Company Law Board
Shri Tommy Mathew vs Duroflex Limited, Shri Chandy Mathew ... on 15 March, 2004
Equivalent citations: [2004]122COMPCAS741(CLB), [2004]55SCL636(CLB)
ORDER
K.K. Balu, Member
1. In the Company Petition filed under Section 111(2) of the Companies Act, 1956 ("the Act") the petitioner while seeking directions against M/s Duroflex Limited ("the Company"), its Chairman and Managing Director to register the transmission of 67,300 shares inherited by him from his deceased mother, Smt. Kunjamma Mathew, simultaneously prays for condonation of a delay of 45 days, in filing the Company Petition by resorting to the Company Application No 125/2003, which is resisted by the Company on the ground that the Company Petition is barred by limitation, as set out in the Company Application No. 127/2003 and in the course of the arguments of Shri. B.C. Thiruvengadam, the learned Counsel appearing for the Company, as under :
The petitioner claims to have forwarded an application on 25.07.2002 to the Company for registration of the transmission of 67,300 shares bequeathed by Smt. Kunjamma Mathew in his favour by virtue of a will dated 21.12.1987, in which case the petitioner must have filed the Company Petition within two months of the receipt of notice of refusal, if any, or where- no notice has been sent by the Company, within four months from the date on which the intimation of transmission was delivered to the Company as envisaged in Sub-sections (2) and (3) of Section 111. The communication dated 31.05.2003 forwarded by the Company (Annexure - F at Page 54 of Petition) was in relation to the claim of the petitioner in terms of the order of the CLB made in CP No. 68/2000. This cannot be construed as formal refusal of the petitioner's application. Accordingly, the petitioner in the present case ought to have filed the Company Petition on or before 24.11.2002 (i.e) within four months from the date on which the petitioner said to rave delivered the application to the Company but chose to file only on 18.09.2003, after a delay of 290 days, and not 45 days as contended by the petitioner, thereby the same is barred by limitation.
The petitioner has not offered any proper explanation for the delay of 290 days. The causes shown are insufficient to condone the inordinate delay on the part of the petitioner, as held in Jonas Hemant Bhutta v. Surgi plast Ltd - 1993 (78) C.C. 296.
There is no provision enabling the Company Law Board under the Act to condone the delay in filing a petition under Section 111(2), warranting the dismissal of the application made in CA No. 125/2003, in limini, in support of which reference is made to the following decisions:
Prakash H Jain v. Marie Fernandas - AIR 2003 SC 4591 to show that the Competent Authority constituted under Maharashtra Rent Control Act is neither a Court nor empowered to exercise any power under the Limitation Act,1963 condoning the delay is filing any application and further to show that there is no such as any inherent power of Court to condone delay in filing a proceeding before Court / Authority concerned, unless the law warrants and permits, since it has a tendency to alter the rights accured to one or the other party under the statue concerned; and Carbon Corporation Ltd v. Abhudaya Properties Pvt. Ltd - Vol. 73 (1992) C.C. 572 - to show that the provisions of the Limitation Act are not applicable to proceedings under sections 22A of the Securities Contracts (Regulations) Act, which is a special statute and that the CLB has no power to condone the delay and extend the time limit provided for a company to file a reference.
Any counter-reply is required to be accompanied by an affidavit in terms of the Company Law Board Regulations, 1991. The statement of objections filed by the petitioner contesting the Company Application No. 127/2003 without any supporting affidavit must be rejected, as held by the High Court of Karnataka in Jindal Vijayanagar Steel Limited v. Prakash industries Limited - CA No. 1176 of 2000 (unreported judgment) Shri. Thiruvengadam, the learned Counsel, therefore, sought for dismissal of the application seeking condonation of the delay as well as the Company Petition as barred by limitation.
