PW1 that Ex. PW1/12 is a forged and fabricated document either by defendant No. 3 or defendant No. 4. And, it is a fact that the defendant No. 1 was proceeded ex-parte. In this connection, I am referring certain portion of cross-examination of PW1 (at behest of defendant No. 4);
"Q. Does the plaintiff company purchase all shares in your name ? Ans. In the normal course of business at the time of purchase the order is given by the client for whom shares are purchased and subsequently the shares are transferred in his name. In this case since the shares were held as bad delivery and the original purchaser M/s Shubham Security had returned the same to us and therefore he was given the necessary credit for these shares. Due to this reason in this case shares were transferred in my name.
Q. Did you give any instructions to the plaintiff company to purchase the shares in question, in your name ?RCA DJ 37/2019
RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 14 of 24 Ans. No, in this case the shares were transferred in my name as the shares were held as bad delivery due to signatures different of the seller."
20. However, the said shares (lodged with the defendant No. 1 for transfer in the name of managing director of plaintiff company vide transfer deed Ex.PW1/12) were returned as bad delivery due to signature difference vide a letter dated 23.03.2003 Ex.PW1/14 sent by M/s MCS Ltd. (the share transfer agent of the defendant No. 3). Director of MCS Limited Sh. Priya Darshan was examined by the plaintiff as PW3. He had brought the letter dated 23.03.2003. PW3 was not cross examined by the defendants. Regarding this letter, D3W1 Sh. Y. K. Gupta was cross-examined on behalf of the plaintiff. Relevant portions of his cross-examination are;
"The letter dated 23.03.2003 Ex.PW1/14 was sent by MCS Ltd. i.e. transfer agent of the defendant No. 3.
Q. The objection raised in Ex.PW1/14 was only of signatures difference of the transferor and no objection were raised by you as to why the said transfer deeds are by Sh. Rajiv Gupta and not by Sh. Saileshwar Ganguli ? What have you to say ?
A. The objections raised by us in the above mentioned letter was only of the signatures difference of the transferor."
21. In the meantime, in the year 2005, the defendant No. 3 declared sub division of shares and also offered bonus shares. The plaintiff company as such wrote letter dated 01.09.2005 (Ex.PW1/15) and letter dated 07.09.2005 (Ex.PW1/16) to the defendant No. 3 requesting it to withhold the bonus shares and dividend till the shares were transferred in the name of the managing director of the plaintiff company. In reply to aforesaid request of the plaintiff company, the defendant No. 3 sent a letter dated 18.09.2005 (Ex.PW1/17) expressing its inability to accede to the request of the plaintiff company and RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 15 of 24 advised the plaintiff to get the fresh transfer deed signed from the defendant No.
1.
22. Accordingly, on 14.10.2005, plaintiff company submitted share certificates along with fresh transfer deed dated 11.10.2005 (Ex.PW1/18A) bearing latest signatures of the defendant No. 1 and thereafter, on 22.10.2005, the plaintiff company submitted the signature up-gradation form (Ex.PW1/20) signed by the defendant No. 1 and duly attested by his banker for transfer of his shares.
23. It may be noted that doubts were casted over the authenticity of Ex.PW1/18A by the defendant No. 3 and the defendant No. 4 (by referring to several circumstances viz. absence of consideration amount, forgery etc.). PW1 in his cross examination was asked on behalf of defendant No. 4 following question;
"Q. Whether plaintiff company has placed on record any document to show plaintiff company had paid the consideration amount for 2000 shares to any body ?
Ans. No. It was not required as plaintiff company had already paid the consideration amount while purchasing 200 shares which were converted into 2000 shares."
24. I am reproducing relevant cross-examination of PW1 on this aspect on behalf of defendant No. 3;
"Q. On 11.10.2005, the 2000 shares as mentioned in Ex.PW1/18A were not in existence at all. What do you say ?
Ans. No, they were very much in existence.
I do not know as to when the 2000 shares as mentioned in Ex.PW1/18A came into existence. I submitted Ex. PW1/20 along with transfer deeds to defendant No. 3. It is wrong to suggest that it was advised by defendant No. 3 that Ex. PW1/20 was to be RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 16 of 24 submitted to it by defendant No. 1 and not by me. It is right to suggest that the 2000 shares as mentioned in Ex.PW1/18A were never handed over to me by defendant No. 1. Ex.PW1/18A was signed by defendant No. 1 on 11.10.2005..."
