Delhi High Court
Reserve Bank Of India vs Crb Capital Markets Ltd.(Provn. Liqn.) ... on 25 July, 2023
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 19 July 2023
Pronounced on:25 July 2023
+ CO. PET. 191/1997 & CO.APPL.1232/2005,
CO.APPL.782/2006, CO.APPL.783/2006, CO.APPL.784/2006
RESERVE BANK OF INDIA ..... Petitioner
Through: Mr. Ramesh Babu M.R., Ms. Manisha
Singh, Ms. Nisha Sharma and Mr. Rohan,
Advs. for RBI
Mr. Dayan Krishnan, Sr. Adv. with Mr.
Rishi Agarwala, Mr. Ankit Banati, Mr.
Prabhav Bahuguna, Adv.for applicants in
CO.APPL.1232/2005, CO.APPL.782/2006,
CO.APPL.783/2006, CO.APPL.784/2006
versus
CRB CAPITAL MARKETS LTD. (PROVN.LIQN.) P.LTD.
..... Respondent
Through: Mr.Bhuvan Gugnani, Adv. with Mr.
Rupender Sharma, Adv. for the Ex-
Management of CRB Capital
Ms. Ruchi Sindhwani, Sr. Standing Counsel
for Official Liquidator with Ms. Meghna
Bharaua, Adv.
Ms. Jahanvi Worah, Adv. for KARVY
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
JUDGMENT
% 25.07.2023 CO.APPL.782/2006 [By Murari Lal Saraf] CO.PET.191/1997 Signature Not Verified Page 1 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40
1. Viewed from the point of view of dispensation of speedy justice, this case presents a somewhat sorry picture.
2. This application was preferred by the applicant 17 years ago. The applicant claims to have purchased 1500 equity shares of Reliance Industries Ltd (RIL) from the open market on 25 April 1997. Aggrieved at the fact that the shares were not being transferred in the applicant's name, purportedly owing to certain orders passed by this Court, the present application was filed in 2006. We are now towards the end of 2023, and the application continues to languish undecided.
Facts
3. Chronologically, it is necessary, before adverting to the purchase of RIL equity shares by the applicant, to refer to a communication, dated 9 April 1997, from the Reserve Bank of India (RBI) to CRB Capital Markets Ltd ("CRBCML", hereinafter), in which the following proscription found place:
"5. Further, the Reserve Bank of India on being satisfied that it is necessary so to do in the public interest, hereby directs your company in accordance with the provisions of section 45 MB (2) of the Reserve Bank of India Act, 1934 not to sell, transfer, create charge or mortgaged or deal in in any manner with its property and assets without prior written permission of the Bank for a period of six months from the date of this Order."
Be it noted, even at this juncture, that the above communication dated 9 April 1997 from RBI to CRBCML was never communicated to the applicant, and finds place for the first time in the reply filed by Karvy CO.PET.191/1997 Signature Not Verified Page 2 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 Consultants Ltd ("Karvy", hereinafter) to the present application of the applicant.
4. The applicant purchased 1500 RIL equity shares, through M/s. A.G. Vidyasagar & Co. ("AGV", hereinafter), a broker registered with the Delhi Stock Exchange ("DSE", hereinafter), on 25 April 1997, @ ₹ 298.75 per share. Payment was made by the applicant through account payee cheques in favour of AGV, which were duly encashed. The applicant has placed on record the Contract Note under which the shares were purchased, as well as the Bank Statement of AGV, evidencing payment of consideration by the applicant to AGV, towards proof of legitimate purchase of the shares by the applicant from AGV.
5. Apart from the 1500 equity shares purchased by the present applicant, 600 equity shares of RIL were purchased by Bihari Lal Saraf and 900 shares were purchased by Banwari Lal Saraf, in each case @ ₹ 298.75 per share. Bihari Lal Saraf, Banwari Lal Saraf and the present applicant are brothers. The amount payable against purchase of the shares, therefore, works out to ₹ 4,48,134/- by the present applicant, ₹ 1,79,253.60 by Bihari Lal Saraf and ₹ 2,68,880.40 by Banwari Lal Saraf, working out to a total of ₹ 8,96,268/-. The bank statement of AGV, placed on record with the present application, indeed discloses credit, into the account of AGV, of an amount of ₹ 8,96,268/- on 1 May 1997.
CO.PET.191/1997 Signature Not Verified Page 3 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:406. Karvy was appointed as the Registrar/Share Transfer Agent of RIL, to maintain records in respect of the shares of RIL and effect transfer thereof. The applicant, having purchased 1500 equity shares of RIL through AGV, lodged the shares with Karvy on 30 April 1997, along with duly executed and stamped transfer deeds, for transfer of the shares in the name of the applicant. The applicant has placed, on record, the receipt issued by Karvy to the applicant.
