Company Law Board
Shri D.R. Talayarkhan vs Transgene Biotek Limited And Dr. K. ... on 2 August, 2005
Equivalent citations: [2007]138COMPCAS727(CLB), [2006]71SCL319(CLB)
ORDER
K.K. Balu, Vice-Chairman
1. This company petition is filed under Section 111A of the Companies Act, 1956 ("the Act") seeking directions against M/s Transgene Biotek Limited ("the Company") to rectify its register of members by entering the name of the petitioner in respect of 1,04,200 equity shares of the Company, impugned therein.
2. The facts, in brief, leading to the present company petition are that the petitioner had extended a loan of Rs. 10 lakhs in favour of the Company against pledge of the impugned shares held in the name of the second respondent, being Managing Director of the Company. The Company purportedly failed to repay the loan amount in full, forcing the petitioner to lodge the share certificates together with the instruments of transfer with the Company for effecting the transfer in the name of the petitioner, upon which, the Company allegedly effected the transfer in favour of the petitioner and returned to him the original share certificates. The allegations regarding (i) lodgment of the transfer documents with the Company; (ii) transfer entries appearing on reverse of the share certificates and (iii) return of the original share certificates to the petitioner are seriously disputed. Hence, the present company petition.
3. Shri R.Subramanian, learned Counsel, while initiating his arguments submitted that the petitioner being an investor in the capital and stock markets has been investing monies by way of loans to corporate and other bodies. The petitioner had advanced in August, 1995 a short term loan of Rs. 10 lakhs carrying interest at 21% per annum in favour of the Company for the period from 28.08.1995 to 23.10.1995 against collateral security of 1,30,000 equity shares of Rs. 10/- each of the Company held in the name of the second respondent, being Managing Director of the Company. This transaction was arranged through Vinmar Capital Markets Limited (VINMAR), a merchant banker, as borne out by their letter dated 25.08.1995 (Annexure A-2). Accordingly, the second respondent lodged with the petitioner the impugned shares together with duly executed transfer deeds by way of security. The Company failed to settle the loan amount in full as agreed and defaulted in the matter of payment of balance of the outstanding principal amount of Rs. 6 lakhs along with interest, in spite of exchange of the prolonged correspondence and the legal notice sent by the petitioner (Annexure A-6 to A-14), calling upon the Company to transfer the impugned shares in favour of the petitioner. Thereafter, the petitioner was constrained to make arrangements for hand delivery of the share certificates and the instruments of transfer in favour of the Company, through a representative of VINMAR, in terms of the endorsement made by the Company on 10.04.1996 and its communication dated 10.04.1996 acknowledging receipt of the share certificates (Annexure A-19 & A-20). After persistent follow up by VINMAR (Annexure A-21 & A-23), the Company forwarded the impugned shares duly transferred in the name of the petitioner by courier to VINMAR (Annexure A-24), which in turn on 02.05.1996 returned the share certificates to the petitioner (Annexure A-25). The petitioner sold in February, 1999, 1000 shares from his total holding, through a Stock Broker and delivered the share certificates in accordance with standard delivery practice and realized the sale proceeds. When the petitioner lodged in May, 1999, 2000 equity shares for deletion of the second holder's name (Annexure A-29), the request was not acceded to by the Company. The petitioner sent 1,000 physical share certificates to his depository participant for dematerialisation, which was returned on the ground of discrepancy in the number of shares submitted for dematerialisation and the shares generated by the depository (Annexure A-32). When the petitioner caused a legal notice on 10.09.2003 (Annexure A-33), calling upon the Company to return 2,000s shares already lodged in physical form duly registered and confirm dematerialisation of 1,000 shares sent to the depository, the Company by its letter dated 18.09.2003 (Annexure A-34) for the first time came up with the plea that the petitioner played fraud by fabricating the transfer entries, rubber seal and register folio numbers recorded on reverse of the share certificates, which are absolutely false and untenable. The learned Counsel pointed out that it would be appropriate, if the CLB would see for itself, whether the disputed documents are forged and fabricated and examine whether even prima-facie, what is pleaded is complicated question or not, without relegating the parties to a civil suit, as held by the Supreme Court in Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd. (1998) vol.94 310. The CLB in Centurion Bank Ltd. v. Bellary Steels And Alloys Ltd. 2004 (vol. 120) CC 439 and Indian Bank v. Kiran Overseas Exports Ltd. 2001 (vol. 104) CC 320 ordered rectification of the register of members of the company in respect of the shares pledged with the bank as security for the financial facilities extended to the Company on the latter's failure to repay the outstanding loan amount, thereby recognizing the bank's entitlement to enforce its rights as pledgee, seeking registration of the pledged shares in its favour. In these circumstances, Shri R.Subramanian, learned Counsel sought directions against the Company to rectify its registers by entering the name of the petitioners in respect of the impugned shares.
