Kerala High Court
Mr. Ayoli Abdulla vs M/S. Meezan Realtors Pvt. Ltd on 20 November, 2015
Author: Anil K.Narendran
Bench: P.R.Ramachandra Menon, Anil K.Narendran
IN THE HIGH COURT OF KERALAAT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON
&
THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN
FRIDAY, THE 17TH DAY OF JUNE 2016/27TH JYAISHTA, 1938
Co.Appeal.No. 13 of 2015 ()
----------------------------
AGAINST THE ORDER IN CP 100/2011 of COMPANY LAW BOARD, CHENNAI BENCH
DATED 20-11-2015
APPELLANT:
----------------
MR. AYOLI ABDULLA,
KUNNAKKAD HOUSE, OORAKKAM,
MELMURI, MALAPPURAM DISTRICT,
KERALA.
BY ADVS.SRI.M.P.SHAMEEM AHAMED
SRI.CYRIAC TOM
SRI.S.K.SAJU
RESPONDENTS:
------------------------
1. M/S. MEEZAN REALTORS PVT. LTD.
HAVINGS ITS REGISTERED OFFICE AT 5/34, IIND LEVEL,
GALLERIA TRADE CETNRE, PUTHIYARA P.O.,
MAVOOR ROAD, CALICUT-673 004.
2. ABDUSALAM KURIKKAL MANJERI PUTHUSSERI
S/O.MOHAMMED ABDURAHIMAN, RESIDING AT SUHARA MANZIL,
MANJERI-3, NELLIPARAMBU P.O.,
KARUVAMBRAM, MALAPURAM DISTRICT-676 123.
3. MOHAMMED KUTTY CHELAT
S/O.MOOSA HAJI CHELAT,
RESIDING AT CHELAT HOUSE, NIRAMARUTHUR,
TIRUR, PIN-676 109.
4. POCKER ULLATTIL
S/O.ULLATTIL MOIDEEN, RESIDING AT JASMINE VILLA,
JAYANTHI ROAD, NALLALAM,
KOZHIKODE-673 027.
R1 BY ADV. SRI. N.K. SANTHA KUMAR(CAVETOR)
R1-R4 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR
R1-R4 BY ADV. SRI.P.GOPINATH
R1-R4 BY ADV. SRI.P.BENNY THOMAS
R1-R4 BY ADV. SRI.KURYAN THOMAS
R1-R4 BY ADV. SRI.PAULOSE C. ABRAHAM
THIS COMPANY APPEAL HAVING BEEN FINALLY HEARD ON 18-03-2016, THE
COURT ON 17-06-2016, DELIVERED THE FOLLOWING:
APPENDIX IN COA.No.13/15
PETITIONER'S ANNEXURES:
ANNEXURE A1: COPY OF CERTIFICATE OF INCORPORATION DT.23.8.03.
ANNEXURE A2: COPY OF FORM 32 DATED 16.5.2007 APPOINTING 2ND
RESPONDENT AS A DIRECTOR OF THE COMPANY.
ANNEXURE A3: COPY OF FORM 32 DATED 23.5.2007 REMOVING MR.SALAHUDDIN
NALAKATH FROM THE ROLE OF DIRECTOR OF THE COMPANY.
ANNEXURE A4: COPY OF RESOLUTION FOR THE REMOVAL OF MR.SALAHUDHIN
NALAKATH FROM THE ROLE OF DIRECTOR.
ANNEXURE A5: COPY OF AFFIDAVIT FILED BY RESPONDENT NO.4 DT.26.7.2011.
ANNEXURE A6: COPY OF SHARE TRANSFER FORM DT.27.4.2011.
ANNEXURE A7: COPY OF FORM 32 DT.10.12.2011 SHOWING THE DESIGNATION OF
THE APPELLANT HAS BEEN CHANGED FROM MANAGING DIRECTOR
TO DIRECTOR AND RESPONDENT NO.4 WAS APPOINTED AS
MANAGING DIRECTOR WITH EFFECT FROM 25.9.2011 AND
FURTHER THAN RESPONDENT NO.3 WAS APPOINTED AS
DIRECTOR WITH EFFECT FROM 25.9.11.
ANNEXURE A8: COPY OF COMPANY PETITION FILED BEFORE THE COMPANY LAW
BOARD.
ANNEXURE A9: COPY OF COUNTER DT.3.9.12 FILED BY THE RESPONDENTS.
ANNEXURE A10: COPY OF ANNUAL RETURN MADE UPTO 30.9.2011 FILED ON
12.12.2011.