7. Karvy, vide response dated 20 June 1997, expressed its inability to transfer the shares in the name of the applicant, citing an order dated 22 May 1997, passed by this Court in the present Co Pet 191/1997 (in which the present application has been filed), whereby all assets of CRB were frozen and a Provisional Liquidator had been appointed to deal with the said assets. Karvy's letter read thus:
"Date: 20th June, 1997 Dear Sir, UNIT: RELIANCE INDUSTRIES LTD As Share Transfer Agents of Reliance Industries Ltd ("Reliance"), we have received shares of Reliance as described below for transfer in your name lodged by you:
Name of Transferor No. of Distinctive
Shares Numbers
CRB CAPITAL MARKETS LTD. 50 410878815
You will notice that in all the above cases the transfer order is the CRB Group Companies.
We wish to inform you that on a winding-up petition filed by Reserve Bank of India (Company Petition No. 191 of 1997) in the Delhi High Court, the Delhi High Court has by its Order dated 22nd May 1997 appointed the Official Liquidator of Delhi High Court as Provisional Liquidator to take charge of all assets and properties of CO.PET.191/1997 Signature Not Verified Page 4 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 CRP Capital Markets Ltd and the Provisional Liquidator has been directed to take immediate custody of all assets. Further, the Hon'ble Delhi High Court has restrained CRB Capital Markets Limited from disposing of, alienating and/or parting with possession of any of its assets. The Delhi High Court by its subsequent order dated 13.6.1997 is also restrained the Directors of CRB Capital Markets Ltd. Given the above situation, we are not in a position to process and give effect to transfer of the above shares in your name until the Delhi High Court's orders are vacated or suitable amended.
Apart from the above, we have received direction from RBI vide its letter Ref. No. FC2512.19.04.004/97-98 dated 6.6.97 and not to effect any transfer of shares, sought to be transferred by CRB Capital Markets Ltd.
In the circumstances, we are returning the transfer forms and share certificates to you to enable you to take appropriate steps in the matter.
A copy of this letter is being endorsed to the office of Official Liquidator, High Court, Delhi.
Yours Faithfully, KARVY CONSULTANTS LTD"
For the sake of completion of the recital of facts, the order dated 22 May 1997, passed by this Court in Co App 552/1997, in Co Pet 191/1997, may be reproduced thus:
"Issue notice to the respondent, returnable on 22.7.1997.
It is stated by the counsel for the petitioner that the respondent Company has a debt of about hundred of crores in the market and in that view of the matter, the petitioner has been forced to approach this Court with this petition, wherein I have issued notice.
On consideration of the averments made in the present application, I am satisfied that there are sufficient grounds in the present case for appointment of a Provisional Liquidator. Accordingly, I appoint the Official Liquidator who is attached to this Court as the Provisional Liquidator who shall take charge of all the assets and CO.PET.191/1997 Signature Not Verified Page 5 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 properties of the Company along with the books of accounts and other records of the Company.
The Provisional Liquidator shall take immediate custody of all the assets as directed and if necessary shall also see police assistance in executing the aforesaid order.
Till the next date, the respondents, its Directors, servants and agents are restrained from disposing of, alienating and/or parting with possession of any of the assets of the Company."
8. On 14 June 1999, the DSE issued Circular No 58/99, with respect to the tainted shares of CRB. It was clarified, in the said Circular, that, if the shares/securities stood lodged with the Share Transfer Agent prior to 21 May 1997, they would not be required to be certified. The relevant paragraph from the said Circular read thus:
"If such securities have been lodged with the company prior to 21st May, 1997 then it do not require certification, if any one or both of the following conditions has/have been complied.
(i) the securities have already been transferred to the name of a person as on 21.5.97.
(ii) the securities have been lodged with the company for transfer prior to 21st May, 1997."
9. In the wake of the aforenoted Circular of the DSE, the applicant wrote to the DSE on 15 June 1999, seeking clarification with respect to the status of the 1500 RIL equity shares held by the applicant as purchased from AGV. The DSE responded, on 22 June 1999, thus:
"June 22, 1999 Mr. Murari Lal Saraf 1290 Karta Dhulia Chandni Chowk, Delhi 110006 CO.PET.191/1997 Signature Not Verified Page 6 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 Sub: Tainted Shares of CRB Entities Dear Sir This is in reference to your letter dtd June 15, 1999 we wish to state that we have informed our members vide our circular 55/99 dtd June 3, 1999 and circular 58/99 dtd June 14, 1999 about the procedure for certification of tainted shares of CRB Entities. (Copy of the same is enclosed.) According to these shares belonging to CRB Entities as defined by the special Court lodged for transfer prior to May 21, 1997 do not require the Certification. These should be lodged for transfer with the Company/Transfer Agent.
