Company Law Board
A. Devarajan vs N.S. Nemura Consultancy India Pvt. Ltd. ... on 15 July, 2004
Equivalent citations: [2006]130COMPCAS407(CLB), (2005)3COMPLJ177(CLB), [2005]58SCL203(CLB)
ORDER
K.K. Balu, Member
1. This is a petition filed under Section 111 of the Companies Act, 1956 ("the Act") seeking directions against M/s N.S. Nemura Consultancy India Private Limited ("the Company") for rectification of the register of members of the Company by deleting the name of the second respondent as owner of 101 equity shares of the Company and entering the name of the petitioner as the holder of the impugned shares.
2. According to Shri A.K. Mylsamy, learned Counsel, the petitioner and one Shri Amalraj are subscribers to the Memorandum and Articles of Association of the Company, each subscribing to 101 equity shares of Rs. 10/- each and the first directors. However, the petitioner had resigned from the office of director on 30.12.1995, upon which the Company had filed form-32 on 02.01.1996 with the Registrar of Companies, intimating the change in the constitution of Board of directors of the Company. The petitioner continued to hold 101 equity shares in the capital of the Company. When the petitioner inspected the records of the Company at the Registrar of Companies, Chennai in March, 2002, he came to know from the annual return filed by the Company on 19.09.1997 that all his shares stood transferred in the name of the second respondent. Thereafter, the petitioner caused a legal notice on 12.04.2003 through his Counsel, in response to which the first respondent replied on 02.05.2003 to the effect that the petitioner had transferred his 101 shares in favour of the second respondent after receiving due consideration. The share certificates together with transfer deeds were delivered by the petitioner to Shri L. Amalraj for transferring the shares in the name of the second respondent. It was further falsely contended that the petitioner had on 03.01.1996 unlawfully and forcefully entered the premises of the Company and removed all the documents including the transfer deeds and the share certificates, resulting in a police complaint lodged by the Company against the petitioner. According to the petitioner, he neither executed any transfer deed in accordance with Section 108 of the Act which is mandatory nor received consideration for the alleged transfer of shares in favour of the second respondent. Shri L. Amalraj, taking advantage of the control of the Company created records as if the shares standing in the name of the petitioner had been registered in the name of the second respondent. Shri Mylsamy, therefore, sought to rectify the register of members of the Company by deleting the name of the second respondent, in support of which relied on National Insurance Company Limited v. Glaxo India Limited - (1999) 2 Comp LJ 205 - to show that in so far as the matters of rectification are concerned, it is the company court alone would have jurisdiction which is now exercised by the CLB under Section 111 of the Act. In the present case, no complicated question of facts are involved and therefore the CLB has jurisdiction to adjudicate the dispute between the parties as held in A. Akhilandam And Smt. A. Nagalakshmi v. The Great Eastern Shipping Company Limited - (2000) 1 Comp LJ 110.
3. Against this, the submissions of Shri Venkatavaradhan, learned Counsel appearing for the respondents is that when the petitioner had resigned from the post of director, had received his share of profits as borne out by his communication dated 30.12.1995 (Annexure-R1), which included consideration for the impugned shares. As the petitioner had transferred his shares held in the Company and received the consideration, he had explicitly indicated in his communication dated 30.12.1995 that "There is no other transaction I will involve myself in the name of the Company". It is therefore beyond doubt that the petitioner had not only resigned from the office of director, but also transferred his holdings in favour of the second respondent. The petitioner never bothered about his shareholding in the Company since December 1995 until the year 2003 and approached the CLB after a lapse of eight years, thereby the claim is barred by limitation. The Company was forced to lodge a police complaint against the petitioner when he had unlawfully entered the Company's premises on 03.01.1996 and removed all the documents including the share certificates and the transfer instruments as borne out by annexure R-2, which was registered with the jurisdictional police station on 04.01.1996. While the petitioner categorically stated in the company petition that he was not given the share certificates, the legal notice dated 12.04.2003 issued on his behalf indicates the ledger folio No. 002 in respect of his shareholding. Similarly, the petitioner in his legal notice dated 12.04.2003 explicitly stated that he had not signed any share transfer deeds and former that his signature had been forged, but the specific plea in the company petition is that he never signed any transfer deed. These contradictions remain unexplained by the petitioner. Though the shares were transferred in favour of the second respondent on 30.12.1995, in view of the pending police complaint, the transfer was registered by the Company in his favour only on 30.01.1997 and therefore the transfer of shares have not been reflected in the annual return dated 16.12.1996. Shri Venkatavaradhan, therefore, sought for dismissal of the company petition.