4. Shri C. Kodandaram, learned Counsel for the Company submitted: The Company already repaid the entire loan amount in a number of instalments, but the petitioner under the premise of non-payment of the dues have retained the pledged shares, despite several demands made by the respondents. According to the Company, the various communications referred to by the petitioner are fabricated documents and vehemently denied issuance of such communications. They are as under:
a) communication dated 08.11.1995 (Annexure A-6) of the General Manager of the Company assuring the petitioner to clear the outstandings;
b) communication dated 14.11.1995 (Annexure A-7) of VINMAR demanding from the second respondent the amounts due to the Company;
c) communication dated 11.01.1996 (Annexure A-10) addressed by K.Mahidar on behalf of the second respondent promising the petitioner to clear the outstandings by the month end;
d) communication dated 29.01.1996 (Annexure A-11) of the petitioner demanding from the second respondent the balance principal amount along with over due interest at 30% per annum;
e) communication dated 14.02.1996 (Annexure A-12) addressed to the petitioner by the General Manager of the Company, confirming payment of the dues with penal interest by the end of February, 1996;
f) communication dated 01.03.1996 (Annexure A-13) of the petitioner conveying his decision by registered post A/D in favour of the second respondent, to lodge the pledged shares for transfer in his name;
g) legal notice dated 09.03.1996 (Annexure A-14) by the petitioner's advocate under registered post A/D calling upon the Company to ensure that the pledged shares are transferred in favour of his client;
h) communication dated nil (Annexure A-19) by VINMAR forwarding therewith the share certificates in favour of the Company with its rubber stamp impression and initial of its representative appearing on the last page of the communication;
i) communication dated 10.04.1996 (Annexure A-20) of the Company in favour of the petitioner acknowledging receipt of the share certificates lodged by the representative of VINMAR;
j) communication dated 18.04.1996 of VINMAR (Annexure A-21) drawing the attention of Srinivas Kollipara for delivery of the share certificates duly transferred in the name of the petitioner;
k) communication dated 18.04.1996 by the General Manager of the Company (Annexure A-22) promising VINMAR to dispatch the share certificates by courier;
l) communication dated 24.04.1996 of VINMAR (Annexure A-23) addressed to the Company drawing the attention of Srinivas Kollipara for delivery of the share certificates;
m) courier cover (Annexure A-24) in favour of VINMAR from the Company.
The second respondent filed an application (CA 74/04) for production of the original documents in the petitioner's custody, but, the latter failed to produce any of them and the petitioner's explanation for non-production of those documents is liable to be rejected. The transfer entries, rubber stamp impression appearing on reverse side of the share certificates are fabricated. The rubber stamp impression on reverse of the share certificates and the rubber stamp impression contained in the communication (Annexure A-19) are not similar in size and they are procured to achieve the ends of the petitioner.
