National Company Law Appellate Tribunal
Chalasani Udaya Shankar vs M/S. Lexus Technologies Pvt Ltd on 10 April, 2023
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
CHENNAI BENCH
Company Appeal (AT) (CH) No. 44 of 2021
&
I.A. No. 548/2021
[Arising out of Order dated 21.08.2021 passed by the Tribunal/National
Company Law Tribunal, Amarvati Bench, Hyderabad in CP No. 667/59
& 241/HDB/2018]
IN THE MATTER OF:
1. Chalasani Udaya Shankar
S/o. Mr. Subba Rao
Address: D. No. 32-14-11, 2nd Floor,
Tulasi Apartments, Near Jammichettu,
Mogalrajapuram, Vijayawada - 520010 ...Appellant No. 1
2. Ms. Sripathi Sreevana Reddy
W/o. Mr. Venkata Krishna Reddy Pingali
Address : D. No. 52-1/8-10A/1, Road No. 2
NTR Colony, Gunadala, Vijayawada -
520008. ...Appellant No. 2
3. Ms. Yalamanchilli Manjusha
W/o. Mr. Balaji
Address : Plot No. 3, Road No. 10B,
Opposite Vinayak Theatre, Bharathi Nagar,
Vijayawada - 520008. ...Appellant No. 3
Versus
1. M/s. Lexus Technologies Pvt. Ltd.
CIN : U72200AP2000PTC034070
D. NO. 60-3-1/4, Y.K. Building, Route No. 5
Ramanachandra Nagar, Vijayawada,
Andhra Pradesh - 520008 ...Respondent No.1
2. Mr. Mantena Narasa Raju
S/o. Mr. Krishnama Raju
NRI Medical College, Chinakakani
Guntur, Andhra Pradesh - 522503 ...Respondent No. 2
3. Mr. Appa Rao Mukkamala
S/o. Mr. Bhaskar Rao
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021
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(i) 4545, Warwick Circle, Grand Blanc,
Michigan - 48439
(ii) NRI Medical College, Chinakakani,
Guntur, Andhra Pradesh - 522503 ...Respondent No. 3
4. Mr. Suresh Anne
S/o. Mr. Hanumantha Rao
(i) 444, Wimbleton Drive,
Birmingham, Michigan - 48009 US
(ii) NRI Medical College, Chinakakani,
Guntur, Andhra Pradesh - 522503 ...Respondent No. 4
5. Mr. V Vasudev Reddy
Partner, Rameshwar Rao & Co.
Chartered Accountants
#132, SBI Colony, II Venture,
Gandhinagar, Hyderabad - 500080 ...Respondent No. 5
6. Registrar of Companies
2nd Floor, Corporate Bhawan, GSI Post,
Tattiannaram, Nagole, Bandiaguda,
Hyderabad, Telangana - 500068 ...Respondent No. 6
7. The Regional Director,
Ministry of Corporate Affairs, 3rd Floor,
Corporate Bhawan, Bandlaguda, Nagole
Tattiannaram, Hayath Nagar Mandal, RR
District,
Hyderabad, Telangana - 500068. ...Respondent No. 7
8. Mr. Nimmagadda Upendranath
1-5-13, NRI Staff Quarters
NRI Academy of Sciences
Chinakakani, Mangalagiri Mandal,
Guntur District, Andhra Pradesh ...Respondent No. 8
9. Dr. Raghava Rao Polavarapu
5 Olde Hamlet Drive,
Jerichho, New Yort, 11753 USA ...Respondent No. 9
10 Dr. Sai Ramesh Bikkina
4539, Long View Drive
Lapeer, Michigan 48446 USA ...Respondent No. 10
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Present:
For Appellants : Mr. PBA Srinivasan, Advocate.
For Respondents : Mr. P.H. Arvindh Pandian, Senior Advocate For
Mrs. Harshini Jhothiraman and Mr. Avinash
Krishnan Ravi, Advocates
J U D G M E N T
(Virtual Mode) (10.04.2023) NARESH SALECHA, MEMBER (TECHNICAL) The Present Appeal is filed against the 'impugned order' dated 21.08.2021 passed in CP. No. 667/59 & 241/HDB/2018 by the 'Tribunal' (National Company Law Tribunal, Amravati Bench, Hyderabad), whereby, the 'Tribunal' dismissed the Petition filed under the Companies Act, 2013.
2. The 1st, 2nd & 3rd Appellant have claimed to be 'Shareholders' of the 1st Respondent Company with alleged holding together 94.80% of total paid up share capital of 1st Respondent.
M/s Lexus Technologies Pvt. Ltd. is a 1st Respondent/ Company incorporated on 28.03.2000, with an authorised share capital of Rs. 1,50,00,000/- divided into 15,00,000 shares of Rs. 10 each and paid up capital of Rs. 1,10,96,230/- divided into 11,09,623 shares. The company is in business of developing software solutions and other ancillary activities.
The 2nd, 3rd & 4th Respondents are Directors of the 1st Respondent Company.
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3. Heard the Counsel for the Parties and perused the records made available including cited judgments of the Hon'ble Supreme Court of India and earlier orders of this 'Appellate Tribunal'.
4. The Counsel for the Appellants submitted that on 09.03.2004 the 2nd Respondent had entered into a share purchase agreement with Mr. C. Suresh (the Erstwhile Shareholder of the Company) and had acquired 10,51,933 equity shares representing 94.8% of the equity share capital of the company. Subsequently, the '2nd & 3rd Respondent' were appointed as the Directors of the Company on 02.03.2004 and thereafter the '4th Respondent' was appointed on 30.09.2004.