Thanking you Yours faithfully For The Delhi Stock Exchange Assn Ltd"
10. Pointing out that this clarification from the DSE placed, beyond the pale of doubt, the issue of the applicant's entitlement to transfer, in its name, of the 1500 shares of RIL purchased through AGV, the applicant again wrote to Karvy on 23 June 1999, requesting that their shares been transferred in the applicant's name. Karvy, however, returned the shares vide communication dated 5 October 1999, citing a communication dated 6 June 1997 issued by the RBI, prohibiting transfer of shares held by CRB Capital Ltd, as it was under
liquidation. The communication dated 6 June 1997, which was issued by RBI to RIL, read as under:
"FC 2512/19.04.004/97-98 6 June, 1997
The Chairman/Managing Director
Reliance Industries Ltd,
3rd Floor, Maker Chambers IV,
222, Nariman Point,
Mumbai 400021
CO.PET.191/1997
Signature Not Verified Page 7 of 26
Signed By:HARIOM
Signing Date:25.07.2023
15:09:40
Sir,
Ref. CRB Capital Markets Ltd
As you are aware the Reserve Bank of India has filed a petition for winding up the above company in the High Court of Delhi and provisional liquidator has been appointed for the purpose. We understand from the captioned company's Balance Sheet that it has invested in the shares/debentures of your company. We, therefore, advised that you should not transfer those shares, register a lien or deal with them in any manner without the prior permission of the official liquidator.
2. Please acknowledge receipt. Also please advise as the number of shares/securities held by the above company and that you have noted the above instructions.
Yours faithfully, (Smita C. Kumar) Manager"
11. The applicant has, in these circumstances, filed the present application before this Court in Co. Pet. 191/1997, seeking, among other things, a direction to Karvy to transfer and register the 1500 RIL equity shares purchased by the applicant through AGV to the applicant with all retrospective benefits.
Rival Contentions
12. In the application, the applicant has pointed out that none of the restraints on transfer of the allegedly tainted shares held by CRB would apply to the present case, as CRB had sold the 1500 shares forming subject matter of dispute much prior to any such restraint being put in place, either by this Court or by the RBI. As such, the right of the applicant, to transfer of the shares in its favour, it is CO.PET.191/1997 Signature Not Verified Page 8 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 contended, cannot be affected either by the orders passed by this Court or by the Circulars issued by the RBI.
13. Though no formal reply to the present application was filed either by CRBCML or by the Official Liquidator ("OL", hereinafter), notes of arguments have been filed by all parties. Before adverting to the said notes of arguments, one may refer to an order dated 25 November 2010 passed by Sanjiv Khanna, J. (as he then was), sitting singly as Company Judge in this Court in Co. Appln. 176/1998 in the present Co. Pet. 191/1997. The order was passed on an application, similar to the application under consideration, filed by M/s Vikram Commercial Ltd ("Vikram Commercial", hereinafter), seeking registration of 5050 shares of RIL purchased by it in the regular course of business from the DSE. The order reads thus:
"Present: Mr. Ashok Aggarwal, Mr. Salar M. Khan, advocates for the petitioner-applicant + Co.APPLN. No. 176/1998 in C.P.No. 191/1997 *
1. The petitioner- M/s. Vikram Commercial Ltd. had filed this application in 1998 for allowing registration of the 5050 shares of Reliance Industries Ltd. purchased by them in regular course of business from Delhi Stock Exchange.
2. The petitioner has placed on record as Annexure B, the delivery bill for the period 12th April, 1997 to 25th April, 1997 with the pay-out date as 6th May, 1997. Final delivery/payment statement (Annexure C) with the adjustment date 3rd May, 1997 has been placed on record in support of the contention that the bill was paid on 3rd May, 1997.
3. Subsequently, the petitioner applied for transfer/registration of the shares with the share transfer agents but vide letter dated 20th June, 1997 was informed that in view of the order dated 22nd May, 1997 of the Delhi High Court passed in Company Petition No. 191/1997 appointing the Official Liquidator as the Provisional CO.PET.191/1997 Signature Not Verified Page 9 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 Liquidator and the letter written by the Reserve Bank of India dated 6th June, 1997, the transfer of the shares cannot be recorded in their register as the shares were originally registered in the name of CRB Capital Markets Ltd.
4. On 1st February, 2005, the court had passed the following Order :-
"Mr. Ashok Aggarwal learned Counsel for the applicant has produced share transfer forms as per which shares of Reliance Industries Ltd. (subject matter of the present application) were held by CRB Capital Markets Ltd. and as per that the CRB Capital Markets Ltd. had put the shares for sale on or before 24.1.1997. His submission is that the CRB Capital Markets Ltd. have sold the shares immediately after 24.1.1997 to some other person and received consideration. In order to verify this fact, learned counsel appearing for Ex-Management of CRB Capital Markets Ltd shall be allowed to inspect the records available with the Official Liquidator and inform to the court on the next date of hearing as to on what date CRB Capital Markets Ltd had received the consideration in respect of these shares. A copy of the share transfer forms along with share certificate be supplied to learned counsel for the Official Liquidator as well as counsel for Ex- Management within one week.