The communications (Annexure A-19 & A-20) show that 2000 shares covered by certificate Nos.4024 to 3043 were lodged with the Company as early as on 10.04.1996. At the same time, the same share certificates were found to be forwarded by the petitioner to the Company for effecting the transfer on 21.05.1999 in terms of his communication (Annexure A-29). The same certificates could never be lodged at different point of times to effect the transfer in favour of the petitioner. While the petitioner is under obligation, the second respondent is entitled for return of the pledged shares, immediately on receipt of the loan amount by the petitioner. Thus, the disputes involve substantial rights of the parties, which cannot be adjudicated in Section 111A proceedings. In view of the complexity of disputes, the parties must be relegated to civil suit, in support of which reference has been made to Ammonia Supplies Corporation Private Ltd. v. Modern Plastic Containers Pvt. Ltd. (1994) 79 CC 163, wherein the full Bench of Delhi High Court held that "the object of Section 155 (now Section 111) of the Companies Act, 1956, is to provide a remedy in non-controversial matters or in matters where a quick decision is necessary and can be rendered in order to obviate irreparable injury to a party. Section 155 is ordinarily not intended for settling controversies necessitating a regular investigation and in such cases the company court can decline to entertain petitions in exercise of its discretionary power and say that since serious disputes are involved, the proper forum for their adjudication is a civil court. " The Supreme Court while affirming the decision of the Delhi High Court in Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd. 1998 (vol.94) CC 310 held that when the documents are disputed to be forged in the proceedings under Section 155, the proper form for adjudication of such disputes is a civil court. The Supreme Court categorically held in Public Passenger Service Ltd. v. M.A. Khadar that where by reason of its complexity or otherwise the matter can be conveniently be decided in a suit, the court may refuse relief under Section 155, in exercise of the discretionary jurisdiction and relegate the parties to a suit. The CLB has held in Bipin K. Jain v. Savik Vijay Engineering Pvt. Ltd. (1998) 91 CC 835 that "if complicated questions of law or facts arise in a Section 111 petition, which cannot be adjudicated on the basis of documents made available, but could be decided only on trial by evidence, then the Company Law Board would relegate the matter to the suit." The CLB in A. Akhilandam and Smt. A. Nagalakshmi v. The Great Eastern Shipping Company Limited (2000) 1 Comp LJ 110 held that "where in a petition under Section 111 of the Companies Act, 1956, complicated question of facts arise, which could not be adjudicated upon and the controversy could be tested by a civil court alone, the Company Law Board would be reluctant to go into the matter but can relegate the parties to civil court. " This Board in Tracstar Investments Limited v. Gordon Woodroffe Limited 1996 (vol.87) CC 941 held that the decision to relegate the parties in a petition under Section 111(4) to a civil court depends on the facts and circumstances of the case. It is not mandatory that whenever allegations of fraud are made, the parties should be relegated to a civil suit. However, the complicated questions of facts and serious controversies involved in the present company petition, necessitate a regular investigation and, therefore, the parties must be relegated to a civil suit. Therefore, these contentious issues cannot be decided in summary jurisdiction by this Board at this stage. Furthermore, the respondents have filed prior to the company petition a criminal case (Crime No. 1340/2003) before the Metropolitan Magistrate Court, Nampalli, Hyderabad, against the petitioner for the offences of forgery and cheating, which is already registered and pending. In view of this, the issue of forgery and manipulation of the transfer entries appearing on reverse of the share certificates cannot be adjudicated in the present proceedings. The Patna High Court held in Ramdeyal Prasad v. Sayed Hasan AIR 1944 (31) page 135 that a sale by a pledgee to himself of securities pledged is void. The Supreme Court in S.L. Ramaswamy Chetty v. M.S.A.P.L. Palaniappa Chettiar 1929 LW (vol.xxx) 898 held that where a pledgee takes over the property pledged, as if upon a sale to himself without the authority of the pledgor and without giving credit to him of its full value, the pledgee is guilty of unauthorized conversion and hence the pledgor is entitled to have his property back with full value on payment of the debt.
5. Sriri S.K.Srinivasan, learned counsel appearing for the second respondent Submitted: The second respondent is the absolute and registered owner of the impugned shares. The rights and interests of the second respondent are entirely distinct from those of the Company. The petitioner had extended the financial assistance in favor of the Company against pledge of the shares belonging to the second respondent. The petitioner is under contractual as well as legal obligation to deliver back the pledged shares in favor of the second respondent immediately on receipt of the amount advanced by him in accordance with the provisions of the Indian Contract Act, 1872. The petitioner has retained the pledged shares wrongfully even after closure of the loan amount by the Company. Therefore, the petitioner is not entitled to claim any right or interest over the impugned shares. The petitioner under the guise of non-payment of the loan amount has retained the security, despite several demands made by the second respondent. The