5. The Counsel for the Appellants stated that on 18.04.2015 the 2nd Respondent sold 10,51,933 number of shares to the 1st, 2nd & 3rd Appellant by executing the securities transfer form SH-4, and the said forms were signed by the '2nd Respondent', against a consideration amount of Rs. 14,67,41,557/-.
6. The Counsel for the Appellants mentioned that the 2nd Respondent addressed a letter to the Board of Directors of the '1st Respondent' company on 29.12.2014, expressing his intention to sell his shareholding which is in accordance with the clause 19 of the Articles of Association of the 1st Respondent company. The Counsel for the Appellants further submitted that the 2nd Respondent fulfilled the requirement of Articles of Association of the '1st Respondent' company by giving a pre-emption right to the existing shareholders and only when the existing shareholders of the company did Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 4 of 41 not show any willingness to purchase the shares of the company, then the '2nd Respondent' offered to sale these shares to the 'Appellant' on 18.04.2015.
7. The Counsel for the Appellants emphasised that the consideration of Rs. 14,67,41,557/- was paid by the 'Appellants' in favour of the '1st Respondent' company for the transfer of the said shares by executing securities Transfer forms (Form No. SH.4), which were duly signed and executed by both Transferor and Transferee in accordance with Section 56 of the Companies Act, 2013 r/w Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014.
8. The Counsel for the Appellants further emphasised that the three 'Appellants' herein are the Lawful shareholders of the '1st Respondent' company, having a shareholding of 31.72%, 31.54%, 31.54% holding 3,51,933; 3,50,000; 3,50,000 equity shares respectively @10 Rupees per share. The Counsel for the Appellants further submitted that the copies of the 'Share Transfer Deeds' along with the respective share certificates duly executed by the Transfer and Transferee, clearly establish the fact of the transfer of shares in favour of the 'Appellants'.
9. The Counsel for the Appellants submitted that the Registrar of Companies had struck off the name of the '1st Respondent' company and have removed the name from its register pursuant to the provisions of Section 248 of the Companies Act, 2013 as the '1st Respondent' company did not file the 'Annual Returns and Financial Statements' for the continued period of 2014-2015, 2015-2016 and 2016-2017.
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10. The Counsel for the Appellants further submitted that in 2017, they searched on the Ministry of Corporate Affairs Portal (in short 'MCA portal') and found out that the '2nd, 3rd & 4th Respondents' submitted fabricated Annual returns for the Financial Year 2014-2015, 2015-2016 and 2016- 2017 of the '1st Respondent' Company with the Registrar of Companies. The Counsel for the Appellants stated that at that stage, they came to know for the first time that the 2nd, 3rd & 4th Respondents were committing fraud. The Counsel for the Appellants further stated that subsequently, the 2nd, 3rd & 4th Respondents were disqualified from the position of Directors of the 1st Respondent Company by virtue of Section 164 of the Companies Act, 2013 for committing fraud.
11. The Counsel for the Appellants brought out to the notice of this 'Appellate Tribunal' that despite various submissions made by the them, neither the 'Tribunal' directed the 'Respondents' nor the 'Respondents' themselves provided to the 'Appellants' with a copy of the documents to substantiate their averments, especially the original share certificates and Power of Attorney.
12. The Counsel for the Appellants mentioned that subsequently, to substantiate their contentions, all three 'Appellants' herein filed Interlocutory Applications before the 'Tribunal' vide IA 44/2019, IA 34/2021 and IA/35/2021, for direction to the 'Respondents' to produce the original share certificates issued in the year 2004 by the company and proving of the veracity of the signatures of the 2nd Respondent. The Counsel for the Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 6 of 41 Appellants assailed the conduct of the 'Tribunal' that the said applications were not disposed off and pending disposal of the same, the Company Petition was dismissed, clearly in violation of law and any judicial ethics.
13. The Counsel for the Appellants submitted that the 'impugned order' dated 21.08.2021 need to be set aside and restrain the 'Respondents' from creating third party interest over the assets of the 1st Respondent Company.
14. The Counsel for the 1st Respondent denied all averments and accusations/ allegations of the 'Appellants' labelling these to be misleading and devoid of any merit and the Counsel for the 1st Respondent submitted that the claims of the 'Appellants' that they are the shareholders of '1st Respondent' Company is far from the facts as the 'Appellants' are neither registered members nor shareholders of the 1st Respondent' Company.
15. The Counsel for the 1st Respondent reiterated that the 'Appellants' are not members of the Company and do not hold any share in the '1st Respondent' Company and the names of the 'Appellants' were never entered in the Register of members of the '1st Respondent' Company at any point in time.
16. The Counsel for the 1st Respondent emphasised that the allegations that the 'Respondent' sold 10,51,933 shares held by him in favour of the '1st, 2nd & 3rd Appellants' is false and against the records of the '1st Respondent' Company. The Counsel for the 1st Respondent submitted that neither any shares were sold nor had executed any securities transfer form in favour of the 'Appellants'. The Counsel for the 1st Respondent further submitted that Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 7 of 41 the 2nd Respondent he has not sold any of his shares and therefore allegation against the 'Respondent' receiving sale consideration of Rs. 14,67,41,557/- is false.
17. The Counsel for the 1st Respondent submitted that the 'Respondents' did not write any letter to the Board of Directors of the 1st Respondent and there was no need for the 'Respondent' to write any such letter as the 'Respondents' did not intend to sell his shares to any person. As the 'Respondent' did not write any letter, the question of willingness to purchase by the 'Appellants' would not arise at all.
18. The Counsel for the 1st Respondent submitted that the certificates of banks filed by the 'Appellant' with the Company Petition is not towards any sale consideration for shares but for other reasons not connected to this case.