ANNEXURE A11: COPY OF COMPANY APPLICATION NO... OF 2015 DT.16.5.15.
ANNEXURE A12: CERTIFIED COPY OF ORDER DT.20.11.2015 OF THE COMPANY LAW
BOARD.
ANNEXURE A13: COPY OF WRITTEN SUBMISSIONS FILED BY THE RESPONDENTS
TO COMPANY APPLICATION No.1 OF 2015.
ANNEXURE A14: COPY OF COMPANY APPLICATION NO.. OF 2015 DT.23.2.2015.
ANNEXURE A15: COPY OF COMPLAINT DT.28.3.2012 FILED BEFORE THE CJM COURT.
ANNEXURE A16: COPY OF FIR REGISTERED AGAINST THE RESPONDENTS.
ANNEXURE A17: COPY OF MEMORANDUM OF ASSOCIATION OF 1ST RESPONDENT
COMPANY DT.22ND AUGUST 2003.
ANNEXURE A18: COPY OF PLAINT FILED BY THE 1ST RESPONDENT COMPANY IN
O.S.NO.82/2006 BEFORE THE COURT OF SUBORDINATE JUDGE,
CALICUT.
ANNEXURE A19: COPY OF JUDGMENT OF THE COURT OF SUBORDINATE JUDGE,
CALICUT.
ANNEXURE A20: COPY OF ARTICLES OF ASSOCIATION OF 1ST RESPONDENT
COMPANY DT.22ND AUGUST 2003.
COA.No.13/15
RESPONDENTS' ANNEXURES:
ANNX.R1(A): TRUE COPY OF MINUTES OF THE MEETING OF THE BOARD OF
DIRECTORS OF MEEZAN JEWELLERS LIMITED HELD ON 27.4.2011.
ANNX.R1(B): TYPED COPY OF ANNX.R1(A)
ANNX.R1(C): TRUE COPY OF LETTER DT.15.8.2011 ISSUED BY THE APPELLANT.
ANNX.R1(D): TRUE COPY OF MINUTES OF THE BOARD MEETING OF MEEZAN
REALTORS PRIVATE LIMITED HELD ON 27.4.2011.
TRUE COPY
P.S. TO JUDGE
dsn
"CR"
P.R.RAMACHANDRA MENON & ANIL K.NARENDRAN, JJ.
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Company Appeal No.13 OF 2015
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DATED THIS THE 17th DAY OF JUNE, 2016
JUDGMENT
ANIL K.NARENDRAN, J.
This appeal arises out of the order dated 20.11.2015 of the Company Law Board, Chennai in C.P.No.100 of 2011. The said Company Petition was one filed by the appellant herein under Sections 111, 398, 402 and 406 of the Companies Act, 1956 (hereinafter referred to as 'the Act'), seeking an order to set aside the share transfers purported to have been made to the 4th respondent by the appellant and the 2nd respondent and the subsequent transfers made by the 4th respondent to the 2nd and 3rd respondents and to declare void (i) Form 32 filed for appointment of the 3rd respondent as a Director and the 4th respondent as the Managing Director of the 1st respondent Company; and (ii) Form 32 filed for changing the designation of the appellant from that of the Managing Director of the 1st respondent Company to that of a Director of that Company. The appellant has also sought for rectification of the register of members of the 1st respondent Company by removing the names of the 2nd, 3rd and 4th respondent Co.Appeal No.13/15 -2- as its members and other consequential reliefs.