transfer entries and the rubber stamp impression appearing on reverse of the impugned share certificates are fabricated ones. The petitioner failed to give any notice under Section 176 of the Indian Contract Act, 1872, before transferring the shares in his favor which is a statutory requirement as held in Prabhat Bank Ltd. v. Babu Ram . The petitioner appropriated the securities without any prior intimation to the second respondent, which is worse than sale of the shares without any notice to the pawner. Any sale by a pledgee to himself of securities pledged is invalid. Applying this principle the transfer of impugned shares by the petitioner being a pledgee to himself is void. The petitioner is a financier and the second respondent is a scientist not being aware of the statutory requirements. While according to the petitioner, the pledged shares stood transferred as early as in May 1996, yet the petitioner by his communication dated 21.05.1999 (Annexure A-29) forwarded 2000 shares covered under share certificate nos.4024 to 4043 to effect the transfer without furnishing the transfer folio nos. The petitioner by his communication dated 14.08.1996 (page 317 of petitioner's compilation) claimed from the Company the TDS certificate for the amount of tax deducted by the Company on 24.10.1995 in respect of the loan availed by the Company, even though the pledged shares stood reportedly transferred in May 1996 in the name of the petitioner. The Company had lodged a criminal complaint in November, 2003 prior to the date of company petition against the petitioner on the file of the Metropolitan Magistrate, Hyderabad for the offences of forgery and cheating. The criminal proceedings are under progress. The serious allegations of fraud and manipulation of transfer documents are being adjudicated in a competent court of criminal jurisdiction and it would be premature for the CLB to intervene at this stage as held in Durga Finance Ltd v. Rungta Irrigation Ltd. and Ors. (2005) 66 CLA 36 (CLB). This Board, while adjudicating the subject disputes is to consider several of the issues namely a) title to the impugned shares; b) mandatory requirement of issue of notice prior to sale of the shares; c) opportunity if any, given to the second respondent for redemption of the shares; d) transfer of the shares to the petitioner; e) correctness in appropriating the pledged shares by the petitioner to himself; f) compliance of the underlying principles of sale under Section 176 of Indian Contract Act, 1872; g) amount if any due and payable by the Company to the petitioner etc. These complicated questions of fact cannot be adjudicated in a summary proceeding under Section 111A. The CLB being a final authority on the question of facts and, therefore, the disputed facts ought not to be adjudicated by this forum, but must be adjudicated by a competent civil court. The second respondent, not withstanding the disputes, forwarded a demand draft for Rs. 17.76 lakhs being the amount claimed by the petitioner, which is till date retained by him. The second respondent on legal advice has recently filed a civil suit for redemption of the pledged shares. Therefore, the claim of the petitioner must be disallowed.
6. Shri R.Subramanian, learned Counsel in his rejoinder referred to the communication dated 28.07.1995 (Annexure A-3) of the Company with signature of the second respondent attested by the bank Manager, the communication dated 08.11.1995 (Annexure A-6) issued under signature of the Company's General Manager assuring the petitioner to clear the outstanding dues, which would show that these communications are on similar letter heads of the Company and that they are genuine documents. The Company by its communications dated 22.11.1995, 11.01.1996 and 14.01.1996 (Annexures A-8, A-10 & A-12) committed to clear the dues along with interest at an early date. When the petitioner in his communication dated 01.03.1996 (Annexure A-13) advised the second respondent that the impugned shares would be lodged with the Company for effecting the transfer in his name, followed by a lawyer's notice dated 09.03.1996 (Annexure A-14), there was no response from the respondents. The petitioner is entitled for the overdue interest till the impugned shares duly transferred in his favour are received by him and, therefore, justified to ask for the TDS certificates for the original interest payment. Though the respondents are vehemently contending that no amount is outstanding, yet the second respondent has forwarded to the petitioner a demand draft dated 03.03.2005 of Rs. 17.96 lakhs, being the balance due with interest and called upon him through a legal notice 30.03.2005, to return the share certificates in his possession. When the petitioner caused a reply notice dated 06.04.2005, challenging the demand for the shares certificates, the second respondent has filed in May, 2005 a civil suit in O.S. No. 14/2005 on the City Civil Court at Hyderabad against the petitioner, his wife being the second holder and the Company for redemption of the pledged shares and the suit is pending. In these circumstances, the petitioner does not intend to encash the demand draft forwarded by the second respondent. The original share certificates are in the petitioner's custody since the year 1995 and the respondents never took any action for retrieving the same, till the petitioner approached the CLB in December, 2003. The respondents claim that a criminal case has been registered against the petitioner on the file of the V Metropolitan Magistrate Court, Nampalli, Hyderabad for the offences of forgery and cheating, but the petitioner has not been put on any notice. Mere plea of forgery and cheating without any adequate proof is not sustainable.