2. According to Shri. P.M. Vasudev, the learned Counsel, the petitioner is already before the CLB in CP No. 68/2000 filed against the respondents under sections 397 and 398 of the Act, which is in progress. The petitioner's efforts made in CP No. 68/2000 for resolving the issue of the shares inherited from his mother were not successful. Moreover, the petitioner was preoccupied with setting up a new unit pursuant to his separation from the Company, which lead to the present delay. The learned Counsel urged that the CLB has the power to condone the delay in filing the Company Petition, as held in V.K. Gupta v. Auto Lamps Ltd - 1999 (96) C.C 555 and further placed reliance on the decision in Citi Bank NA v. Power grid corporation of India Ltd - 1995 (83) CC 454 - to show that the remedies under Section 111(2) and Section 111 (4) are alternate remedies. Refusal to register transfer and delay in registering transfers are treated at par, in which case the present petition can be maintained under Section 111(4) which does not prescribe any time limit within which the CLB must be approached unlike Sub-section (3) of Section 111. While the petitioner would be put to irrepairable hardship, in the event of dismissal of the Company Petition on the ground of limitation, the respondents would not in any way be prejudiced if the delay is condoned by the CLB. The learned Counsel pointed out that he was under bonafide belief till the recent clarification made by the--CLB in the connected proceeding that there is no requirement of any statement of objections accompanied by an affidavit verifying the same and therefore, sought indulgence of this Bench to waive the said requirement. For these reasons, the learned Counsel, sought to condone the delay in tiling the Company Petition and further emphasised that the same is maintainable in law.
3. I have considered the arguments of the learned counsel. The short issue before me is whether the CLB is vested with powers to condone the delay of 290 days in filing the Company Petition under the provisions of the Limitation Act, 1963, in the facts and circumstances of the case. If the answer is in affirmative, then the Company Petition would be maintainable and if not the same be dismissed in limini. The issue as to whether the provisions of the Limitation Act, 1963 are applicable to proceedings under Section 111 when came to be considered before the CLB time and again, it was consistently held in several of the decisions viz., Shiv Dayal Agarwal v. Siddhartha Polyster (P.) Ltd. - [1996] 21 CLA 44 (CLB)/[1997] 88 Comp Cas 705; T.G. Veela Prasad V. Rayalseema Alkalias-[1996] 21 CLA 352 (CLB)/[1997] 89 Comp Cas 13 and GN Byra Reddy V. Arathi Cine Enterprises (P.) Ltd - [1997] 26 CLA 27 (CLB)/[1997/89 Comp Cas 745 that the limitation Act does not apply to applications under Section 111. However, by virtue of the decision of a Division Bench of the Calcutta High Court in the case of Smt. Nupur Mitra v. Basubani Pvt. Ltd - (1999) 2 Cal LJ 264, which was later confirmed in appeal by the Apex Court, after an analysis of various contentions as regards the limitation and delay, it was categorically held that in proceedings under Section 111, the provisions of the Limitation Act would apply. It may not be out of place to mention that in the case of Basubani Pvt. Ltd (Supra), the petition under Section 111 was filed nearly 50 years after the allotment of shares and the CLB dismissed the petition as time barred, which order was set aside by the Calcutta High Court, which decision was confirmed by the Supreme Court. Thus, in view of the Supreme Court upholding the decisions, of the Calcutta High Court that the provisions of Limitation Act are applicable to the proceedings under Section 111, the said decision is binding on the CLB and accordingly followed in all the subsequent decisions. Therefore, the proposition laid down in Carbon Corporation Ltd. v. Abhudaya Properties Pvt. Ltd. (Supra) is no more good in law. The decision in Prakash H Jain v. Marie Fernandes, forcibly relied on by the learned Counsel for the Company, not having been rendered with reference to the CLB, in my considered view, has no application in the facts and circumstances of the present case. I shall now proceed to consider as to whether the petitioner has shown "sufficient cause" to condone the delay of 290 days in filing the Company Petition. Towards this end, I am guided by the settled law as propounded by the Supreme Court in a number of cases to the effect that the term "sufficient cause" in Section 5 must receive liberal consideration so as to advance substantial justice and, generally, delays in bringing the appeals are required to be condoned in the interest of justice, whose no gross negligence or deliberate inaction or lack of bonafides is imputable to the parties seeking condonation of delay. While the petitioner seeks to condone a delay of 45 days, it is denied as 290 days by the Company. This controversy, in my view, must be borne in mind in the light of the communication dated 31.05.2003 of the Company in favour of the petitioner (Annexure-F at page 54 of petition), relevant portion of which reads as under:
"Sub: (1) Settlement brought about by Hon CLB (2) Full and Final Settlement of Shares including all Claims Ref: (a) Orders of Hon. CLB
(b) Our letter Ref: DL/CLB/CP-68/121/2003-04 dated 9th May 2003 The total amount payable to you is Rs. 210 lakhs. As against this we have already paid you and your son a sum of Rs. 183,75,000/- (Rupees One Hundred Eighty Three lakhs and Seventy Five Thousand only).