25. No suggestion was given to the witness as to on which date the shares mentioned in Ex.PW1/18A came into existence. It may be noted that even D3W1 had not disclosed as to when the defendant No. 3 declared sub division of shares and also offered bonus shares. D3W1 in his cross-examination deposed that the sub-division of shares and issuance of new shares certificate in favour of defendant No. 1 was done on 17th October 2005 as mentioned in ExD3W1/2. Document Ex.D3W1/2 however, in the considered view of this court, is not sufficient to hold that shares mentioned in Ex.PW1/18A came into existence on 17.10.2005 because on an earlier occasion on 18.09.2005 (Ex.PW1/17), the defendant No. 3 company itself had written a letter to Sh. Rajiv Gupta having reference of bonus shares/ dividend. PW3 even proved the Ex. PW1/17. After all, the plaintiff submitted Ex.PW1/18A in response to Ex.PW1/17. Further, Ex.PW1/18A was a transfer deed dated 11.10.2005 executed by the defendant No. 1 in favour of the plaintiff and the defendant No. 1 could be the best witness to allege/ prove the spuriousness of Ex.PW1/18A who never appeared in the witness box.
26. However, instead of receiving duly transferred certificates of the aforesaid shares from the defendant No. 3, the plaintiff company received copies of letters dated 11.11.2005 (Ex.PW1/21) and 28.12.2005 (Ex.PW1/22) which were addressed to the defendant No. 1. In the said letters the defendant No. 3 requested the defendant No. 1 to either send back Certificate No. 5050 of 2000 shares which had been wrongly mailed to the defendant No. 1 or to hand over the same to the plaintiff company. PW3 brought both the letters Ex.PW1/21 and Ex.PW1/22 and proved the same. I am referring the relevant contents of letter RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 17 of 24 dated 28.12.2005 (Ex.PW1/22) written by defendant No 3 to defendant No. 1 (cc to the plaintiff);
"We once again inform you that 2000 shares vide certificate No. 5050 has been wrongly mailed to you on 05/11/2005 vide postal regn. No. 29662.
You are requested to kindly send back the same to us or alternatively please hand over the same to Mr. Rajiv Gupta R/o 10/18 Ist Floor, West Patel Nagar, New Delhi-110008."
27. On 10.02.2006, the Managing director of the plaintiff company received three letters from the defendant No. 3 (Ex.PW1/24A to Ex.PW1/24C). All the letters were proved by PW3. I am referring to the contents of one such letter (Ex. PW1/24B) addressed to the defendant No. 1 (cc to the plaintiff);
"We would like to inform you that as per our records you are the shareholder of company under folio no. 12311 and as per holdings in the said folio you were holding 200 shares (of face value of Rs. 10/-) vide certificate No. 197175-76, 281575-76 (50 shares each). The company had decided the sub-division and issue of bonus shares for which 17th Oct, 2005 was fixed as record date. Accordingly you were issued new share certificate no. 5050 for 2000 shares (face value of Rs. 2/-) and the earlier issued share certificates were cancelled without surrender of old certificates.
As you are aware that Mr. Rajiv Gupta lodged the old share certificates for transfer before the record date i.e. 17th Oct 2005 and Mr. S. K. Singhal has now lodged the new share certificate for transfer but both cases were rejected due to signature mismatch. This shows that you have traded physical shares twice. We, therefore, request you to please settle the matter at your end with respective parties..."RCA DJ 37/2019
RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 18 of 24
28. Defendant No. 3 company failed to explain as to what prompted it to issue fresh letters Ex.PW1/24A to Ex.PW1/24C when earlier vide letters Ex.PW1/21 and Ex.PW1/22 it had asked the defendant No. 1 either return the shares (wrongly mailed to defendant No. 1) to it, or to hand over the same to the plaintiff.
29. What emerges from discussion made hereinabove (paras 16 to 28 supra) that the plaintiff company earlier had lodged 200 shares with the defendant No. 1 for transfer in the name of its managing director vide a transfer deed Ex.PW1/12 which was returned as bad delivery due to signature difference vide a letter dated 23.03.2003 Ex.PW1/14 sent by M/s MCS Ltd. (the share transfer agent of the defendant No. 3). In the meantime, in the year 2005, the defendant No. 3 declared sub division of shares and also offered bonus shares. Plaintiff company then again submitted a fresh transfer deed dated 11.10.2005 (Ex.PW1/18A). The plaintiff company however received copies of letters dated 11.11.2005 (Ex.PW1/21) and 28.12.2005 (Ex.PW1/22) whereby it was informed that 2000 shares were wrongly mailed to the defendant No. 1. Finally, it came to the knowledge of the plaintiff company vide Ex.PW1/24A to Ex.PW1/24C that the defendant No. 4 had now lodged the new share certificate for transfer with the defendant No. 3. The plaintiff thus filed the present Suit on 13.03.2006, asking for relief of declaration thereby declaring the plaintiff as the absolute and lawful owner of 200 shares of the defendant No. 3 existing in the name of the defendant No. 1 including of new share certificate bearing No. 5050 comprising of 2000 shares issued in lieu of 200 shares.