4. Shri Mylsamy, in his rejoinder denied that any consideration was received by the petitioner towards the alleged transfer of shares, as borne out by Annexure R-1, which pertains to the profit amount due to the petitioner for the business transacted upto 30.12.1995 settled by the Company through a cheque dated 30.12.1995. This cheque of Rs. 34,810/- has not even been encashed by the petitioner. The annual return dated 16.12.1996 discloses that the petitioner is holding 101 shares in the Company and the petitioner's holding has not undergone any change eversince his resignation on 30.12.1995. The petitioner approached the CLB, when he acquired the knowledge of the alleged transfer of the shares in favour of the second respondent and therefore, the petition would not be barred by limitation as held in Jagjit Rai Maini v. Punjab Machinery Works (P) Ltd. - (1995) 4 Comp LJ 110. Moreover, the Limitation Act is not applicable to the proceedings before the CLB, as held in C. Mathew v. Cochin Stock Exchange Ltd. - (1997) 4 Comp LJ 455. Shri Mylsamy further denied that the petitioner had forcefully removed the alleged transfer deeds and the share certificates from the Company's premises and contended that when the petitioner had not executed any transfer deed, it could only be inferred that his signature in the alleged transfer deed should have been forged.
5. Before dealing with the matter on merits, it would be appropriate to deal with the objection of the respondents regarding limitation. By way of preliminary objection, Shri Venkatavaradhan argued that the shares were transferred in December, 1995 and the present company petition was filed in July, 2003, after a delay of 8 years. The petition has been filed under Section 111 of the Act and the prayer is for rectification of the register of members. A petition under Section 111 may lie under Sub-section (2) or Sub-section (4). Whereas Sub-section (2) deals with an appeal or a refusal by the board of directors, subsection (4) deals with an application for rectification of the register of members. In the latter case, there is no limitation of time and there is no precondition of a refusal by the board of directors. Thus, there is no limitation period provided for making an application for rectification of register of members, under Sub-section (4). Against this background the decision in Punjab Machinery Works (P) Ltd. (supra) assumes importance, wherein the CLB relying upon the decision of the apex court in the case reported as Kerala State Electricity Board v. T.P. Kumhaliumma - AIR 1977 SC 282 held that article 137 of the Limitation Act, 1963 will apply to any petition for rectification of the share register, which prescribes a period of three years of the transfer of shares. In the present case, the shares were purportedly transferred on 30.01.1997 which is under dispute. According to the petitioner, he had no knowledge about the transfer till, the records of the Company were inspected by him in March, 2002. The plea of the petitioner that he acquired the knowledge of transfer of the shares on 31.03.2002, when he had inspected the records of the Company at the Registrar of Companies, Chennai has not been denied in unequivocal terms by the respondents, which according to them is "a belated attempt by the petitioner in trying to get back his shares". Moreover, according to the respondents, the transfer of shares is reflected in the communication dated 30.12.1995 of the petitioner (Annexure R-1), which reads as under: -
"The Company's account settled on 30th December 1995 have been accepted and agreed to by me. I have also received my profit amount due to me for the business transacted upto 30 Dec. 95.
There is no other transaction I will involve myself in the name of the company viz. N S NEMURA CONSULTANCY INDIA PVT LTD. MADRAS."