7. After considering the pleadings and elaborate arguments of learned Counsel, the issue that arises for my consideration is whether the Company be directed to rectify its register of members by incorporating the name of the petitioner in respect of the impugned shares, in the facts and circumstances of the present case? The facts in serious disputes are -
Whether the Company repaid the principal amount in full and paid interest to the petitioner in accordance with the agreed terms and conditions?
whether the pledged share certificates were forwarded to the Company for effecting the transfer in the name of the petitioner?
whether title to the impugned shares was transferred in favour of the petitioner?
Whether the transfer entries and rubber stamp impression on the reverse of the share certificates are genuine and effected by the Company?
Whether the Company had returned back to the petitioner, the original share certificates duly transferred in his name?
Whether the correspondence on record exchanged, inter-alia, among the petitioner, Company, VINMAR and others are genuine or fabricated documents?
Against the above background, it shall be seen whether by virtue of Section 111 A, the petitioner can seek any remedy before the CLB? There are judicial pronouncements that the jurisdiction of the CLB under Section 111 (old Section 155) is discretionary in nature, providing a summary remedy in non-controversial mattes or in matters where a quick decision is necessary so as to obviate an irreparable injury to a party. The CLB is not bound to give any relief under Section 111/111 A, if it is found that complicated questions of facts or law or disputes of complicated nature or serious disputes relating to title are involved. Where the allegations are forgery and fabrication of documents, which ' could only be resolved by oral testimony tested by cross examination, cannot be resolved on the strength of the averments made in the affidavits, defeating the purpose and object of the summary procedure prescribed by Section 111/111 A. The proper course in such cases of complexity, necessitating investigation is to relegate the parties to a civil suit. The full Bench of the Delhi High Court in Ammonia Supplies Corporation Pvt. Ltd. v. Modern Plastic Containers Pvt. Ltd. (supra) held that the jurisdiction exercised by the Company under Section 155 (now under Section 111/111 A) is discretionary and summary in nature. In exercise of its discretionary and summary jurisdiction, the company court can decline to entertain any petition for rectification of the register of members involving disputed and complicated questions requiring examination of evidence and would be justified to reject the petition and relegate the parties to a civil suit. The apex court, while affirming the judgment of full Bench of the Delhi High Court unequivocally observed that it would be appropriate, if the court would see for itself, whether the disputed documents are forged or fabricated and examine whether even prima-facie what is pleaded is complicated question or not without relegating the parties to a civil court. The Division Bench of the Karnataka High Court in Muniyamma v. Arathi Cine Enterprise Pvt. Ltd. (1992) 9 CLA 148 held that even though proceeding under Section 155 is a summary proceeding, since it is a relief provided under the statute, in a proper and appropriate case, it is open to the court to grant relief even though it may involve complicated questions of law and fact. Whether in a particular case relief should be granted or not would depend upon the facts and circumstances of the case. This Board in Bipin K. Jain v. Savik Vijay Engineering Pvt. Ltd. and A. Akilandam and A. Nagalakshmi v. The Great Eastern Shipping Company Limited (supra) held that if complicated questions of facts or law arise in a Section 111 petition, which cannot be adjudicated on basis of the available documents, the CLB would relegate the controversies to a civil suit. This Board in Tracstar Investments Limited v. Gordon Woodroff Limited (supra), while examining the issue whether in a petition under Section 111 for rectification of the register of members involving serious disputed questions of facts or law and allegations of fraud, malafides etc., the parties must be relegated to a civil suit, considered plethora of judgements and concluded that no restrictions could be put on the discretion of the CLB in dealing with matters under Section 111(4) of the Act. The decision to relegate the parties in a petition under Section 111(4) to a civil suit depends on the facts and circumstances of each case. It is not mandatory that whenever allegations of fraud are made, the parties should be relegated to a civil suit. Thus, the legal position is well settled that the CLB in exercise of its discretion would decide, on the facts of each case, whether to entertain a petition for rectification under Section 111 A, despite seriously disputed controversies or to relegate the same to a civil suit. I, therefore, proceed to consider this company petition for rectification of the register of members of the Company on various grounds set out therein and see for myself whether the allegations of fraud and fabrication of records reportedly resorted to by the Respondents are made to exclude the jurisdiction of the CLB or they are genuinely made or the parties should be relegated to a civil suit.