30. Hon'ble Madhya Pradesh High Court in Bharat Singh V/s Kunwar Singh; AIR 1991 MP 368; MANU/MP/0067/1991, held;
7. It is common plea of the learned counsel for the parties that the suit in so far as it relates to declaration shall be governed by Article 58 of the Limitation Act, 1963 which prescribes a period of limitation of 3 RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 19 of 24 years commencing when the right to sue first accrues. It is trite law that the limitation would not commence unless there has been a clear and unequivocal threat to infringe the right claimed by the plaintiff. [See C. Mohd. Yunus v. Syed Unnissa MANU/SC/0359/1961 : AIR 1961 SC 808; Rukhmabai v. Laxminarayan MANU/SC/0186/1959; Mt. Bolo v. Mt. Koklan MANU/PR/0054/1930 : AIR 1930 PC 270:
(1930 All LJ 1188)].
8. In C. Mohd. Yunus's case (supra) it is further held that mere denial by the defendant of the rights of the plaintiffs would not set the period of limitation running against them. In Mst. Rukhmabai's case (supra), their Lordships observed that where there were successive invasions or denials of right, the right to sue would accrue when the defendant had clearly and unequivocally threatened to infringe the right asserted by the plaintiff in the suit. Their Lordships also observed:--
"Every threat by a party to such a right, however ineffective and innocuous it may be, cannot be considered to be a clear and unequivocal threat so as to compel him to file a suit. Whether a particular threat gives right to a compulsory cause of action depends upon the question whether that threat effectively invades or jeopardizes the said right."
9. C. Mohd. Yunus's case was followed by the High Court of Orissa in Gouranga v. Bhaga Sahu MANU/OR/0013/1976 : AIR 1976 Ori 43, a suit to obtain a declaration as to plaintiffs to hold that a mere denial or oral protest which have no apparent connection with the actual exercise of the right of enjoyment of the property and even mutation proceedings in which status of adoption is challenged would not set the limitation to commence unless there was actual interference with the plaintiff's right or an unequivocal threat of infringement of such right.
10. It follows from the abovesaid authorities that a distinction has to be drawn between a mere denial of a right or ineffective and innocuous RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 20 of 24 threat to the plaintiffs' right on the one hand and a clear and unequivocal threat or infringement of the right asserted by the plaintiff on the other. It is only the later which would set on start of limitation under Article 58 of the Limitation Act, 1963.
(Underlined by me)
31. From the above discussion this court concludes that the Suit of the plaintiff is within the limitation period. Thus the findings of Ld. Trial Court on issue No. (ii) is hereby reversed, and the issue No. (ii) is decided in favour of the plaintiff and against the defendants.
32. Now, coming to the aspect of locus standi- Whether the plaintiff company has no locus standi to file the present Suit ?
33. The plaintiff company is asserting its right to seek relief based on the fact that it (the plaintiff company) made a payment to M/s Shubham Securities (the broker of Sh. Saileshwar Ganguli), thereby entitling it to lodge the said 200 shares in its own name. As such, in february 2003, the plaintiff company lodged those 200 shares with the defendant No. 1 for transfer in the name of its managing director vide transfer deed Ex.PW1/12. The transfer deed Ex.PW1/12 was however returned as bad delivery due to signature difference vide a letter dated 23.03.2003 Ex.PW1/14 sent by M/s MCS Ltd. (the share transfer agent of the defendant No. 3). In the meantime, in the year 2005, the defendant No. 3 declared sub division of shares and also offered bonus shares. Plaintiff company then again submitted a fresh transfer deed dated 11.10.2005 (Ex.PW1/18A). The plaintiff company however received copies of letters dated 11.11.2005 (Ex.PW1/21) and 28.12.2005 (Ex.PW1/22) whereby it was informed that 2000 shares were wrongly mailed to the defendant No. 1. Finally, it came to the knowledge of plaintiff company vide Ex.PW1/24A to Ex.PW1/24C that the defendant No. 4 had now lodged the new share certificate for transfer with the defendant No. 3.
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34. The case of the plaintiff company is that all these communications (through Ex.PW1/12, Ex.PW1/14, Ex.PW1/15, Ex.PW1/16, Ex.PW1/17, Ex.PW1/18, Ex.PW1/18A, Ex.PW1/21, Ex.PW1/22, Ex.PW1/24A, Ex.PW1/24B and Ex. PW1/24C) with the defendant Nos. 1 & 3 were made on its behalf by its managing director Sh. Rajiv Gupta. On the other hand, the case of the defendant No. 3 is that it communicated with Sh. Rajiv Gupta as an individual and not in his capacity as a managing director of the plaintiff company.