List again on 27th April, 2005."
5. It is pursuant to this Order that a second reply has been filed by CRB Capital Markets Ltd. in which the following statement has been made:
"It is submitted that Non-applicant took inspection of the records available with Official Liquidator. However, from the records made available to the Non-applicant the exact status of captioned Shares could not be ascertained as CRB Capital Markets Ltd. had not sold any shares of Reliance Industries Ltd. after issue of order dated 09.04.1997 passed by Reserve Bank of India inter-alia prohibiting CRB Capital Markets Ltd. from disposing off and alienating its assets."
6. The contention of the petitioner is that they had purchased the said shares from the open market and that too prior to the passing of the Order dated 22nd May, 1997 and the letter dated 6th CO.PET.191/1997 Signature Not Verified Page 10 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 June, 1997 issued by the Reserve Bank of India. The aforesaid facts are clearly proved and established from the documents placed on record by the petitioner (Annexures B and C).
7. Learned counsel for the respondent has submitted that the Reserve Bank of India had issued Order dated 9th April, 1997 prohibiting CRB Capital Markets Ltd from disposing of and alienating their assets. However, the respondent has not stated the date on which they had sold or transferred these shares. In the second reply it is stated that CRB Capital Markets Ltd. had not sold any shares of Reliance Industries Ltd after issue of Order dated 9th April, 1997. In the said eventuality, the shares were sold by CRB Capital Markets Ltd prior to 9th April, 1997 and are therefore not covered by the restraint orders dated 9th April, 1997, 22nd May, 1997 passed by this Court in Company Petition no. 191/1997 or the subsequent letter of the Reserve Bank of India dated 6th June, 1997.
8. Learned counsel for the respondent has submitted that vide order dated 24th January, 2006, a scheme was approved by the single Judge of this Court and an appeal is now pending before a Division Bench of this Court. It is stated that while sanctioning the scheme, the single Judge had observed that all pending applications stand disposed of accordingly. The said order cannot be construed as an order disposing of the present application. It is noted that the application has remained pending last 12 years and was repeatedly listed and adjourned on several dates even after order dated 24th January, 2006 was passed. In fact the case made out by the petitioner-herein is that they had already purchased the said 5050 shares before the interim restrain orders were passed and they are the owners of the said shares and registration of which have been wrongly refused by the Registrar of Companies.
9. Accordingly, it is clarified that the orders passed by this Court on 22nd May, 1997 will not come in the way of the petitioner getting the shares registered in their name provided the said transfer and purchase is otherwise in accordance with law.
10. Application/petition is disposed of."
Mr. Dayan Krishnan, learned Senior Counsel for the applicant, submits that the present case is squarely covered by the afore- extracted order dated 25 November 2010 passed in Co. App. 176/1998.
CO.PET.191/1997 Signature Not Verified Page 11 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:4015. The application has been strongly resisted by Ms. Ruchi Sindhwani, learned counsel for the OL and Mr. Sudhanshu Batra, learned Senior Counsel for CRBCML, instructed by Mr. Bhuvan Gugnani, learned Counsel.
16. The trajectory of the arguments advanced by learned Counsel for the non-applicants was interesting. Much was sought to be made of an application, filed by AGV (Co App 179/1998), in which AGV had sought to contend that the 1500 shares purchased, from it, by the applicant, had, in turn, been purchased by it from CRB Corporation Ltd, on whose behalf they were held in trust by CRB Trustee Limited. Payment against the purchase of these shares had been made by AGV to CRB Corporation Ltd, and not to CRBCML. As such, Mr. Batra took serious exception to shares, against which no money had been received by CRBCML, being sought to be transferred to the applicant by means of the present application. On the attention of Mr. Batra being invited, however, to the fact that the cancelled share certificates relating to the 1500 shares forming subject matter of controversy clearly indicated that the shares were initially held by CRBCML, Mr. Batra was constrained to concede the point. Mr. Batra, therefore, accepted that the 1500 shares forming subject matter of the present controversy were indeed originally held by CRBCML. According to Mr. Batra, however, till the imbroglio regarding payment having been made by AGV to CRB Corporation Ltd is not resolved, transfer of the shares in favour of the applicant cannot be directed.