2. The Company Law Board (hereinafter referred to as 'the CLB') by Annex.A12 order dated 20.11.2015 dismissed C.P.No.100 of 2011 as not maintainable, on a finding that the appellant ceased to be a shareholder of the 1st respondent Company, on transfer of his shares to the 4th respondent and as such he has no locus standi to file Company Petition before the CLB. The reasoning of the CLB, as contained in Para.8 of Annex.A12 order, reads thus;
"8. The petitioner has not denied the transfer of shares to the 4th respondent nor disputed the signatures on the share transfer forms. However at para 6(viii) it is stated that he was merely coerced by the 4th respondent along with few other persons with a threat to his life and bodily harm, to transfer the shares held by him in the R1 Company to the 4th respondent. Further it is stated that he was coerced to sign a share transfer form which was first signed by the 2nd respondent as the 1st holder and the petitioner was forced to sign it as a 2nd holder. There is no record to show that what legal action the petitioner has taken if he was threatened to sign the share transfer form and transfer the shares to the 4th respondent. As per law the transfer of shares by the petitioner is legal and valid. Co.Appeal No.13/15 -3- Further the petitioner contends that he represented the Company when the Company filed a suit for specific performance against the defendant being OS No.82 of 2006 before the Hon'ble Court of Subordinate Judge, Calicut. The R1 Company is the plaintiff in the suit however the petitioner represented the Company in the capacity as Managing Director. The said stand cannot be a ground to contend that he continued to be a shareholder of the Company or has any vested interest. Further the 4th respondent filed an affidavit dated 26.7.2011 before the Hon'ble Sub Court in OS No.82 of 2006 clarifying the position and stated that the petitioner had transferred his shares on 27.4.2011 itself and he ceases to be a director of the Company and lost all association with the Company. Hence it was prayed to delete the name of the petitioner from the cause title of the plaint being O.S.No.82 of 2006. It is more clinching evidence regarding transfer of shares of the petitioner to the 4th respondent from the annual returns for the year 30.9.2011 wherein the transfer of shares of the petitioner was shown as transferred to the 4th respondent. In view of the aforesaid reasons, the petitioner ceases to be a shareholder of the Company and has no locus standi to file a petition before this Bench. Accordingly, the C.P.No.100/2011 is dismissed as not maintainable. The interim orders if any operating as on this date stand vacated. Applications if any pending as on this date stand disposed of. No order as to costs." Co.Appeal No.13/15 -4-
3. Feeling aggrieved by Annex.A12 order passed by the CLB, the appellant is before this Court in this appeal filed under Section 10F of the Act, raising substantial questions of law.
4. By order dated 7.12.2015 in I.A.No.4332 of 2015 in Co.Appl.No.13 of 2015 this Court ordered that status quo shall be maintained till the next posting date and the matter was ordered to be listed immediately after competition of service of notice. The said order of status quo was thereafter extended from time to time till 2.2.2016. Later, on 4.2.2016, while posting the matter to 12.2.2016, it was ordered that the interim order will continue till then.
5. We heard the arguments of the learned counsel for the appellant and also the learned counsel for the respondents.
6. Going by the averments in the Company Petition, M/s.Meezan Realtors Pvt. Ltd. (hereinafter referred to as the 1st respondent Company) was incorporated on 23.8.2003, vide Annex.A1 certificate of registration, with the appellant and one Mr.Salahuddin Nalakath as its first Directors. The authorised capital of the Company was 1,00,000/- divided into 1,000 equity Co.Appeal No.13/15 -5- shares of 100/- each and that, the appellant holds 500 equity shares of 100/- each, equivalent to 50% of the issued share capital. Article 29 of the Articles of Association of the 1st respondent Company prescribes holding of at least 5 equity shares as qualification shares for continuing as a Director and that such shares shall be acquired within a period of two months from the date of their appointment. Mr.Salahuddin Nalakath failed to pay the share subscription money in respect of the equity shares agreed to be subscribed, within the time prescribed under Section 270 of the Act, and thus vacated his office as Director on 5.11.2003, under the provisions of Section 283(1)(a) of the Act. Annex.A3 is Form No.32 regarding cessation of office of Mr.Salahuddin Nalakath. Soon after the incorporation, the 2nd respondent was admitted as a Director of the 1st respondent Company on 29.8.2003. Annex.A2 is Form No.32 filed by the 1st respondent Company in this regard. But, the 1st respondent Company did not issue any shares to the 2nd respondent.
7. The appellant contended that, after cessation of office of Mr.Salahuddin Nalakath, the entire affairs of the 1st respondent Co.Appeal No.13/15 -6- Company was being managed by him as its Managing Director. Later, in O.S.No.82/2006 filed on behalf of the 1st respondent Company before the Sub Court, Kozhikode, for specific performance of Annex.A4 agreement, the 4th respondent filed an application along with Annex.A6 affidavit seeking an order to amend the cause title of the plaint by substituting his name as the Managing Director of the 1st respondent Company, in the place of the appellant. In the said affidavit it has been stated that, on 27.4.2011 the entire shareholding of the appellant in the 1st respondent Company was transferred in the name of the 4th respondent and necessary application for transfer of shares has already been submitted. The 4th respondent was appointed as the Managing Director of the Company, he having purchased the shares of the appellant and the other Director, and ever since 27.4.2011 the appellant ceased to have the authority to represent the Company.