35. I am reproducing the relevant cross-examination of PW1 on this aspect (conducted on behalf of defendant No. 3);
"Q. In Ex.PW1/15 and Ex.PW1/16 it is nowhere mentioned that the said letters have been addressed to defendant No. 3 by plaintiff company. What do you say?
Ans. I have written the said letters to defendant No. 3 because the company had delegated the powers to me to write the said letters. Q. Do you have any document showing that power in this regard was delegated to you by the plaintiff company ?
Ans. No such document is required for delegation of power to me because I am managing director of the plaintiff company and I could have written said letters without any formal delegation of powers in this regard.
Q. I suggest you that no letter was written by defendant No. 3 to plaintiff company which is Ex.PW1/17. What do you say ? Ans. The said letter was written by defendant No. 3 to me and it amounted to writing to the plaintiff company because shares were sent for transfer in my name.
It is wrong to suggest that Ex.PW1/18 was sent by me in my personal capacity (Voluntarily, it was sent on behalf of plaintiff company).RCA DJ 37/2019
RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 22 of 24 Q. In Ex.PW1/18, it is nowhere mentioned that the said letter was written by the plaintiff company. What do you say ? Ans. I had written the said letter on behalf of plaintiff company as the shares were sent for transfer in my name.
XXXXX Q. Was any transfer deed was signed by defendant No. 1 in favour of plaintiff company ?
Ans. Defendant No. 1 had signed a transfer deed in my name and the said deed was in the name of plaintiff company as I was authorised by the plaintiff company.
Ex.PW1/21 and Ex.PW1/22 have been written to me for plaintiff company. In the said documents it is nowhere mentioned that it was addressed to plaintiff company. (Voluntarily, it was the fault of the person who had written the said letters.) It is right to suggest that Ex.PW1/24A and Ex.PW24B have been addressed to me and not to plaintiff company.
Q. Did you ever write to defendant No. 3 asking him to write letters to plaintiff company and not to you ?
Ans. No."
36. From reading of cross-examination of PW1 it appears that to the objection of locus standi, defence of the plaintiff company is that Sh. Rajiv Gupta being its managing director required no document showing delegation of power by the plaintiff company in his favour. And, as such, it should be accepted that Sh. Rajiv Gupta was acting as Managing Director of the plaintiff company and not in his individual capacity. In the considered view of this Court, the defence/ submission of the plaintiff company can not be accepted. As rightly put by the Ld. Trial Court that any communication made by a Managing Director without the authority and express authentication can not be treated as a communication made by a company. If a Managing Director/ Director is making any RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 23 of 24 communication on behalf of the company then it has to be shown specifically by him that he acted on behalf of the company. This is more so important for the protection of interest of an outsider (say defendant Nos. 1 and 3) dealing with the company. After all, an outsider is entitled to know as to with whom it/she/he is dealing/ transacting. The plaintiff company has failed to show any instance/ document showing/ proving that Sh. Rajiv Gupta was acting as its managing director while dealing with the defendants. It is apparent that if viewed from the perspective of the defendants, Sh. Rajiv Gupta interacted/communicated throughout with them in his personal capacity and not as director/managing director/authorized representative of the plaintiff company.
37. This Court accordingly holds that the plaintiff company has no locus standi to file the present Suit. Further, since the plaintiff company has no locus standi to file the Suit, the plaintiff company is not entitled to relief of declaration, permanent and mandatory injunction. Issue No. (i), (iii), (iv) and (v) are decided against the plaintiff.
38. In the considered opinion of this Court, the Suit of the appellant/plaintiff is rightly dismissed by the Ld. Trial Court and there is no error in the impugned judgment and decree dated 07.03.2019. The present appeal is thus dismissed and the impugned judgment and decree dated 07.03.2019 passed by Ld. Civil Judge- III, West District, Tis Hazari Courts, Delhi in Suit having CS No. 610567/2016 is upheld. Parties to bear their own costs.
39. Decree sheet be prepared accordingly.
(Announced in the open court on this 18th day of March, 2025 This Judgment consists of Twenty Four of signed pages).
(Abhishek Srivastava) Digitally signed by ABHISHEK District Judge-05, ABHISHEK SRIVASTAVA SRIVASTAVA Date: Central, THC, Delhi 2025.03.18 16:05:44 +0530 RCA DJ 37/2019 RSG Share & Stock Brokers Ltd. Vs. Harsh Gupta & Ors Judgment dated 18.03.2025 Page No. 24 of 24