19. The Counsel for the 1st Respondent stated that the 'Appellants' failed to produce the original 'Transfer Deeds' and Share Certificates before the 'Tribunal' and the 'Tribunal' rightly observed in the 'impugned order' that no transfer of shares ever took place.
20. The Counsel for the 1st Respondent emphasised that the name of the company was restored by the 'Tribunal' and the status of the '1st Respondent' Company as on date in the Ministry of Corporate Affairs poral is "Active".
21. The Counsel for the 1st Respondent submitted that it is trite law that it is for the 'Appellants' to prove their case by producing relevant documents Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 8 of 41 that have been relied upon by them. The Counsel for the 1st Respondent further submitted that the 'Respondents' had moved an 'Application' bearing No. IA/23/2019 seeking directions against the 'Appellant' to produce original share certificates and share transfer deeds before the 'Tribunal' and the 'Tribunal' in its order dated 18.02.2021 directed the 'Appellants' to produce the original certificate but the 'Appellants' failed to comply with the said order of the 'Tribunal'.
22. The Counsel for the 1st Respondent submitted that only a "member" can maintain a petition under Section 241 of the Companies Act, 2013 and the 'Tribunal' held correctly that the 'Appellants' herein is not a member of the 1st Respondent Company and has further found that the petition under Section 59 of the Companies Act, 2013, seeking inclusion of the 'Appellants' as a "member" of the 1st Respondent itself is contrary to law for non- adherence to stipulated procedure and on account of forgery.
23. The Counsel for the 1st Respondent mentioned that the Articles of Association restricts transfer of shares by a member to a non-member of the company and a non-member of the company ceases from to become a member of the Company, except otherwise, in compliance with Clause 17 to 23 of the Articles of Association. The Counsel for the 1st Respondent stated that the 'Appellants' except making false allegations that their name were entered in the register of members and the 'Respondent' erased their names, no concrete documentary evidence was furnished on record to establish that the 'Appellants' complied with Articles of Association and thereby entitled to Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 9 of 41 file this 'Appeal' under Section 59, 241, 242 & 244 of the Companies Act, 2013.
24. The Counsel for the 1st Respondent stated that the underlying company petition under Section 59 and consequent relief(s) under Section 241, 242 and 244 of the Companies Act, 2013 is not maintainable. The Counsel for the 1st Respondent stated that Transfer forms (SH-4) enclosed with the is appeal are all dated 18.04.2015, the various columns like "for office use only" such as checked by, signature tallied by, entered in the register of transfer on ----- vide transfer No. ----, approval dated----, power of attorney/ probate/death certificate/ letter of administration registered on --
-------------at--------- and the No.---are left open as blank. The Counsel for the 1st Respondent stated that this indicates that these forms were never delivered to the '1st Respondent' Company and further no reliance is placed on record by the 'Appellants' to say that the Share Transfer forms (SH-4) is delivered to the Company as per Section 56 of the Company Act , 2013.
25. The Counsel for the 1st Respondent submitted that as per law and practice after execution of proper instrument of transfer with all particulars of transferor and transferee, the responsibility cast upon the transferor or transferee to deliver the said instrument to the Company within a period of 60 days from the date of execution along with the certificate relating to the securities for the company to process the same as per Section 58 of the Companies Act, 2013 and no such material is placed on record by the Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 10 of 41 'Appellants' to establish that the 'Appellants' complied with Section 56 of the Companies Act, 2013.
26. The Counsel for the 1st Respondent stated that a private company limited by shares in pursuance of the powers conferred to it under its articles or otherwise, if refuses to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of 30 days from the date on which the instrument of transfer, or the initiation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be giving reasons for such refusal.
27. The Counsel for the 1st Respondent mentioned that the 'Appellants' besides seeking relief under Section 59 of the Companies Act, 2013 have also sought consequential reliefs under Section 241, 242 and 244 but failed to produce any evidence to show that they have complied with Section 56, 58 and 59 of the Companies Act, 2013 enabling them to be recognised as legitimate share holders and acquired the equity shares from the '2nd Respondent' in compliance of Articles of Association.
28. The Counsel for the 1st Respondent emphasised that the 'Appellants' without enclosing any proof, stated that subsequent to transfer of shares the names of the 'Appellants' have been entered in the register of the members of the '1st Respondent' Company and the 2nd, 3rd & 4th Respondent erased the share-holding of the 'Appellants' from the records of the '1st Respondent' Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 11 of 41 Company. The Counsel for the 1st Respondent stated that the 'Appellants' names were never entered in the register of members of the Company as shareholders.
29. The Counsel for the 1st Respondent stated that the Share Certificates filed with this 'Appeal', dated 27.04.2015 to the Company Petition is not as per the format and design of the '1st Respondent' Company. The Counsel for the 1st Respondent further stated that the Share Certificates of '1st Respondents' Company is a printed format and the back ground comprises with company names as LTPL and the Certificate No. starts as with LTPL 000---, whereas the alleged Share Certificate enclosed to this Petition is a computer generated one and the same is not covered by any such features stated above.
30. The Counsel for the 1st Respondent submitted that the contention of the 'Appellants' that the '2nd, 3rd & 4th Respondents' affixed their signature on the share transfer forms is false as the 2nd Respondent informed to the 1st Respondent Company that the original Share Certificates are in his possession and the Share Certificates enclosed by the 'Appellant' to are fabricated and the 2nd Respondent also stated that he has not alienated his shares either to existing members or to non-member of the Company.
31. The Counsel for the 1st Respondent stated that the 'Appellants' are not shareholders at all of the Company and further argued that assuming without conceding that if the 'Appellants' considers themselves as 95% shareholders of the 1st Respondent they should have not waited for more Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 12 of 41 than three years to raise alleged objection before the company and the 'Appellants' never raised the alleged objection with the company. The Counsel for the 1st Respondent further stated that the 1st Respondent except acquiring valuable land no other business is carried after its incorporation.