CO.PET.191/1997 Signature Not Verified Page 12 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:4017. Later, however, on instructions, Mr. Batra relaxed his stand, and submitted that, if the applicant had, in fact, purchased the shares in the open market from AGV, there could be no embargo on the shares being transferred in favour of the applicant. According to Mr. Batra, however, for shares to be purchased from the open market, there must be a contract note indicating the order number, trade number, trade time, quantity, particulars of security provided thereagainst, purchase rates, brokerage, and other such details, along with the bill indicating the kind of security and a Delivery Challan. These details, he submits, are not forthcoming in the present case. In the absence of such details, he submits that no conclusive determination can be made to the effect that the 1500 shares were, in fact, purchased by the applicant in the open market. For these reasons, Mr. Batra submits that the applicant cannot seek the benefit of the order dated 25 November 2010 passed by this Court in Co. App. 176/1998 supra.
18. I may observe, here, that the applicant seriously questioned the locus standi of CRBCML to contest the present application. I, too, queried of Mr. Batra as to how, once he accepted that CRBCML had, in fact, at one time been holding the 1500 shares in issue, and had thereafter sold them, CRBCML could retain any interest in the shares. Though Mr. Batra was not able to provide any satisfactory response to the query, I nonetheless heard him and, therefore, do not intend to dwell further on the issue of locus standi of CRBCML.
CO.PET.191/1997 Signature Not Verified Page 13 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:4019. Supplementing the submissions of Mr. Batra, Ms. Sindhwani, learned Counsel for the OL, placed reliance on the RBI communication dated 9 April 1997 to CRBCML. She further submits that the said communication would squarely apply to the present case, as the Contract Note between AGV and the applicant is dated 25 April 1997, after the said communication had been issued. She has also drawn attention to the Contract Note, which has been placed on record, and which, even while acknowledging the sale of 1500 shares of RIL to the applicant by AGV, does not mention the identity of the person who was initially holding the shares. She has drawn attention to the fact that, in the Bank Statement of AGV, consideration of ₹ 5 lakhs, ₹ 5 lakhs and ₹ 13,52,300/- has been shown to have passed from AGV to CRB Corporation on 22, 23 and 24 April 1997 vide Cheques No. 158099 and 158100 and 158080 for ₹ 3,52,300/-.
20. Ms. Sindhwani has also raised the plea of limitation relying, for the purpose, on Section 446(2)(b)1 of the Companies Act, 1956, which requires a claim to be lodged within 3 years, failing which it is no longer legally enforceable. She has also placed reliance, in this context, on the judgment of the Supreme Court in State of Gujarat v. Kothari & Associates2 and of this Court in P.T. Gajwani v. A.R. 1
446. Suits stayed on winding up order. -
(2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of -
***** whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.
2(2016) 14 SCC 761 CO.PET.191/1997 Signature Not Verified Page 14 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 Chadha & Co.3 Ms. Sindhwani also places reliance on Section 531A4 of the Companies Act.
21. Arguing in rejoinder, Mr. Dayan Krishnan submits that the applicant cannot be concerned with whether AGV had purchased the shares from CRB Corporation or from anyone else. There is no dispute about the fact that the shares were initially held by CRBCML. The sole ground on which Karvy had refused to transfer the shares to the applicant was the embargo placed by this Court and by the RBI on transfer of shares by CRBCML. The matter, he submits, stands squarely covered by the order passed in Co. App. 176/1998 supra which holds, unambiguously, that no embargo on transfer of RIL shares, originally held by CRBCML, would apply where the shares had been transferred by CRBCML prior to 9 April 1997.
22. Insofar as the objection of Mr. Batra regarding the documents which were required to be available and forthcoming the purchase of the shares by the applicant from AGV was, in fact, an open market purchase, Mr. Krishnan submits that the only documents which were required to be shown by him were the contract note and the share transfer certificate. He points out that he has placed on record, (i) the contract note with AGV, (ii) the delivery note by AGV, which indicated that the shares had initially been held by CRBCML, (iii) the 3 1973 ILR (2) Delhi 752 4 531-A. Avoidance of voluntary transfer. - Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by the Tribunal or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator.
CO.PET.191/1997 Signature Not Verified Page 15 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40Share Transfer Form from RIL with respect to the said shares, with the signature of the Director of CRBCML figuring thereon, in which the applicant is shown as the transferee and (iv) Share Certificate dated 16 March 1995 issued by RIL to CRBCML indicating that the said shares had in fact been purchased by CRBCML from RIL, as the Distinctive Numbers of the shares were forthcoming on the Share Certificate. That the shares in controversy were, therefore, RIL shares which were originally held by CRBCML, and that they had been purchased by the applicant for consideration in the open market from AGV, submits Mr. Dayan Krishnan, cannot be doubted or questioned. In that view of the matter, there can be no justification to refuse, to the applicant, relief in the terms granted by this Court to Vikram Commercial by order dated 25 November 2010 passed in Co. App. 176/1998.