8. The appellant contended that, he has not consented to the purported transfer of shares alleged to have been made on 27.4.2011 and that he was coerced by the 4th respondent along Co.Appeal No.13/15 -7- with few others, with a threat to his life and bodily harm, to transfer the shares held by him in the 1st respondent Company to the 4th respondent. He was coerced to sign a share transfer form as the second holder, which form was first signed by the 2nd respondent as the first holder. The appellant contended further that, the transfer deed executed by him was invalid, as the date of presentation of that deed was 16.11.2010, which has not been re-validated before its acceptance in a Board meeting, even if it is to be assumed that such a Board meeting was in fact convened. Further, the said transfer deed contain the signature of both the appellant and the 2nd respondent as the joint transferors, for the transfer of 500 equity shares of the 1st respondent Company, as if the appellant and the 2nd respondent are the joint holders of those equity shares, which is prima facie invalid and erroneous. In sub-para (i) to (xii) of Para.6(b) of the Company Petition, the appellant has stated in detail the alleged oppressive tactics and acts of mismanagement in the affairs of the 1st respondent Company. It was in such circumstances, the appellant approached the CLB in C.P.No.100 of 2011, seeking various Co.Appeal No.13/15 -8- reliefs.
9. Before the CLB, the respondents filed Annex.A9 counter. According to the respondents, the appellant had transferred his entire shareholding to the extent of 1000 shares, by executing Annex.B1 share transfer form on 27.4.2011, in favour of the 4th respondent. Having thus divested his entire shareholding, the appellant ceased to be a member of the 1st respondent Company and hence he has no locus standi to maintain the Company Petition before the CLB. The respondents have also denied the alleged acts of oppression and mismanagement in the affairs of the 1st respondent Company.
10. The respondents contended that, the Board of Directors of the 1st respondent Company at its meeting held on 28.5.2011 considered and approved the transfer of shares to the extent of 330 shares each held by the 4th respondent, to and in favour of the 2nd and 3rd respondents. Annex.B2 is the minutes of that Board meeting held on 28.5.2011. The fact that no fresh shares were issued in favour of the 2nd respondent has been admitted in Para.14 of Annex.A9 counter. According to the Co.Appeal No.13/15 -9- respondents, the unsubscribed 500 equity shares of the other promoter Mr.Salahuddin Nalakath has been transferred in favour of the 2nd respondent way back on 5.11.2003 and the Board, of which the appellant was a party, unanimously approved the share transfer and handed over the share certificates in favour of the 2nd respondent, as evident from Annex.B3 minutes of the Board meeting held on 5.11.2003.
11. The respondents alleged that, when the appellant was the Managing Director of the 1st respondent Company he had collected 2,24,10,000/- as share application money from prospective investors, but did not allot shares or even increased the authorised capital of the Company. When there was protest from the investors, a religious leader acceptable to both the parties acted as a mediator and facilitator to resolve the deadlock in the management and in the meeting held on 27.4.2011, it was resolved to transfer the management and control of the 1st respondent Company from the hands of the appellant to the 4th respondent. In pursuance of that decision the appellant tabled before the Board a duly signed share transfer form to transfer all Co.Appeal No.13/15 -10- the shares held by him to the 4th respondent, which was unanimously approved in the meeting. Therefore, according to the respondents, the appellant is not holding any shares in the 1st respondent Company and the appellant not being a member of the said Company has no business to enquire into its affairs.
12. Regarding the share transfer forms, the respondents contended that, if the share transfer forms are invalid as alleged, the appellant has to take the responsibility for the same, since it was he who presented the forms. The respondents would also point out that, the appellant has not denied his signature on the form and the only aspect that is being impugned before the CLB is that, the 2nd respondent has also signed the form as if he was a joint holder of the shares. According to the respondents, the appellant, knowing fully well that the 2nd respondent's signature was not needed as transferor, duly acquiesced in the process, and having done so, he is estopped at this stage from questioning the validity of that process.
13. The respondents contended that, at the Board meeting held on 9.8.2011, the 3rd and 4th respondents have been made Co.Appeal No.13/15 -11- additional Directors of the 1st respondent Company. Later, they were confirmed as Directors of the Company in the General Meeting of the 1st respondent Company held on 30.9.2011, as evident from Annex.B5 resolution. The appellant raised the issue of threat to life, etc., only in the Company Petition which was filed before the CLB in December, 2011. He did not find it proper to approach the Police authorities to file a complaint if he was indeed threatened with death or bodily harm. According to the respondents, since the entire shareholding of the appellant stood transferred in favour of others, with effect form 27.4.2011, he did not hold necessary qualification shares (5 shares) as required under Article 29 of the Articles of Association of the 1st respondent Company. Hence his office stood automatically vacated in terms of Section 283(1)(a) of the Act, without any act or deed or thing on the part of the Company or its Directors.