32. The Counsel for the 1st Respondent submitted that the 'Appellants' herein have not placed any documentary to evidence establish that the 'Appellants' contacted the company or any other directors of the company.
33. The Counsel for the 1st Respondent submitted the underlying proceedings are barred by limitation. Pursuant to section 433 of the Companies Act, 2013 read with Article 113 of Limitation Act, 1963, the period of limitation is three years. Assuming without conceding if the stand of the 'Appellants' is taken as true for while, the case of the 'Appellants' is that they have acquired shares from the 'Respondents' on 18.04.2015 and the underlying Petition was filed before this Tribunal only on 09.11.2018 i.e. after a lapse of 3 years and 7 months as such the underlying application is barred by limitation.
34. Supporting the averments of the Counsel for the Respondents, the Counsel for the 2nd Respondent submitted that the 'Tribunal' has rightly dismissed the Company Petition with cost on the following main grounds -
(i) That the question of limitation does not arise as the Petition is not filed within the period of limitation of three years;
(ii) That there is no transfer of shares from the Respondent to the Appellants;
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(iii) That there is no communication between the parties and the assumption that the money was paid only for consideration for transfer of shares cannot hold water and therefore it cannot be called as consideration;
(iv) That the purported share certificates filed by the Appellants are not genuine and are fabricated only for the purpose of the case.
35. The Counsel for the 2nd Respondent submitted that the 1st Respondent company has not issued any share certificate to the 'Appellants.' The Counsel for the 2nd Respondent further submitted that the 3rd and 4th Respondents, Directors of the '1st Respondent' company have stated before the 'Tribunal' that they never signed any share certificate alleged to have been issued to the 'Appellants'. The Counsel for the 2nd Respondent still holds the original share certificates issued by the company pertaining to 10,51,933 shares and he has not sold or alienated the same to any person.
36. The Counsel for the 2nd Respondent submitted that the distinctive nos do not match with the original distinctive Nos issued by the Company. This clearly establishes fabrication of Share Certificates by the 'Appellants' and moreover, photocopies of share certificates and transfer deeds are not acceptable as evidence.
37. The Counsel for the 2nd Respondent emphasised that an analysis of fabricated share enclosed by the 'Appellants' and original shares held by the 2nd Respondent reveals following discrepancies:
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 14 of 41 i. That there are huge discrepancies with respect to photocopies of transfer deeds vis a vis photocopies of share certificates annexed in the Company Petition.
ii. There are certificates without corresponding transfer deeds and transfer deeds without corresponding share certificates. iii. There are several photocopy transfer deeds even without execution by the transferee.
iv. That the said deeds do not satisfy the tenets of section 56 of the Companies Act, 2013.
v. The transfer deed does not contain any share certificate no. It is mandatory to enclose share certificates.
vi. The 'Appellants' fail to explain how they paid stamp duty without even having an agreement to acquire shares from the 'Respondents' as there was no agreement regarding share purchase between the 'Appellants' and the 2nd Respondent.
38. The Counsel for the 2nd Respondent submitted that the transfer deeds that annexed with the appeal are fabricated as can be easily demonstrated by a bare perusal wherein, the company's acknowledgement column is no where endorsed, no one from company signed or checked or tallied the signature of transferor, no transfer number provided, approval dated not provided, this itself proves these share transfers were not lodged with the Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 15 of 41 company. Since the share transfers are not lodged within time prescribed under Act, due to limitation the 'Appeal' is not maintainable.
39. The Counsel for the 2nd Respondent stated that the format of share certificate is not that of the Company and the Share Certificates are not the one approved by the company and issued to the shareholders, hence Share Certificates claimed by the 'Appellants' are prepared and fabricated by the 'Appellants' themselves to grab the company by illegal methods.
40. The Counsel for the 2nd Respondent submitted that the Respondent borrowed an amount of about Rs. 5.66 Crores from one Mr. Lingamaneni Ramesh, a friend of this Respondent, who agreed to lend to the 'Respondents', but informed the 2nd Respondent that he would be remitting through banking channels about Rs. 14.66 Crores out of which he would take back Rs. 9 Crores immediately and balance of about Rs. 5.66 can be retained by this Respondent.
The Counsel for the 2nd Respondent elaborated that the above two payments were made to a trust belonging to Mr. Lingamaneni Ramesh and the other person (Venkata Surya R) is his brother and submitted Mr. Lingamaneni Ramesh, at the time of granting the loan, forcefully obtained the signatures of this respondent on several documents (including white papers, letter heads and blank non judicial stamp papers and green sheets). As per the Counsel for the 2nd Respondent, since the 'Respondent' was in urgent need of the money at that time the 2nd Respondent could not make any protest. The Counsel for the 2nd Respondent submitted that they believe Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 16 of 41 that the blank papers might have, been handed over to the 'Appellants' by Mr. Lingamaneni Ramesh and now the 2nd Respondent realized the fraud committed by Mr. Lingamaneni Ramesh in order to grab the Respondent No. 1 Company and its assets by illegal and fraudulent methods.
41. The Counsel for the 2nd Respondent emphasised that the monies involved and transferred in the case at hand clearly indicate that there is some other transaction which is not being brought to notice of the 'Appellate Tribunal' by the 'Appellants' and further there were no communication between the parties abut such transfer of money in law of alleged share purchased from the 2nd Respondent and that on some assumption the transfer of monies have to be considered as consideration cannot hold water and therefore the money so transferred cannot be considered as consideration for purchase of shares
42. The Counsel for the 2nd Respondent submitted that the 'Appellants' who had prayed for rectification of members' register cannot allege oppression and mismanagement for a very simple reason that they are not members of the company as per their own submission.