Please note that the Hon. CLB had ordered you vide its order dt 7/6/02 to hand over the R&D Division (Natura) premises on 31/10/2002. This was handed over to the company only on 15/04/2003.
Further, as on 13.07.2001, you and your son were shareholders of Duroflex Limited. On that date the Hon'ble Company Law Board, evolved a compromise, pursuant to which, you had agreed to exit from the company by selling the shares to other respondents/company at the value fixed by Hon. CLB of Rs. 55/- per share.
Subsequently, the Board of Directors of this Company was notified about the sad demise of Mrs. Kunjamma Mathew. The Board resolved to give effect to the Will of Mrs. Kunjamma Mathew, and accordingly the shares were transmitted to the beneficiaries named in her Will. (emphasis supplied).
In order to make your exit form the Company complete, we are releasing Rs. 98.505/- (Rupees Ninety Eight Thousand Five Hundred and five only) being the value of 1791 shares which have been transmitted to you from the folio of Mrs. Kunjamma Mathew, as per her Will. "
It is clear from the above that the petitioner would exit from the Company by selling his shares to the respondents at the rate of Rs. 55/-pcr share and that the petitioner handed over the R&D Division (Natura) on 15.04.2003 to the Company in accordance with the consent order made in CP No. 68/2000 by the CLB. The communication further reveals that the Board of Directors of the Company was notified about the demise of Mrs. Kunjamma Mathew, mother of the petitioner, upon which the Board transmitted the shares, bequeathed under her will, in favour of the beneficiaries and adjusted value of 1791 shares given to its petitioner towards final settlement, in terms of the consent order of the CLB. While the petitioner claims 67,300 shares by virtue of the will left by her mother, the Company had transmitted 1791 shares in his favour. This act, in my view, would amount to refusal by the Company made on 31.05.2003 to register the transmission of the remaining shares bequeathed in favour of the petitioner by his deceased mother. In this connection, beneficial reference is invited to a decision of the CLB in Vimal K. Gupta v. Auto Lamps Ltd. - (1996) 86 CC 157 to show that if a company does not formally refuse to transfer shares after any length of time, against the time limit specified under Sub-section (1) of Section 111, two months from the date of such intimation of refusal would be available to the aggrieved person to approach the CLB under Section 111(2). Under these circumstances, the petitioner ought to have filed the Company Petition within two months form the date of receipt of the communication dated 31.05.2003 by the petitioner of the refusal by the Company to effect the transfer (i.e) on or before 01.08.2003, but filed only on 18.09.2003. Thus, the delay could not be 290 days, as contended by the Company. Against this background, the claim of the petitioner in support of his application made on 25.07.2002 (Annexure E at page 53 of petition) for registration of the transmission of the shares in his favour and the counter claim of the Company denying any such application become redundant, in the light of the specific averments made by the Company in its communication dated 31.05.2003 (Supra) to the effect that ...... "the Board of directors of this Company was notified about the sad demise of Mrs. Kunjamma Mathew. The Board resolved to give effect to the will of Mrs. Kunjamma Mathew, and accordingly the shares were transmitted to the beneficiaries named in her will". In the present case, the causes for delay are two fold - (i) that the petitioner's efforts in resolving the issue in relation to the subject shares made in CP No. 68/2000 before the CLB ended in loss of time and (ii) that the petitioner was preoccupied with setting up a new unit for himself, which, to my mind, derive support from the communication dated 31.05.2003 (Annexure - F) of the Company, according to which it was already observed that the Company had taken into account 1791 shares inherited by the petitioner from his mother, while settling his claim and that the petitioner handed over the R&D Division of the Company on 15.04.2003, as per the consent order passed in CP No. 68/2000 by the CLB, compelling the petitioner to look for a new unit for himself. Therefore, the petitioner cannot be saddled with gross negligence or deliberated inaction or lack of bonafides. The causes put-forth by the petitioner are found to be justifiable to condone the consequential delay in filing the Company Petition and accordingly I do so. In these circumstances, the respondents are directed to file counter in the Company Petition by 21.04.2004 and rejoinder to be filed by 05.05.2004. The Company Petition will be heard on 17.05.2004 at 10.30 A.M. With these directions the applications in CA No. 125 & 127 of 2003 stand disposed of, however, without any order as to costs. -- While disposing these applications, I have not placed any reliance on the statement of objections on record, not being supported by an affidavit verifying the same in terms of the Company Law Board Regulations, 1991, but took cognizance of the affidavit filed in support of the Company Application No. 125/2003.