14. The respondents contended further that, the decisions taken at the General Meeting of the Company on 27.4.2011 was duly ratified by the Board in its meeting held on 15.5.2011. Hence, the transfer of shares was complete. Further, the Board Co.Appeal No.13/15 -12- meetings held on various dates on and subsequent to 27.2.2011, the date on which the appellant transferred his entire shareholding in favour of others, were all with necessary quorum, in terms of Article 32 of the Articles of Association of the 1st respondent Company, i.e., one-third of the total strength of the Board or two Directors, whichever is higher. All the meetings were conducted with proper quorum as evidenced by Annex.B2 to B4. Therefore, according to the respondents, the Company Petition is nothing but a sham to arm-twist the respondents. Since the appellant has no locus standi to prefer or maintain the Company Petition, the same is liable to be dismissed.
15. The CLB, after considering the rival contentions, dismissed the Company Petition by Annex.A12 order, holding that since the shareholding of the appellant was shown as transferred to the 4th respondent, he ceases to be a shareholder of the 1st respondent Company and has no locus standi to file a petition before the CLB. Accordingly, the Company Petition was dismissed as not maintainable. It was also ordered that the interim orders, if any, operating as on the date of order shall stand vacated and Co.Appeal No.13/15 -13- the applications, if any, pending as on that date shall stand disposed of.
16. Since the Company Petition filed being a composite one seeking rectification of register and also alleging oppression and mismanagement, the appellant has to establish his right to apply, as provided under Section 399 of the Act. A reading of Annex.A12 order passed by the CLB would show that the appellant was non-suited accepting the case of the respondents that, the entire shareholding of the appellant stands transferred in favour of the 4th respondent on the strength of Annex.B1 share transfer form and as such, as on the date of presentation of C.P.No.100 of 2011, the appellant has no locus standi to maintain such a petition before the CLB. The circumstances taken into account by the CLB for arriving at such a conclusion are that, the appellant has not denied the transfer of shares to the 4th respondent nor disputed the signatures on the share transfer forms; there is no record to show that what legal action the appellant has taken if he was threatened to sign the share transfer form and transfer the shares to the 4th respondent; the Co.Appeal No.13/15 -14- transfer of shares held by the appellant to the 4th respondent is shown in the annual returns of the 1st respondent Company for the year 30.9.2011; etc. In view of the aforesaid reasons, the CLB concluded that, the transfer of shares by the appellant to the 4th respondent is legal and valid, and the appellant, who ceased to be a shareholder of the 1st respondent Company, has no locus standi to file such a petition.
17. Along with the Company Appeal the appellant produced certain additional documents, which do not form part of the Company Petition filed before the CLB. Instead of producing the additional documents along with an application under Order XLI Rule 27 of the Code of Civil Procedure, 1908, those documents are marked as Annexures and produced along with the memorandum of appeal, as if it forms part of the proceedings before the CLB. Going by the provisions under Order XLI Rule 27 of the CPC, additional documents can be accepted only if due diligence is established, despite which the appellant could not produce the same before the CLB. No explanation is forthcoming from the appellant in this regard. During the pendency of this Co.Appeal No.13/15 -15- appeal, the appellant produced few more additional documents along with I.A.No.138 of 2016 filed on 14.1.2016 and I.A.No.1049 of 2016 filed on 18.3.2016, both filed under Rule 154 of the Rules of the High Court of Kerala, 1971. It is well settled that, mere quoting of a wrong provision of law in an application will not disentitle the party to the relief sought for in that application. However, for entertaining such an application, in the affidavit accompanying the said application the appellant has to make out a case for the exercise of power by the appellate Court under Order XLI Rule 27 of the CPC.
18. Though a copy of I.A.Nos.138 of 2016 and 1049 of 2016 has been served on the respondents, they have not sought for time to file any counter affidavit. On 16.3.2016, the respondents have filed an additional affidavit sworn by the 2nd respondent, producing therewith a true copy of the minutes of the meeting of the Board of Directors of Meezan Jewellers Ltd. held on 27.4.2011 [Annex.R1(a)]; a true copy of the letter dated 15.8.2011 of the appellant addressed to Meezan Jewellers and to its Managing Director [Annex.R1(c)]; and a true copy of the Co.Appeal No.13/15 -16- minutes of the meeting of the Board of Directors of 1st respondent Company held on 27.4.2011 [Annex.R1(d)].