43. Concluding the arguments on behalf of the 1st and 2nd Respondents, the Counsel for 1st and 2nd Respondents reiterated that the 'Appeal' is mischievous, misleading, far from truth and devoid of any merits and need to be set aside.
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44. This 'Appellate Tribunal' has carefully examined the 'impugned order' dated 21.08.2021. The 'Tribunal' has decided the original Petition on five grounds, namely:-
(i) Whether the Petition filed is well within the time.
(ii) Whether purported transfer of shares is in accordance with the provisions of the Companies Act and in accordance with clauses of the Articles of Association.
(iv) Whether the amount purportedly paid should be treated as consideration to the shareholders of the Company, by the Petitioners.
(v) Whether the share certificates purportedly issued to the Petitioners are genuine.
(vi) Whether any relief can be granted to the Petitioners or whether the petition is maintainable.
45. (a) The 'Tribunal' has held that alleged transfer of shares in favour of the 'Appellant' herein was claimed to be on 18.04.2015, whereas, the Petition was filed on 09.11.2018 which is beyond three years and as per Article 113 of the Limitation Act, 1963 the limitation period is only three years. The 'Tribunal' held that the Petition was not filed within time.
(b) As regards, transfer of shares in accordance with provisions of Companies Act, 2013 and Article of Association, the 'Tribunal' held that no documentary evidence or communication between the parties establishing the alleged transfer of shares could be produced by the 'Appellants' herein, as therefore the provisions of Articles of Association and Companies Act were not complied.
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(c) The issue regarding payment of Rs. 14,57,41,557/- as consideration for purchase of alleged share, the 'Tribunal' held that the 'Appellants' herein indeed remitted Rs. 14,66,39,400/- leaving an unexplained difference of Rs. 1,02,157/-. The 'Tribunal' also held that money has not come from the 'Appellant No. 1' herein but from Mr. Linganameni Ramesh, who had remitted the money to the 1st Respondent company herein and taken back substantial amount from the same amount thus, the reason for such transfers cannot be attributed towards transfer of shares and cannot be treated as consideration for acquisition of shares.
(d) As regard, genuineness of the Shares Certificate, the 'Tribunal' has held that glaring differences and concluded that Share Certificates cannot be treated as genuine shares and look fabricated.
(e) Finally, with regard to maintainability of the Petition and entitlement of the relief by the 'Appellant' herein, the 'Tribunal' held that since the 'Appellant' herein failed to proof the case, the Petition was not maintainable.
46. Before examining the merit of the issues, it should be necessary to look into the relevant provisions of the 'Companies Act, 2013'.
"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], specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.
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56. Transfer and transmission of securities - (1) A company shall not register a transfer of securities of the company, or the interest of a member in the company in the case of a company having no share capital, other than the transfer between persons both of whose names are entered as holders of beneficial interest in the records of a depository, unless a proper instrument of transfer, in such form as may be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company by the transferor or the transferee within a period of sixty days from the date of execution, along with the certificate relating to the securities, or if no such certificate is in existence, along with the letter of allotment of securities:
Provided that where the instrument of transfer has been lost or the instrument of transfer has not been delivered within the prescribed period, the company may register the transfer on such terms as to indemnity as the Board may think fit.
(2) Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of an intimation of transmission of any right to securities by operation of law from any person to whom such right has been transmitted.
(3) Where an application is made by the transferor alone and relates to partly paid shares, the transfer shall not be registered, unless the company gives the notice of the application, in such manner as may be prescribed, to the Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 20 of 41 transferee and the transferee gives no objection to the transfer within two weeks from the receipt of notice.
(4) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal or other authority, deliver the certificates of all securities allotted, transferred or transmitted--
(a) within a period of two months from the date of incorporation, in the case of subscribers to the memorandum;
(b) within a period of two months from the date of allotment, in the case of any allotment of any of its shares;
(c) within a period of one month from the date of receipt by the company of the instrument of transfer under sub- section (1) or, as the case may be, of the intimation of transmission under sub-section (2), in the case of a transfer or transmission of securities;
(d) within a period of six months from the date of allotment in the case of any allotment of debenture:
Provided that where the securities are dealt with in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities.
(5) The transfer of any security or other interest of a deceased person in a company made by his legal representative shall, even if the legal representative is not a holder thereof, be valid as if he had been the holder at the time of the execution of the instrument of transfer.
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 21 of 41 (6) Where any default is made in complying with the provisions of sub-sections (1) to (5), the company shall be punishable with fine which shall not be less than twenty- five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.
(7) Without prejudice to any liability under the Depositories Act, 1996, where any depository or depository participant, with an intention to defraud a person, has transferred shares, it shall be liable under section 447.
58. Refusal of registration and appeal against refusal - (1) If a private company limited by shares refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.
(2) Without prejudice to sub-section (1), the securities or other interest of any member in a public company shall be freely transferable:
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 22 of 41 Provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract.
(3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days from the date of receipt of the notice or in case no notice has been sent by the company, within a period of sixty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company.
(4) If a public company without sufficient cause refuses to register the transfer of securities within a period of thirty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, is delivered to the company, the transferee may, within a period of sixty days of such refusal or where no intimation has been received from the company, within ninety days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal. (5) The Tribunal, while dealing with an appeal made under sub-section (3) or subsection (4), may, after hearing the parties, either dismiss the appeal, or by order--
(a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within a period of ten days of the receipt of the order; or
(b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 23 of 41 (6) If a person contravenes the order of the Tribunal under this section, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
59. Rectification of register of members - (1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, or to a competent court outside India, specified by the Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the register. (2) The Tribunal may, after hearing the parties to the appeal under sub-section (1) by order, either dismiss the appeal or direct that the transfer or transmission shall be registered by the company within a period of ten days of the receipt of the order or direct rectification of the records of the depository or the register and in the latter case, direct the company to pay damages, if any, sustained by the party aggrieved.