Analysis
23. To address, first, the preliminary objections raised by Ms. Sindhwani, it is clear, ex facie, that neither of the provisions, on which she places reliance, can have any application to the present case at all. Section 446(2)(b) deals with claims against a Company in liquidation. The applicant has raised no claim against CRBCML. Section 531A deals with transactions which are not bona fide, or in the ordinary course of business. There is no reason to hold that the sale of the subject 1500 shares from CRBCML was otherwise than in the ordinary course of business, or wanting in bona fides. Indeed, this is an aspect which has, if anything, to be pleaded, and no such pleading, CO.PET.191/1997 Signature Not Verified Page 16 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 either from the OL or from CRBCML, is forthcoming. Nor has Ms. Sidhwani adverted to any material on the basis of which it could so hold. The submission, therefore, is apparently one made in vacuo.
24. On merits, having heard learned Counsel and applied my mind to the material on record, I am of the considered opinion that the applicant has, with no reasonable justification at all, been deprived of its legitimate right to have the subject 1500 shares transferred in its name. I am constrained to record that, for reasons which would probably best be known to the CRB Group of Companies, but which may have some relation to the fact that the value of the said shares might, over time, have spiralled, every possible hurdle has been placed in the way of ensuring that the shares are transferred in the name of the applicant.
25. The nature of the objections raised by CRBCML and the OL, particularly the former, when seen in the light of the documents which are on record, partakes of a sense of irony.
26. The factual position which emerges from a conjoint and juxtaposed reading of the documents is clear and telling. Each of the letters addressed by Karvy to the applicant, clearly sets out the Distinctive Numbers of the RIL equity shares, forming the subject matter of controversy. For ready reference, one may reproduce, by way of example, letter dated 5 October 1999, from Karvy to the applicant:
CO.PET.191/1997 Signature Not Verified Page 17 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 "REF : KCL/RIL/CRB/OBJ/99/0006
DATE : 05-10-1999
MURARI LAL SARAF,
1290, KATRA DHULIA,
CHANDNI CHOWK, DELHI-6.
Dear Sir/Madam,
Sub : Transfer of Equity Shares
We wish to bring your kind notice that the below mentioned share that are lodged by you for transfer are being returned herewith under objection with original share certificates and transfer deeds.
Please note that there is an order dated 06-06-97 passed by RBI, stating that CRB CAPITAL LTD. is in the process of liquidation and the shares held by CRB CAPITAL LTD. is/are not to be transferred.
Kindly quote the above reference no. and date for future correspondence in this matter.
Thanking you, Yours faithfully, for KARVY CONSULTANTS LIMITED UNIT - RELIANCE INDUSTRIES LIMITED SRINIVASA VARMA A. Objections Dept. TD NO. FOLIO NO. CERT.NO. DIST.NO. SHARES
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1501740 7520946 16503585 410878815 50 1501741 7520946 16503586 410878865 50 1501742 7520946 16503587 410878915 50 1501743 7520946 16503588 410878965 50 1501744 7520946 16503589 410879015 50 1501745 7520946 16503590 410879065 50 1501746 7520946 16503591 410879115 50 1501747 7520946 16503592 410879165 50 1501748 7520946 16503593 410879215 50 1501749 7520946 16503594 410879265 50 1501750 7520946 16503595 410879315 50 1501751 7520946 16503596 410879365 50 CO.PET.191/1997 Signature Not Verified Page 18 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 1501752 7520946 16503597 410879415 50 1501753 7520946 16503598 410879465 50 1501754 7520946 16503599 410879515 50 1501755 7520946 16503600 410879565 50 1501756 7520946 16503601 410879615 50 1501757 7520946 16503602 410879665 50 1501758 7520946 16503603 410879715 50 1501759 7520946 16503604 410879765 50 1501760 7520946 16503605 410879815 50 1501761 7520946 16503606 410879865 50 1501762 7520946 16503607 410879915 50 1501763 7520946 16503608 410879965 50 1501764 7520946 16503609 410880015 50 1501765 7520946 16503610 410880065 50 1501766 7520946 16503611 410880115 50 1501767 7520946 16503612 410880165 50 1501768 7520946 16503613 410880215 50 1501769 7520946 16503683 410883715 50---------------------------------------------------------------------------------
TOTAL : 1500
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27. The applicant has placed, on record, each of the 30 cancelled share certificates, covering 50 shares each, whereunder the shares were purchased by CRBCML from RIL, which tally with the Distinctive Numbers of the shares which were purchased by the applicant from AGV. The sale bills, raised by AGV on the applicant, which also reflect the same Distinctive Numbers of the shares, have also been placed on record. The applicant has also filed the Share Transfer Form, which indicate that the said shares of RIL were originally held by CRBCML and were transferred to the applicant. The Share Transfer Form bears the signature of the Director of CRBCML, as well as the stamp of AGV, as the broker, on the reverse. There can, therefore, be no doubt, whatsoever, about the fact that the shares forming subject matter of the present controversy were RIL equity shares originally issued to CRBCML, and had been purchased, CO.PET.191/1997 Signature Not Verified Page 19 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 for consideration, by the applicant, from AGV, in the open market. The objections raised by the respondents in this regard are, in my considered opinion, completely bereft of substance.