The above communication of the petitioner must be read in the context of his letter dated 30.12.1995 (Annexure-R) of resignation from the post of director of the Company. A perusal of Annexure R-1 reveals that he had received the profits due to him from the Company and that he would not involve himself in the name of the Company, especially when he ceased to be the director with effect from 30.12.1995. It does not in any way speak of the transfer of shares or execution of the transfer deeds in favour of the second respondent. This communication, in my view, does not impute any knowledge on the part of the petitioner about the transfer of shares as on 30.12.1995. There is no documentary proof to show as to when the petitioner acquired the knowledge of the transfer of shares. Under these circumstances, it would be presumed that the petitioner had the knowledge from the date when he had the inspection of the records of the Company at the Registrar of Companies, Chennai, i.e. 31.03.2002. The present company petition which was filed on 21.07.2003, within three years of acquiring the knowledge of transfer of shares, in my considered view, is not barred by limitation on the basis of the principles adopted by the Board in Punjab Machinery Works (P) Ltd. cited supra.
On merits, the case of the Company as set out in their lawyer's notice dated 02.05.2003 is that the petitioner had transferred his shares in favour of the second respondent and received the consideration on 30.12.1995 (Annexure-R1), as borne out by the communication dated 30.12.1995 of the petitioner and further that the transfer deeds were handed over to Shri L. Amalraj, director of the Company for transferring the shares in favour of the second respondent. The communication dated 30.12.1995 does not even whisper about the transfer of shares in favour of the second respondent or delivery of the transfer deeds in favour of Shri Amalraj or payment of consideration towards the transfer of shares by the second respondent. There is no reference to the second respondent or Shri Amalraj at all in the said communication. Moreover, the cheque dated 30.12.1995 of Rs. 34,810 said to be representing the profit amount of the petitioner due from the Company and consideration towards the transfer of shares was issued in the name of the Company and by the Company. There is nothing on record to show that the amount of the cheque represents the consideration towards the transfer of shares by the petitioner or payment of the consideration by the second respondent. Though the transfer was said to be effected on 30.12.1995, the transfer was registered only on 31.01.1997. The Company has not chosen to produce either the original minutes of the meeting of the Board of directors approving the transfer of impugned shares or the register of members or share transfer which ought to be in their custody or any other document substantiating their claim and therefore the CLB must make every presumption against the respondents to their disadvantage consistent with the facts, in support of which beneficial reference in drawn to the decision of the apex court reported as Atyam Veerraju v. Pechetti Venkanna - AIR 1968 SC 1413. The second respondent neither' produced the affidavit and the indemnity bond said to have been executed by him in favour of the Company before registering the transfer of shares by the Company. The reply notice dated 02.05.2003 (page 9 of the company petition) caused on behalf of the Company shows that the petitioner had transferred his shares in favour of the second respondent, handed over the share certificates and the transfer deeds to Amalraj for transferring the shares on 30.12.1995 and further categorically shows that the petitioner had unlawfully and forcefully entered into the Company's premises and removed away the share certificates as well as the transfer deeds. It is, therefore, beyond doubt that since 03.01.1996, the share certificates and the transfer deeds were not in the custody of the Company, in which case, it is rather surprising as to how the Company could have registered the transfer on 30.01.1997, without custody of the share certificates and transfer deeds. From the above sequence of events, I am firmly of the view that the respondents have failed to establish by production of necessary documents both the transfer of shares in favour of the second respondent and registration of the transfer of shares by the Company, without which the Company must, in the interest of justice, be directed, notwithstanding any of the discrepancies pointed out by Shri Venkatavaradhan, learned Counsel, to rectify the register of members of the Company by inserting the name of the petitioner in the place of the second respondent as claimed in the company petition and further that the Company shall issue duplicate share certificates in respect of the impugned shares in favour of the petitioner. Ordered accordingly, in exercise of the powers vested in Section 111 and the Company shall complete the whole process in terms of this order within 30 days of receipt of the same. With these directions, the company petition stands disposed of.