19. Relying on Annexure R1(a) minutes, the learned counsel for the respondents contended that, in the meeting of the Board of Directors of Meezan Jewellers Ltd. held on 27.4.2011, a decision has been taken to transfer all the shares held by the appellant in Meezan Realtors Pvt. Ltd. (the 1st respondent Company) in favour of the 4th respondent, who has been authorised to take over the management of all associate Companies of 'Meezan Group'. Following the said decision, the appellant sent Annex.R1(c) letter dated 15.8.2011, resigning from the directorship of Meezan Jewellers Ltd.
20. The learned counsel for the respondents, with reference to the averments made in the additional affidavit filed on 16.3.2016, contended that, since all the members and directors of the 1st respondent Company are directors of Meezan Jewellers Ltd. and all of them were present in the meeting of the Board of Directors of Meezan Jewellers Ltd. held on 27.4.2011, following the execution of Annex.B1 share transfer form by the Co.Appeal No.13/15 -17- appellant, a meeting of the Board of Directors of the 1st respondent Company was also held on 27.4.2011, wherein a decision was taken to induct Mr.Salahuddin Nalakath as a Director of the 1st respondent Company, as reflected in Annex.R1
(d) minutes. The learned counsel contended further that, the said appointment of Mr.Salahuddin Nalakath was for filling up the casual vacancy in the Board of Directors of the 1st respondent Company, resulted on account of the 'disqualification' incurred by the appellant under Section 283(1)(a) of the Act.
21. As borne out from the pleadings and materials on record, the fact that the 1st respondent Company was incorporated on 23.8.2003 with the appellant and one Mr.Salahuddin Nalakath as its Directors is not in dispute. It is also not in dispute that, the appellant had subscribed 500 equity shares, out of the authorised share capital of 1,00,000/- of the 1st respondent Company divided into 1,000 equity shares of 100/- each. As such, the appellant was holding equity shares equivalent to 50% of the issued share capital of the 1st respondent Company. The fact that, the appellant was the Co.Appeal No.13/15 -18- Managing Director of the Company is also not in dispute.
22. The case put forward by the respondents in Para.5 of Annex.A9 counter, in order to non-suit the appellant is that, he had transferred his entire shareholding to the extent of '1000' shares in the 1st respondent Company by executing Annex.B1 share transfer form on 27.4.2011, in favour of the 4th respondent. However, as a matter of fact, the shareholding of the appellant in the 1st respondent Company was only 500 equity shares. Further, as per Article 16 of the Articles of Association of the 1st respondent Company (which is a Private Company), no member shall be entitled to transfer his shares except with the previous sanction of its Board of Directors. Neither the documents produced along with Annex.A9 counter filed by the respondents before the CLB nor the additional documents produced along with the additional affidavit filed before this Court on 16.3.2016 would show any such sanction of the Board of Directors of the 1st respondent Company.
23. We also notice that, in the additional affidavit filed before this Court on 16.3.2016, the respondents have absolutely Co.Appeal No.13/15 -19- no case that the Board of Directors of the 1st respondent Company had accorded sanction on 27.4.2011 for the alleged transfer of 500 shares held by the appellant in favour of the 4th respondent, following the execution of Annex.B1 share transfer form. The only averment in the said additional affidavit is that, following the execution of Annex.B1 share transfer form by the appellant, a meeting of the Board of Directors of the 1st respondent Company was held on 27.4.2011, wherein a decision was taken to induct Mr.Salahuddin Nalakath as a Director of the said Company. Moreover, Annexure R1(d) minutes of meeting of the Board of Directors of 1st respondent Company held on 27.4.2011, produced along with the additional affidavit, would not even indicate any sanction accorded by the Board of Directors of 1st respondent Company for transfer of shares in terms of Annex.B1 share transfer form.
24. Regarding the alleged share transfer in terms of Annex.B1 share transfer form, the specific stand taken by the respondents in Para.29 of Annex.A9 counter filed before the CLB was that, the decision taken at the General Meetings of the 1st Co.Appeal No.13/15 -20- respondent Company on 27.4.2011 were duly ratified by the Board at its meeting held on 15.5.2011 and hence the transfer of shares was complete. However, as borne out from the additional affidavit filed before this Court on 16.3.2016, the stand now taken by the respondents is that, in the meeting of the Board of Directors of Meezan Jewellers Ltd. held on 27.4.2011 a decision has been taken to transfer all the shares held by the appellant in the 1st respondent Company in favour of the 4th respondent, who had been authorised to take over the management of all associate Companies of 'Meezan Group'. Annexure R1(a) is the minutes of said meeting of the Board of Directors of Meezan Jewellers Ltd. held on 27.4.2011.