While according to the Company, the entire loan amount has been repaid in instalments - (a) Rs. 31,068 by way of cheque; (b) Rs. 2,00,000/- by way of demand draft; (c) Rs. 2,00,000/- by way of demand draft; (d) Rs. 5,00,000/- through Ashok Janani, Mumbai; and (e) Rs. 1,00,000/- by cash. The payment of Rs. 5,00,0007- through Ashok Janani and cash payment of Rs. 1,00,000/- are denied by the petitioner. The Company has not chosen to furnish the dates on which the disputed payments were made or the person(s) in whose presence those payments were made to the petitioner. The petitioner in his lawyer's notice dated 26.09.2003 (Annexure A-36) caused to the Company categorically stated that the loan amount was not repaid in full by the Company. But the Company in its reply dated 06.10.2003 (Annexure A-38) never pleaded that the loan amount was repaid in full to the petitioner and in particular failed to furnish the details of payment of Rs. 5,00,000/- reportedly made through Ashok Janani and the cash payment of Rs. 1,00,000/-. There is no other material other than the bare pleadings, evidencing discharge of the loan amount in full by the Company. Had the loan amount been repaid in full by the Company, I do not see any reason on the part of the second respondent to (a) send in March, 2005 in favour of the petitioner a demand draft of Rs. 17,96,000/- being the balance due with interest and (b) demand the share certificates in possession of the petitioner. This assumes all the more importance when the impugned shares are now worth over Rs. 1,87,50,000/- (Rs.180/- per share) as claimed by the petitioner in his lawyer's reply notice dated 06.04.2005 as against their worth of Rs. 10,94,100/- at the rate of Rs. 10.15 per share, which was prevailing at the time of lodgment of the impugned shares with the Company for effecting the transfer in the name of the petitioner, as borne out by the communication dated 01.03.1996 of the petitioner (Annexure A-13).
The lodgement of the share certificates together with instruments of transfer with the Company and the consequent transfer entries on reverse of the share certificates which are under serious dispute must be examined in the light of various communications on record before the Bench. The petitioner in his communication dated 01.03.1996 (Annexure A-13) reportedly sent by registered post had advised the second respondent that he had decided to send the pledged shares for effecting the transfer in his name, on account of the failure of the Company to repay the outstanding dues, which has been reiterated in the lawyer's notice dated 09.03.1996 (Annexure A-14), in the following words:-
Ultimately by his letter of lsl March 1996 our client recorded the facts and decided to enforce the Security and lodge with you the said 85,200 Equity Shares for transfer in his name @ Rs. 10.50 per share being the approximate rate quoted at the Bombay Stock Exchange.
In the aforesaid circumstances you are called upon to ensure that the said 85,200 equity shares are transferred immediately in our client's favour. The over due interest @ 30% will be calculated till the date of the receipt of the shares duly transferred in our client's favour.
The lawyer's notice speaks of 85,200 equity shares as against 1,05,200 shares pledged in favour of the petitioner. The petitioner has not produced the postal acknowledgements to prove service of those communications genuineness of which is under challenge. VINMAR by its communication dated 21.03.1996 (Annexure A-15) acknowledged receipt from the petitioner of 1,05,200 shares along with 48 unstamped transfer deeds duly signed by the second respondent for the purpose of lodging the same with the Company to effect transfer in favour of the petitioner. It is, therefore, far from doubt that the transfer deeds were neither stamped nor signed by the petitioner, while they were received by VINMAR for lodging the transfer documents with the Company. It is, however, observed from copies of the transfer deeds (Annexure A-16) that they were stamped; signed and executed by the petitioner and his wife on 25.03.1996, after parting possession of the share certificates and the transfer deeds by the petitioner in favour of VINMAR. This discrepancy remains unresolved. VINMAR had forwarded by hand delivery at Hyderabad on 29.03.1996, (Annexure A-17) 864 share certificates together with 48 duly executed and stamped transfer deeds in respect of 86,400 shares and not 1,05,200 shares to the Registrars and Transfer Agents of the Company for registration of transfer in the name of the petitioner as well as his wife and requested for return of the share certificates duly transferred in their names at their address furnished therein. The Transfer Agents by their letter dated 09.04.1996 (Annexure A-18) advised the petitioner that they stopped their services for the Company and requested the petitioner to contact the Company for further clarifications. This communication sent to the petitioner at Bombay does not indicate whether the share certificates were forwarded to him by the Transfer Agents. It is not known as to how the communication was sent to the petitioner, whether by ordinary post or hand delivery etc. There is no material showing the return of share certificates by the Transfer Agents to the petitioner. At the same