Company Law Board
Bharat K. Gajjar And Anr. vs Castrol India Limited, Mumbai And ... on 31 October, 2001
Equivalent citations: [2003]115COMPCAS396(CLB)
ORDER
C.R. Das, Member
1. This petition has been filed under Section 111A of the Companies Act, 1956 seeking, substantially, the following main reliefs:
(a) Rectification of Register of Members of Respondent No. 1 - Castrol (India) Limited and enter the names of the petitioners in place and stead of Respondent No. 2 in respect of shares bearing distinctive Nos. 01141601 to 01141650 represented by Share Certificate No. 10840 (hereinafter referred to as "the said shares");
(b) Respondent No. 1 company be ordered and directed to pay over the petitioners and to account for all rights which attached to and accretions including all dividends, bonus shares, right shares which attached to or arose in connection with the holding of the said shares as on 30.6.1988 or alternatively pay to the petitioners the money equivalent thereof.
The other reliefs which are incidental to the above two are set out in the petition.
2. Brief facts of the case are that to filing of the present petition, the petitioners had filed a suit in the City Civil Court, Bombay being S.C. Suit No. 6007 of 1988 (hereinafter referred to as the said suit) in respect of the said shares wherein Respondent No. 1 & 2 herein were Defendant Nos. 1 & 2 respectively. We shall, however, to facilitate quicker under standing refer the Plaintiffs and the Defendants therein as Petitioners and Respondents. The main prayers in the said suit substantially were:
(a) that the 1st Respondent be ordered by an order and mandatory injunction to return the said Share Certificate (in respect of the said shares) to the petitioners;
(b) it be ordered and declared that the said share transfer form submitted by the 2nd Respondent is forged and fabricated and should be not acted upon;
(c) that the 1st Respondent be permanently restrained by an order and injunction from acting upon the share transfer form submitted by the 2nd Respondent which contains the forged signatures of the petitioners and from transferring the shares to the name of 2nd Respondent.
3. Significantly, in the said suit there was no prayer for rectification of Register of Members of Respondent No. 1 as is prayed for in the petition. It is worth noting that had such a prayer been included in the said suit the occasion to file the present petition might not have arisen at all as all the bonus and right shares (issued on the said shares) and claim to dividend is in respect of shares issued by respondent No. 1 company after the passing of the decree in the said suit, which decree was passed on 22.12.1988. It is also not petitioners' case that the petitioners were precluded from making such a prayer in the said suit.
4. The said suit, it appears, was lodged on 3.8.1988 an application for urgent orders appears to have been made and the Hon'ble City Civil Court, Bombay was pleased to pass an order restraining the Respondent No. 1 from transferring the said shares in favour of the Respondent No. 2.
5. On 22.12.1988 an ex-parte decree was passed in favour of the petitioners in terms of prayers (a) and (b). However, due to typographical error the Roznama of the Hon'ble city Civil Court pertaining to the said date i.e. 22.12.1988 showed decree in terms of prayers (a) and (d). A diligent investor ought to have noticed the said error immediately on receipt of the said Roznama. By his letter dated 23.12.1988, the petitioners' then Advocate informed Respondent No. 1 of the passing of the said ex-parte decree in terms of prayers (a) and (d). Under cover of their letter dated 30.1.1989 Respondent No. 1 in compliance with prayer (a) of the said decree returned the share certificate pertaining to the said shares to the petitioners. As prayer (d) was an interim prayer compliance therewith was not called for after the said suit was decreed.
6. The share certificate pertaining to the said shares, however, continued to show the name of the Respondent No. 2 as the registered holder. It is not disputed by the petitioners that the share certificate pertaining to the said share was returned by the Respondent No. 1 under cover of their letter dated 30.1.1989. The cause of action of file the petition for rectification thus arose at the latest on receipt of the said letter dated 30.1.1989 alongwith the share certificates pertaining to the said shares. It was, however, only in July, 1993 i.e. after a period of almost 5 1/2 years that the petitioners woke up to the fact that their names were not shown as the registered holders in the share certificate pertaining to the said shares. Respondent No. 1 was undisputedly always a regular dividend paying company. One would have expected that the petitioners should have at least within a year woken up to the fact they did not receive dividend in respect of the said shares, which obviously must have gone to the Respondent No. 2 as he was shown as the registered holder of the said shares. However, as stated above the petitioners woke up to the said fact only after 5 1/2 years!
7. By their letter dated 7.10.1993, the Respondent No.1 informed the petitioners that the said decree was in terms of prayers (a) and (d) and the Respondent No. 1 had in substantial compliance thereof had sent the share certificate pertaining to the said shares to the petitioners. It was only in July, 1994 i.e. almost a year after the said fact was admittedly discovered by the petitioners themselves that the petitioners got the said decree rectified. It is pertinent to note here that it took almost another three months for the petitioners to send the certified copy of the amended Roznama of the Hon'ble City Civil Court rectifying the said typographical error.