(3) The provisions of this section shall not restrict the right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 24 of 41 to voting rights unless the voting rights have been suspended by an order of the Tribunal.
(4) Where the transfer of securities is in contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992 or this Act or any other law for the time being in force, the Tribunal may, on an application made by the depository, company, depository participant, the holder of the securities or the Securities and Exchange Board, direct any company or a depository to set right the contravention and rectify its register or records concerned.
CHAPTER XVI PREVENTION OF OPPRESSION AND MISMANAGEMENT
241. Application to Tribunal for relief in cases of oppression, etc.-- (1) Any member of a company who complains that--
(a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or
(b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company's shares, or if it has no share capital, in its Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 25 of 41 membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter.
(2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter.
[Provided that the applications under this sub-section, in respect of such company or class of companies, as may be prescribed, shall be made before the Principal Bench of the Tribunal which shall be dealt with by such Bench.] [(3) Where in the opinion of the Central Government there exist circumstances suggesting that -
(a) any person concerned in the conduct and management of the affairs of a company is or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law or of breach of trust;
(b) the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices;
(c) a company is or has been conducted and managed by such person in a manner which is likely to cause, or has caused, serious injury or damage to the interest of Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 26 of 41 the trade, industry or business to which such company pertains; or
(d) the business of a company, is or has been conducted and managed by such person with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public interest, the Central Government may initiate a case against such person and refer the same to the Tribunal with a request that the Tribunal may inquire into the case and record a decision as to whether or not such person is a fit and proper person to whole the office of director or any other office connected with the conduct and management of any company.
(4) The person against whom a case is referred to the Tribunal under sub-section (3), shall be joined as a respondent to the application.
(5) Every application under sub-section (3)-
(a) shall contain a concise statement of such circumstances and materials as the Central Government may consider necessary for the purposes of the inquiry; and
(b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908 (5 of 1908), for the signature and verification of a plaint in a suit by the Central Government.]
242. Powers of Tribunal.-- (1) If, on any application made under section 241, the Tribunal is of the opinion--
(a) that the company's affairs have been or are being conducted in a manner prejudicial or oppressive to any Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 27 of 41 member or members or prejudicial to public interest or in a manner prejudicial to the interests of the company; and
(b) that to wind up the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.
(2) Without prejudice to the generality of the powers under sub-section (1), an order under that sub-section may provide for--
(a) the regulation of conduct of affairs of the company in future;
(b) the purchase of shares or interests of any members of the company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital;
(d) restrictions on the transfer or allotment of the shares of the company;
(e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case;
(f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e):
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021
28 of 41 Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned;
(g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;
(h) removal of the managing director, manager or any of the directors of the company;
(i) recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims;
(j) the manner in which the managing director or manager of the company may be appointed subsequent to an order removing the existing managing director or manager of the company made under clause (h);
(k) appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal on such matters as the Tribunal may direct;
(l) imposition of costs as may be deemed fit by the Tribunal;
(m) any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made.
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 29 of 41 (3) A certified copy of the order of the Tribunal under sub- section (1) shall be filed by the company with the Registrar within thirty days of the order of the Tribunal. (4) The Tribunal may, on the application of any party to the proceeding, make any interim order which it thinks fit for regulating the conduct of the company's affairs upon such terms and conditions as appear to it to be just and equitable.
[(4-A) At the conclusion of the hearing of the case in respect of sub- section (3) of section 241, the Tribunal shall record its decision stating therein specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.] (5) Where an order of the Tribunal under sub-section (1) makes any alteration in the memorandum or articles of a company, then, notwithstanding any other provision of this Act, the company shall not have power, except to the extent, if any, permitted in the order, to make, without the leave of the Tribunal, any alteration whatsoever which is inconsistent with the order, either in the memorandum or in the articles.
(6) Subject to the provisions of sub-section (1), the alterations made by the order in the memorandum or articles of a company shall, in all respects, have the same effect as if they had been duly made by the company in accordance with the provisions of this Act and the said provisions shall apply accordingly to the memorandum or articles so altered.
(7) A certified copy of every order altering, or giving leave to alter, a company's memorandum or articles, shall Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 30 of 41 within thirty days after the making thereof, be filed by the company with the Registrar who shall register the same.
(8) If a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh 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 shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both."
244. Right to apply under section 241. - (1) The following members of a company shall have the right to apply under section 241, namely:--
(a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than onetenth of the issued share capital of the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares;
(b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members:
Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241.
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 31 of 41 Explanation.--For the purposes of this sub-section, where any share or shares are held by two or more persons jointly, they shall be counted only as one member.
(2) Where any members of a company are entitled to make an application under subsection (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them
248. Power of Registrar to remove name of company from register of companies. - (1) Where the Registrar has reasonable cause to believe that--
(a) a company has failed to commence its business within one year of its incorporation; (or) [***]
(c)a company is not carrying on any business or operation for a period of two immediately preceding financial years and has not made any application within such period for obtaining the status of a dormant company under section 455,
(d) the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation under sub-section (1) of section 10-A; or
(e) the company is not carrying on any business or operations, as revealed after the physical verification carried out under sub-section (9) of section 12,] he shall send a notice to the company and all the directors of the company, of his intention to remove the name of the company from the register of companies and requesting Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 32 of 41 them to send their representations along with copies of the relevant documents, if any, within a period of thirty days from the date of the notice.