25. It is trite law that, a Company incorporated under the provisions of the Companies Act is a separate legal entity distinct from its individual shareholders or Directors. A Company is a juristic person and has an existence independent from that of the shareholders and it is the Company which owns its assets and not the shareholders. Therefore, Meezan Realtors Pvt. Ltd. (the 1st respondent Company) and Meezan Jewellers Ltd. are two juristic Co.Appeal No.13/15 -21- persons entirely distinct from its shareholders or Directors. In that view of the matter, any decision taken in the meeting of the Board of Directors of Meezan Jewellers Ltd. on 27.4.2011, as reflected in Annex.R1(a) minutes, would have no bearing on the shareholding of the appellant in the 1st respondent Company. Merely for the reason that, all the members and Directors of the 1st respondent Company are also Directors of Meezan Jewellers Ltd., the decision as reflected in Annex.R1(a) minutes cannot be treated as an approval/sanction of the Board of Directors of the 1st respondent Company, as provided under Article 16 of its Articles of Association, for transferring the 500 shares held by the appellant in favour of the 4th respondent.
26. As discernible from the document produced as Annex.R1(a) and R1(d) in the additional affidavit filed by the respondents, the so called minutes of the meeting of the Board of Directors of Meezan Jewellers Ltd. and Meezan Realtors Pvt. Ltd. are written on 'Classmate' note book, the pages of which are not even numbered consecutively, as mandated by sub-section (1) of Section 193 of the Act, a provision intended to ensure the Co.Appeal No.13/15 -22- authenticity of the minutes of proceedings of general meeting and of the proceedings the Board of Directors of a Company incorporated under the Act.
27. Section 193 of the Companies Act deals with minutes of proceedings of general meeting and of Board and other meetings. By the Companies (Amendment) Act, 1960 (Act 65 of 1960) sub-section (1) of Section 193 of the Act was substituted. Sub-section (1) of Section 193 of the Act, as amended by Act 65 of 1960 provides that, every Company shall cause minutes of all proceedings of every general meeting and of all proceedings of every meeting of its Board of Directors or of every committee of the Board, to be kept by making within fourteen days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered. The time limit of 'fourteen' days prescribed in Sub- section (1) of Section 193 has been later amended as 'thirty' days by the Companies (Amendment) Act, 1965 (Act 31 of 1965). Sub-section (1A) of Section 193 provides the manner in which each page of every such book has to be initialled or signed, Co.Appeal No.13/15 -23- etc. Sub-section (1B) of Section 193 provides further that, in no case the minutes of proceedings of a meeting shall be attached to any such book as aforesaid by pasting or otherwise.
28. Section 194 of the Act provides that, the minutes of meetings kept in accordance with the provisions of Section 193 shall be evidence of the proceedings recorded therein. Section 195 of the Act provides further that, where minutes of the proceedings of any general meeting of the Company or of any meeting of its Board of Directors or of a committee of the Board have been kept in accordance with the provisions of Section 193, then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and in particular, all appointments of directors or liquidators made at the meeting shall be deemed to be valid.
29. In Madhusoodhanan v. Kerala Kaumudi (P) Ltd. (2004 (9) SCC 204) the Apex Court held that, under Section 194 of the Companies Act, 1956, minutes of meetings kept in accordance with the provisions of Section 193 shall be evidence Co.Appeal No.13/15 -24- of the proceedings recorded therein and, unless the contrary is proved, it shall be presumed under Section 195 that the meeting of the Board of Directors was duly called and held and all proceedings thereat to have duly taken place.
30. A conjoint reading of Sections 194 and 195 of the Act along with Section 193, makes it explicitly clear that, in order to treat the minutes of the proceedings of any general meeting of the Company or of any meeting of its Board of Directors or of a committee of the Board to be evidence as provided under Section 194, or to draw presumption as provided under Section 195 that, such meeting have been duly called and held, and all proceedings thereat have been duly taken place, etc., the minutes of meetings has to be kept in accordance with the provisions of Section 193. Therefore, in order to have evidentiary value under Section 194 or to draw presumption under Section 195 of the Act, the minutes should be one kept in accordance with the provisions of Section 193. The presumption under Section 195 of the Act is a rebuttable presumption, which can be rebutted by showing that the minutes were not kept in accordance with the Co.Appeal No.13/15 -25- provisions of Section 193 of the Act.