8. The petitioners moved the Company Law Board only in Oct., 1999 by way of present petition for rectification which entailed an unexplained delay of 5 1/2 years again!.
9. In the meantime, as is the grievance of the petitioners in the petition also, the Respondent No. 1 paid regular dividends and also from time to time issued bonus shares and right shares the benefit of all of which went to the Respondent No. 2 and the subsequent transferees.
10. It would not be out of place to mention here that the Respondent No. 1 had taken out an Interim Application in the present petition being Interim Application No. 5 of 2000 inter alia praying for an order to implead the subsequent transferees & National Securities Depository Limited (NSDL) are joined therein as Respondent Nos. 3, 4 & 5 respectively. NSDL was sought to be made a party Respondent as by this time the trading in shares of Respondent No. 1 was to be compulsorily in dematerialized form. At the hearing of the said interim application before one of us on 16.5.2000 Counsel for the Petitioners strangely objected to impleading the said Respondents in the present petition. This completes the narration of the relevant facts.
11. It is not disputed that the proceedings under Section 111-A of the Companies Act, 1956 are in the nature of summary proceedings. Being summary proceedings, serious questions of dispute pertaining to title cannot and ought not to be tried in a summary manner and a suit would only be a proper remedy. In cases such as this the petitioners to succeed in the petition would have to prove that the subsequent transferees/holders were not bonafide transferee/holders which can be proved only if the petitioners are able to establish that the subsequent transferees/holders had notice of the said suit or the petitioners' claim to the said shares an impossible task, in our view, without leading evidence and without impleading the subsequent transferees/holders. In the present case, as stated above the petitioners have from time to time also been guilty of delay and latches (twice for almost 5 1/2 years!) in asserting their rights in respect of the said shares. If the petitioners had taken prompt action perhaps the subsequent transferees/holders would not have come into the picture. It was also not seriously disputed befoe us that if the petitioners were to file a suit in the Civil Court praying for rectification of register of members, the said suit would be hopelessly time barred. The cause of action to file a suit for rectification arose at least on receipt of the letter dated 30.1.1989 from Respondent No. 1 enclosing the share certificate pertaining to the said shares which showed Respondent No. 2 (and not the petitioners) as the registered holder thereof. In any event and at the latest the petitioners themselves came to know of the forgoing in July, 1993 as by their letter dated 21.7.1993 they had themselves complained to the Respondent No. 1 that their names were not shown as the registered holders of the said shares. In either case therefore, the petitioner suit would be time barred. We, therefore, would have been justified in dismissing the petition completely on this ground also for the simple reason that what could not have been availed of in a suit (which is a wider remedy) cannot be availed of in the present petition under Section 111A of the Companies Act, 1956 which is a much stricter and narrower remedy.
12. However, Counsel for Respondent No. 1 says that Respondent No. 1 has no objection in rectifying the Register of Members in respect of the said shares (numbering
50) comprised in share Certificate No. 10840 and show the petitioners as the registered holders thereof. Accordingly, we direct the Respondent No. 1 to rectify its Register of Members showing the petitioners as the registered holders of the aforesaid 50 shares comprised in Share Certificate No. 10840 and bearing Distinctive Nos. 01141601 to (sic)650. We direct the Respondent Company to rectify its register of members accordingly.
13. As regards 270 shares (being right/bonus shares issued from time to time on the said shares) which we, are informed by the Counsel for Respondent No. 1 have been sent to the company by Respondent No. 2 and the 498 shares (also being right/bonus shares issued from time to time on the said shares) of which Narayan C. Demble and Geeta N. Demble were the subsequent transferees/holders we decline to pass any orders since the petitioners as already stated above have been time and again guilty of delay for more than 11 years (which till date remains unexplained) in availing of the present remedy and all the necessary parties i.e. NSDL and the subsequent transferees have not been joined as party respondents. However, Respondent No. 2 by his letters dated 5.2.2000 and 13.11.2000 addressed to the Respondent No. 1 company and Bench Officer, Company Law Board, respectively, has while returning the said 270 shares to Respondent No. 1 asked for return of these shares or compensation therefore which in the circumstances of the case the Respondent No. 1 cannot be called upon to bear and pay.
14. The petition is disposed of accordingly with no order as to costs. However, the petitioners are at liberty to pursue any other remedy which may be available to them and as they may be advised to recover the said 270 and 498 shares from the Respondent No. 2 subsequent transferees.