time, it is observed as borne out by Annexure A-19 that the petitioner and his wife forwarded by hand delivery to the Company at Hyderabad 1,052 share certificates as against 864 share certificates with 59 duly executed and stamped transfer deeds instead of 48 transfer deeds in respect of 1,05,200 shares and not 86,400 shares forwarded by VINMAR to the Transfer Agents of the Company for effecting registration of the transfer in favour of the petitioner and his wife. Thus, there is variance in the number of share certificates, shares and transfer deeds lodged with the Company for effecting the transfer in favour of the petitioner. It is unknown as to how the petitioner and his wife got back possession of the share certificates on 10.04.1996 from the Transfer Agents which are not in consonance with the quantum of shares sent by VINMAR to the Transfer Agents. The communication (Annexure A-19) addressed to the Company comprises of three pages, the first page of which starts in the following manner: -
We forward herewith 1052 Share Certificate together with 59 duly executed and stamped transfer deeds in respect of 105200 Equity Shares of Transgene Biotek Ltd, for registration of transfer in our names ie
1. MR. D.R. TALYARKHAN
2. MRS. URMILLA TALYARKHAN It is clear that the petitioner and his wife addressed the communication and forwarded the share certificates. But, the last para contained in the third page of the said communication reads as follows: -
Kindly return the share certificates duly transferred and endorsed in the names of Mr. Talyarkhan & Urmilla Talyarkhan by hand delivery at the earliest.
Thanking you, Yours Faithfully, RAJESH GUPTA (AUTHORISED SIGNATORY) While the first page of the communication dated nil (Annexure A-19) reveals delivery of the pledged share certificates to the Company by the petitioner and his wife, the last page indicates that the certificates were handed over to the Company by one Rajesh Gupta, out of which one could only be possible. This communication does not bear the signature of the petitioner and his wife and further does not disclose as to how the petitioners at Bombay got back possession of the share certificate from the Transfer Agents at Hyderabad. This communication is not in the letter head of VINMAR but in plain paper, while the rest of communications of VINMAR, save Annexure A-25, are found to be on its letter head. Thus, this communication is full of contradictions, without any explanation. The last page of the communication (Annexure A-19) contains the rubber stamp impression of the Company with initial of someone from the Company, of whom no details are available. The rubber stamp impression is smaller in size when compared to the rubber stamp impression appearing on reverse of the share certificates (Annexure A-26 series). However, the communication dated 10.04.1996 (Annexure A-20) of the Company reveals that it had acknowledged receipt of the share certificates from Rajesh of VINMAR. I find that these communications (Annexure A-19 and A-20) run parallel to each other. The communication dated 10.04.1996 (Annexure A-20) does not indicate as to how Rajesh of VINMAR got possession of the share certificates and from whom he gained possession of the share certificates. There is no explanation for these inconsistencies. Furthermore, the communication dated 10.04.1996 of the Company acknowledging the receipt of the share certificates (Annexure A-20) contains, inter-alia, share certificate nos. 4480-4499, which are not reflected in the communication bearing the endorsement reportedly made by someone from the Company on 10.04.1996 (Annexure A-19). VINMAR in its communication dated 18.04.1996 (Annexure A-21) had referred to the commitment made by one of the Company's officials, viz., Srinivasa Kollipara that he would bring with him on 17.04.1996, the impugned share certificates duly transferred in the name of the petitioner and his wife, which has been reiterated by VINMAR in its subsequent communication dated 24.04.1996 (Annexure A-23). In view of the controversy regarding the lodgment of the share certificates with the Company, an affidavit from Srinivas Kollipara would have thrown light on the dispute before me. The communication dated 24.04.1996 (Annexure A-23) speaks of a fax message allegedly sent by the General Manager (Finance) of the Company undertaking to forward the share certificates on 22.04.1996 by courier to VINMAR. There is no material showing the fax message sent by the Company, containing any such undertaking. The petitioner produced the original courier parcel cover along with the original share certificates in the course of hearing, but no initiative was taken to cause production of the consignee copy, which ought to have been obtained by the courier agent from VINMAR. It shall be borne in mind that there has been no forwarding letter of the Company, when the valuable securities were reportedly returned by the Company to VINMAR, after effecting the transfer in the name of the petitioner. VINMAR had forwarded along with its communication dated 02.05.1996, copy of which is on record (Annexure A-25), the impugned share certificates in favour of the petitioner. The said communication is neither in the letter head of VINMAR nor signed by its Vice-President, who reportedly issued the