31. In the instant case, the CLB in Annex.A12 order non- suited the appellant on a finding that, the transfer of shares by the appellant to the 4th respondent is legal and valid, and on such transfer the appellant ceased to be a shareholder of the 1st respondent Company, who has no locus standi to file the Company Petition. Two circumstances taken into account by the CLB for arriving at such a conclusion are that, the appellant has not denied the transfer of shares to the 4th respondent nor disputed the signatures on the share transfer forms and that, the transfer of shares held by the appellant to the 4th respondent is shown in the annual returns of the 1st respondent Company made upto on 30.9.2011.
32. When the fact that, on incorporation of the 1st respondent Company the appellant was issued with 500 equity shares, equivalent to 50% of the issued share capital of the Company, and the further fact that he was managing the affairs of the Company as its Managing Director are not in dispute, the burden is heavily upon the respondents to prove that the Co.Appeal No.13/15 -26- appellant ceased to be a share holder of the said Company on account of the alleged transfer of his entire shareholding to the 4th respondent and vacated the office of the Director of the Company, as provided under Section 283(1)(a) of the Act. Though the respondents would contend that, the alleged share transfer was with the approval of the Board of Directors of the 1st respondent Company, none of the documents produced along with Annex.A9 counter filed before the CLB or the additional affidavit filed before this Court would indicate any such approval/sanction. In such circumstances, we find no reason to sustain the finding in Annex.A12 order of the CLB that appellant ceased to be a shareholder of the 1st respondent Company and hence he has no locus standi to file the Company Petition. The question as to the locus standi of the appellant to maintain the Company Petition requires fresh consideration with reference to the original minutes of the meetings of the Board of Directors of the 1st respondent Company and other statutory records. As the Company Law Board stands dissolved with effect from 1.6.2016, on the constitution of the National Company Law Tribunal, by Co.Appeal No.13/15 -27- virtue of the provisions under sub-section (1) of Section 466 of the Companies Act, 2013, such exercise shall be undertaken by the National Company Law Tribunal, Chennai Bench.
33. The learned counsel for the respondents advanced arguments on the maintainability of the Company Petition on the ground that the jurisdiction of the CLB is only summary in nature. The learned counsel has also argued that, the provisions under sub-section (1A) of Section 108 of the Act is only directory in nature and hence a duly executed instrument of transfer of share shall continue to be effective and valid even after the expiry of the period specified in sub-section (1A); the pleadings in the Company Petition do not disclose the material particulars or facts as to the alleged coercion in the execution of the share transfer form; the appointment of Mr.Salahuddin Nalakath as the Director of the 1st respondent Company on 27.4.2011 is perfectly legal and valid, etc. Per contra, the learned counsel for the appellant argued that the jurisdiction of the CLB is not ousted merely because there is an allegation of coercion; the provisions under sub-section (1A) of Section 108 of the Act is mandatory in nature Co.Appeal No.13/15 -28- and as such, the alleged transfer of shares has no legal sanctity; there is nothing on record to support the case put forward by the respondents as to the alleged transfer of shares; the appointment of Mr.Salahuddin Nalakath as the Director of the 1st respondent Company on 27.4.2011 is per se illegal, etc. Both sides have also cited various decisions in order to buttress their arguments. Since we propose to remand the matter to the National Company Law Tribunal, we leave open all such contentions raised by both the sides, which shall be dealt with by the Tribunal in accordance with law. It would be open to both the sides to produce additional documents before the Tribunal in support of their case.
In the result, this Company Appeal is allowed, setting aside Annex.A12 order of the Company Law Board, Chennai dated 20.11.2015 dismissing C.P.No.100 of 2011 as not maintainable and consequently vacating the interim orders, if any, operating as on that date in that Company Petition, and the matter is remanded to the National Company Law Tribunal, Chennai Bench, for fresh consideration of the question of locus standi of the appellant to maintain the Company Petition, with reference to the Co.Appeal No.13/15 -29- original minutes of the meetings of the Board of Directors of the 1st respondent Company and other statutory records.
No order as to costs.
Sd/-
P.R.RAMACHANDRA MENON, JUDGE Sd/-
ANIL K.NARENDRAN, JUDGE dsn True copy P.S.to Judge