28. Mr. Dayan Krishnan is correct in his submission that, so long as the subject 1500 shares were initially issued to CRBCML, and had been purchased in the open market by the applicant from a broker registered with the DSE, the applicant cannot be denied the right to have the shares transferred in its name. The Statement of account of AGV, which has been placed on record, indicates that the amount of ₹ 896,268/-, received against sale of the 3000 shares to the applicants, Bihari Lal Saraf and Banwari Lal Saraf, was indeed credited in the said account on 1 May 1997. As to why AGV paid ₹ 13,67,000 to CRB Corporation, is something for which the applicant can hardly be made to answer.
29. I am constrained to observe that, if anything, CRBCML has been less than forthcoming with the Court in this regard. There is no dispute about the fact that CRB Corporation and CRBCML are both group companies of the CRB Group. Indeed, the order dated 22 August 1997, in Co. Pet. 280/1997, by which the Provisional Liquidator was appointed in the case of CRB Corporation Ltd, reveals that the sole ground urged before this Court, on the said occasion, was that a Provisional Liquidator has already been appointed in the case of CRBCML. There is no doubt, therefore, of the fact that CRBCML would be well aware of the transactions with respect to the aforenoted 1500 shares, and as to why payment was made by AGV to CRB CO.PET.191/1997 Signature Not Verified Page 20 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 Corporation. One would have expected, therefore, that, in the interests of fair play, CRBCML would have come upfront and explained the transaction, rather than seeking to stymie the legitimate claim of the applicant, who is a complete stranger to the transaction between AGV and CRB Corporation. It does not take much to read between the lines. It is apparent that the CRB Group of Companies is unwilling to release hold over the 3000 shares which have, in due course and for due consideration, been purchased by the applicant and his brothers through AGV in the open market.
30. This Court cannot possibly be an approver to such an attempt.
31. Once these facts are accepted and acknowledged, there can be no justifiable reason for this Court adopting a view different from that expressed by Sanjiv Khanna, J. (as he then was) in the order dated 25 November 2010 in Co. App. 176/1998. The 1500 RIL shares in issue were admittedly sold by CRBCML much prior even to 9 April 1997, when the proscription against sale of its asserts by CRBCML was put in place by the RBI. The statement, of CRBCML, that it did not sell any of the RIL equity shares held by it after 9 April 1997, stands accepted by this Court in the order dated 25 November 2010 in Co. App. 176/1998. As in that case, the applicant in the present case, too, purchased the shares from the open market prior to the order by this Court on 22 May 1997 and the letter dated 6 June 1997 issued by the RBI. The finding, of this Court, in the order dated 25 November 2010, that "the shares were sold by CRB Capital Markets Ltd prior to 9th April, 1997 and are therefore not covered by the restraint orders CO.PET.191/1997 Signature Not Verified Page 21 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 dated 9th April, 1997, 22nd May 1997 passed by this Court in Company Petition No. 191/1997 or the subsequent letter of the Reserve Bank of India dated 6th June, 1997", therefore, applies to the present case, mutatis mutandis.
32. Though this Court, in its order dated 25 November 2010 in Co. App. 176/1998 in Vikram Commercial's application, entered a caveat that the right of Vikram Commercial to have the shares transferred in its name was "provided the said transfer and purchase is otherwise in accordance with law", I do not deem it appropriate to hedge in the present order with any such caveat, for two reasons.
33. Firstly, the applicant has placed, on record, ample material, to which this order already alludes hereinbefore, to vouchsafe the credibility of the purchase of the subject 1500 shares from AGV - including the Share Transfer Form which is signed by the Director of CRBCML, reflects the shares to be of RIL and shows the applicant as the transferee thereof. That these were indeed the shares originally held by CRBCML, besides being admitted by Mr. Batra, is also manifest by a comparison of the Distinctive Numbers of the shares in the Share Certificates issued by RIL to CRBCML with the Distinctive Numbers of the shares in the communications from Karvy. Neither of the respondents questioned the credibility or genuineness of any of these documents.
34. Secondly, it is now 17 years since this application was filed, and 26 years since the shares were purchased by the applicant from CO.PET.191/1997 Signature Not Verified Page 22 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 AGV. To keep this dispute alive, in the absence of any convincing reason to do so, would, in my opinion, be a travesty of justice. Given the ferocity of the opposition put up, to the present application, both by the OL and by CRBCML, I am convinced that, if any leeway is left with them to deny the applicant the right to transfer of the shares in its favour, they would take advantage thereof.