(2) Without prejudice to the provisions of sub-section (1), a company may, after extinguishing all its liabilities, by a special resolution or consent of seventy-five per cent. members in terms of paid-up share capital, file an application in the prescribed manner to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub- section (1) and the Registrar shall, on receipt of such application, cause a public notice to be issued in the prescribed manner:
Provided that in the case of a company regulated under a special Act, approval of the regulatory body constituted or established under that Act shall also be obtained and enclosed with the application.
(3) Nothing in sub-section (2) shall apply to a company registered under section 8.
(4) A notice issued under sub-section (1) or sub-section (2) shall be published in the prescribed manner and also in the Official Gazette for the information of the general public.
(5) At the expiry of the time mentioned in the notice, the Registrar may, unless cause to the contrary is shown by the company, strike off its name from the register of companies, and shall publish notice thereof in the Official Gazette, and on the publication in the Official Gazette of this notice, the company shall stand dissolved.
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 33 of 41 (6) The Registrar, before passing an order under sub- section (5), shall satisfy himself that sufficient provision has been made for the realisation of all amount due to the company and for the payment or discharge of its liabilities and obligations by the company within a reasonable time and, if necessary, obtain necessary undertakings from the managing director, director or other persons in charge of the management of the company:
Provided that notwithstanding the undertakings referred to in this sub-section, the assets of the company shall be made available for the payment or discharge of all its liabilities and obligations even after the date of the order removing the name of the company from the register of companies.
(7) The liability, if any, of every director, manager or other officer who was exercising any power of management, and of every member of the company dissolved under sub-
section (5), shall continue and may be enforced as if the company had not been dissolved.
(8) Nothing in this section shall affect the power of the Tribunal to wind up a company the name of which has been struck off from the register of companies."
(emphasis supplied)
47. It is the case of the 'Appellants' that the 2nd Respondent was in need of the money and requested the 'Appellants' herein to take over the company by way of acquisition of 10,51,933 equity shares from 2nd Respondent for consideration of Rs. 14,67,41,557/-. The 'Appellants' submitted that they gave the money to the 'Respondents' and the 'Respondents' issued Share Certificate dated 18.04.2015 duly executed as per Section 46(1) of the Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 34 of 41 Companies Act, 2013 r/w Companies (Share Capital and Debentures Rules, 2014).
48. It is further the case of the 'Appellants' that due to their long relationship with the 'Respondents', the 'Appellants' had full trust and never doubted any wrong doing on the part of the 'Respondents'. The 'Appellants' interest was only in successful running of the company and under this good faith assumption never cross checked regarding any other aspects. However, during 2017, the 'Appellants' were horrified to know that the name of the 1st Respondent company has been removed for non-submission of financial statement for the year 2014-15, 2015-16, 2016-17 and the Registrar of Companies struck off the name of the 1st Respondent company in terms of Section 248 of the Companies Act, 2013.
49. The 'Appellant' pleaded that non transfer of shares in favour of the 'Appellants' by the 'Respondents' tantamounted to Oppression and Mismanagement in terms of Section 241 of the Companies Act, 2013 and therefor, filed the Petition before the 'Tribunal' under Section 59, 241 r/w Section 242, 244 of the Companies Act, 2013.
50. Per-contra, it is the case of the 'Respondent' that there was no relationship between the 'Appellants' and the 'Respondents' and the Respondents never received any money from the Appellants and therefore, there was no question of any transfer of shares from 2nd Respondents to the Appellants. It is further the case of the Respondent that the 'Appellants' in connivance with Mr. Linganameni Ramesh, who gave Rs. 14,67,41,557/-
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 35 of 41 but taken back Rs. 9 Crores, are trying to grab the 1st Respondent company who has a valuable piece of the land. The 2nd Respondent submitted that under threat and looking into circumstances of dire financial stress the 'Respondents', Mr. Linganameni Ramesh forced the 2nd Respondent to sign blank paper which apparently has been used by the 'Appellants' to commit frauds on 1st Respondent company as well as 2nd, 3rd & 4th Respondents.
51. This 'Appellate Tribunal' has already discussed the relevant provisions of the Companies Act, 2013 and the procedure regarding transfer of shares in case of Private Limited Company along with the Rules regarding compliance of Article of Association. This 'Appellate Tribunal' notes from the averments of the parties as well as from the 'impugned order' that there was no direct relationship between the 'Appellants' herein with the 'Respondents' herein.
Accordingly, to the understanding with the 2nd Respondent, Mr. Lingamaneni Ramesh remitted through his known persons the following amounts to the Respondent's bank account with YES Bank, Vijayawada.
1. 17.04.2015 Sripathi Srivana 4,87,90,000
2. 17.04.2015 Vahini Surya Ch 4,90,59,400
3. 17.04.2015 Manjusha 4,87,90,000 Yalamanchali 14,66,39,400/-
Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 36 of 41 Details of amount returned as per the instructions of Mr. Lingamaneni
1. 18.04.2015 Swarna Bhaskar H 7,50,00,00
2. 18.04.2015 Venkata Surya R 1,50,00,000 9,00,00,000 First of all, the money has not been transferred by the 'Appellants' in favour of the 'Respondents'. Secondly, as admitted in the averments as well as recorded clearly in the 'impugned order' that, Mr. Linganameni Ramesh gave Rs. 14,67,41,557/- and took back Rs. 9 Crores from the 'Respondents' as such prima-facie this does not seem to be a clear transaction of payment of money towards acquisition of shares and consequently allotment of shares in favour of the 'Appellants' is also not established.
52. As regard, the point of limitation, this 'Appellate Tribunal' we have carefully perused the recording in the 'impugned order' and note that the 'Tribunal' has held that alleged transfer of shares in favour of the 'Appellant' herein was claimed to be on 18.04.2015, whereas, the Petition was filed before the 'Tribunal' on 09.11.2018 which is beyond three years and as per Article 113 of the Limitation Act, 1963 the limitation period is only three years. This 'Appellate Tribunal' do not find any error in the 'impugned order'.
53. This 'Appellate Tribunal' also do not find any material which can substantiate that all the procedures laid down in the companies Act, 2013 as well as the Article of Association were followed by the 'Appellants' herein. The photocopies of the share capital as a form have already been denied to be true by the 'Respondents' and the same has been held by the 'Tribunal' Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 37 of 41 as tannable averments from the Respondents herein. This 'Appellate Tribunal' also observes that the 'Tribunal' had discussed this aspect in detail in the 'impugned order' and recorded that no concrete evidence or documentary proof could be furnished by the 'Appellants' herein to proof their claims of genuine certificates. In fact, the 'Tribunal' held that the alleged Share Certificate submitted by the 'Appellants' herein to be fabricated and fraudulent as there were lot of discrepancies, in the forms and substance, of the Shares Certificate vis-à-vis the original certificates held by the 'Respondents'. In fact, on this particular point about genuineness of Share Certificates claimed by the 'Appellant', the 'Respondents' herein had moved an 'Application bearing No. IA/23/2019 before the 'Tribunal' seeking directions against the 'Appellant' to produce original share certificates and share transfer deeds before the 'Tribunal' and the 'Tribunal' in its order dated 18.02.2021 directed the 'Appellants' to produce the original certificate but the 'Appellants' herein failed to comply with the said order of the 'Tribunal'. This entire series of events, do not augur well for the 'Appellants' and do not establish genuineness of the alleged Shares Certificates claim to be held by the 'Appellants' along with the process of obtaining the Share Certificate.
54. This 'Appellate Tribunal' further finds it strange that the 'Appellants' claimed to have given Rs. 14,67,41,557/-, which was never followed by the 'Appellants' to pursue his rights and no concrete/ solid documentary evidence could be furnished by the 'Appellants' to indicate that all basic requirements before issue of Share Certificate were complied with in Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 38 of 41 accordance with Companies Act, 2013 r/w Rule 11 of the Companies (Share Capital and Debentures) Rules, 2014 as well as Article of Association. It is fundamental that without completing these formalities no corporate entity can issue or transfer the Share Certificate in the name of Allottee/ Transferee. Moreover, both the 1st Respondent Company as well as 2nd Respondent and alleged transferor of shares had denied any such events. In fact, the 2nd Respondent has categorically stated that he had neither intention of selling or transferring of any share nor did he transfer any share.
55. This 'Appellate Tribunal' also observed that there is no communication between the 'Appellant' herein and the Respondent herein during the relevant period of alleged dates of transfer of shares in the year 2015 and immediately thereafter and in absence of any concrete trail of suitable communications between the various parties involved, it is difficult to believe that indeed such transaction took place which establishes the right to claim said shares by the 'Appellants'.
56. This 'Appellate Tribunal' further finds it surprising that although the Appellants is claiming to hold 94.8% of Share Capital of the 1st Respondent Company, yet they did not bother to take over the management and control of the 1st Respondent Company. It is natural and established commercial prudence that person holding the majority of share will have dominating position in composition of Board of Directors of the Company. It is no one's case that after investing Rs. 14,67,41,557/-, allegedly as consideration for share transfer, the 'Appellants' were completely silent till 2017 and all of a Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 39 of 41 sudden in 2017 they, on their own try to find out from MCA Portal regarding existence or non existence of the 1st Respondent Company. This 'Appellate Tribunal' also takes into consideration the averment made by the 'Appellants' before this 'Appellate Tribunal' that the 'Appellants' had long time relationship with the 'Respondents' and had full trust in the 'Respondents' and in this background this 'Appellate Tribunal' finds it difficult to accept the fact that alleged fraud was done by the 'Respondents' as well as the 'Appellants' woke up to its rights in 2017 without any rhyme and reason or trigger point which instigated the 'Appellants' to look into the matter. Further, this 'Appellate Tribunal' also does not find convincing that the 'Appellants' did not get any notice of the meeting including that of AGM or have not received any documents/ minutes/circular/ agenda/ annual financial statement/ statutory audit report and yet did not seek any remedy thereafter in the entire period.
57. As regards, the case of `Oppression and Mismanagement', claimed by the `Appellants', under Section 241 r/w Section 242 of the Companies Act, 2013, the 'Appellants'/ `Claimants', has to cross the first hurdle of Locus. The `Oppression and Mismanagement', is available only to a person who is aggrieved and who is also a `Member' / `Shareholder', of the Company.
As discussed and observed earlier in preceding paragraphs that the 'Appellants' could not establish regarding their entitlement to receive `Transfer Shares', from the 'Respondents', neither could prove that the `payment', was indeed made by the 'Appellants' to the 'Respondent' for Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 40 of 41 consideration of said shares. It is, therefore, establishes that the 'Appellants', did not have any share in their names and were therefore not `members' / `shareholders', of the 1st Respondent Company and therefore, the 'Appellants', do not have any `Locus', to file an application, under Section 241, r/w Section 242 of the Companies Act, 2013.
58. In the light of above detailed, qualitative and quantitative analysis, keeping in mind the legal provisions of the Companies Act, 2013, this 'Appellate Tribunal', do not find any error in the 'impugned order'. The 'Appeal', is `Dismissed', as devoid of any merit(s). No Costs.
[Justice M. Venugopal] Member (Judicial) [Naresh Salecha] Member (Technical) Simran Company Appeal (AT) (CH) No. 44 of 2021 & I.A. No. 548/2021 41 of 41