35. I am, therefore, only inclined, in the interests of balancing the equities, to enter a limited restraint on the applicant dealing with the subject shares for a period of 30 days from the date of pronouncement of this judgment, to allow the respondents an opportunity to seek their remedies against this judgment, if they so choose.
36. Subject to this limited rider, the applicant would, therefore, be entitled to transfer of the 1500 RIL equity shares in its name. On perusing the order sheets in this case, I find that, vide orders dated 22 May 2020 and 31 August 2020, passed by this Court, the OL was directed to open a DEMAT account in the name of CRBCML with Stock Holdings Corporation Ltd and to covert all shares into DEMAT form so that all accretions on the shares could also be received in the said account. The OL had also assured, on the said date, that the shares would remain protected, subject to further orders to be passed by this Court.
Conclusion CO.PET.191/1997 Signature Not Verified Page 23 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40
37. The OL is, therefore, directed to transfer the subject 1500 RIL equity shares in the name of the applicant within a period of 7 days from the date of pronouncement of this order. The shares would, forthwith thereupon, be registered in the names of the applicant. The applicant would also be entitled to all accretions earned on the said shares from 1997 onwards, such as dividend, bonus, and the like, in accordance with the judgment of the Supreme Court in Standard Chartered Bank v. Custodian5.
38. The applicant would, however, stand restrained from dealing with the said shares in any manner for a period of 30 days from the date of pronouncement of this order.
39. The application stands allowed in the aforesaid terms.
CO.APPL.783/2006 [By Bihari Lal Saraf]
40. The applicant Bihari Lal Saraf, purchased 600 shares of RIL through AGV. All facts applicable to Murari Lal Saraf in Co Appl 782/2006 apply, mutatis mutandis, to the present application as well. The only difference between the two cases - already noted hereinabove - is that Murari Lal Saraf purchased 600 equity shares of RIL, originally held by CRBCML, through AGV. Needless to say, the Distinctive Numbers of the said shares are also different. But for these formal differences, the case of Murari Lal Saraf and Bihari Lal Saraf are indistinguishable.
5(2000) 6 SCC 427 CO.PET.191/1997 Signature Not Verified Page 24 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40
41. The present application, too, therefore, stands allowed in terms of paras 37 to 39 supra.
CO.APPL.784/2006 [By Banwari Lal Saraf]
42. The applicant Banwari Lal Saraf, purchased 900 shares of RIL through AGV. All facts applicable to Murari Lal Saraf in Co Appl 782/2006 apply, mutatis mutandis, to the present application as well. The only difference between the two cases - already noted hereinabove - is that Murari Lal Saraf purchased 900 equity shares of RIL, originally held by CRBCML, through AGV. Needless to say, the Distinctive Numbers of the said shares are also different. But for these formal differences, the case of Murari Lal Saraf and Bihari Lal Saraf are indistinguishable.
43. The present application, too, therefore, stands allowed in terms of paras 37 to 39 supra.
CO.APPL.1232/2005 [By Anoop Jain]
44. The applicant in this application is Anoop Jain. The facts relating to this application are, to all intents and purposes, similar to those of Co App 782-784/2006, the differences being merely cosmetic in nature, but deserving of mention nonetheless.
45. The applicant purchased 28900 equity shares of RIL through Ravi Kapur & Co., a share broker registered with the DSE, in the open CO.PET.191/1997 Signature Not Verified Page 25 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40 market. Karvy, as the Share Transfer Agent to whom the applicant sent the shares for transfer in his name, however, transferred only 24900 shares, demurring from transferring the remaining 4000 shares on the ground - as in the case of Co App 782-784/2006 - that they were originally held by CRBCML and were, therefore, subject to the proscriptions contained in the Circulars dated 9 April 1997 and 6 June 1997 of the RBI and the order dated 22 May 1997 supra passed by this Court.
46. In the case of the present applicant, too, the applicant has placed, on record, the blank Share Transfer Forms relating to the subject 4000 shares, in which the applicant has been shown as the transferee, and which are signed by the Director of CRBCML, as well as the Share Certificates whereunder the said shares of RIL were subscribed by CRBCML. The Distinctive Numbers of the said shares correspond to the Distinctive Numbers of the shares purchased by the applicant Anoop Jain through Ravi Kapur & Co. I see no reason, therefore, to extend, to Anoop Jain, a treatment different from that extended to Murari Lal Saraf, Bihari Lal Saraf and Banwari Lal Saraf.
47. The present application, too, therefore, stands allowed in terms of paras 37 to 39 supra.
C. HARI SHANKAR, J.
JULY 25, 2023 kr/dsn CO.PET.191/1997 Signature Not Verified Page 26 of 26 Signed By:HARIOM Signing Date:25.07.2023 15:09:40