communication. The petitioner did not choose to produce in original the communication (Annexure A-25) in support of his claim. It shall be borne in mind that the communication dated Nil of VINMAR (Annexure A-19) forwarding the share certificates to the Company for effecting the transfer and the communication dated 02.05.1996 (Annexure A-25) of VINMAR, sending the share certificates to the petitioner after duly effecting the transfer in his name, which are the most important ones, are only in plain paper, which is not only unusual but also improbable. Though the share certificates (Annexure A-26 series) in respect of the impugned shares indicate the transfer folio number, yet it is emphatically contended by the Company that they are manipulated transfer entries. According to the Company, no transfer entries were made on reverse of any of the share certificates. This plea gains support from the communication dated 21.05.1999 of the petitioner (Annexure A-29) requesting the Company to effect the transfer of 2,000 shares covered by share certificate Nos. 4024 to 4043. While the said communication gives the distinctive numbers of the shares, it does not furnish the transfer folio number of those shares sought to be transferred. The petitioner claims that 1,000 shares out of 1,05,200 shares were sold on 26.02.1999 in the open market, through the Bombay Stock Exchange as borne out by copy of the contract note (Annexure A-28) issued by the concerned Stock Broker. However, it is unknown whether the Company had registered the transfer of said 1,000 shares sold by the petitioner in the name of the purchaser/transferee, recognizing the petitioner's title in respect of the impugned shares. The impugned shares were reportedly transferred in the name of the petitioner as early as in May, 1996, but the petitioner claimed from the Company the TDS certificate for the amount of tax deducted by the Company in October, 1995, as borne out by the communication dated 14.08.1996 (page 317 of the petitioner's compilation) of VINMAR. The petitioner has produced copy of the communication dated 14.02.1996 (Annexure A-12) signed by the General Manager (Finance) of the Company promising the petitioner to repay the loan in January, 1996 and copy of the communication dated 18.04.1996 (Annexure A-22) signed by the General Manager (Finance) assuring to dispatch the share certificates by courier. The signatures of the General Manager of the Company in these communications (Annexure A-12 & A-22) not being similar are at variance. The rubber stamp impressions of the Company appearing on reverse of the share certificates (Annexure A-26 series) vary in size from the rubber stamp impression appearing on the communication of VINMAR at page 73 of the company petition. The Company failed to indicate the person who has affixed the rubber stamp impression on the said communication and initialed the same acknowledging receipt of the share certificates from VINMAR. When the petitioner lodged 2,000 shares covered by certificate Nos. 4024 to 4043 with the Company for deletion of the second holder's name in terms of his letter dated 21.05.1999 (Annexure A-29), the Company by its letter dated 09.06.1999 advised the petitioner in the following words: -
This has reference to the Equity shares (2000 quantity) and Share Transfer form sent by you for deletion of 2nd holder's name. In this connection, we bring to your notice that the transfer entries appearing on the shares certificates sent by you for the above purposes are not genuine and use of duplicate rubber stamp amounts to forgery. It is pertinent to mention that no such names are found in the register of members of the company as such you and/or Mrs. Urmila Talyarkhan are not considered as registered members/shareholders of this company which fact disentitle both of you for any transaction in your favour.
Further, the transfer entries appearing on the instruments of share certificates are totally different in all respects with that of the normal procedure being adopted by our Share Transfer Agents M/s Ikon Visions Private Limited, Hyderabad, who were solely authorised to undertake all such transfers etc. pertaining to shares. Therefore, it is informed that we are retaining the said shares with the company in view of the fact that your claim is a fraudulent and also not genuine and advise both of you to return all those documents in your possession immediately.
The Company has taken the plea as early as in June, 1999 that the transfer entries as appearing from the share certificates are not genuine and the rubber stamp impressions on reverse of the share certificates are forged. This communication of the Company forming part of the complaint filed under Section 200 of Criminal Procedure Code before the court of Metropolitan Magistrate, Hyderabad has not been questioned. The criminal compliant lodged by the Company is pending before the court of Metropolitan Magistrate, Hyderabad. The plea that the petitioner has no knowledge of the criminal complaint is of no consequence. The issues of forgery and fraudulent manipulation of the transfer entries appearing in the share certificates impugned in the company petition are being adjudicated in a competent court of criminal jurisdiction and, therefore, unless and until the decision of the court in the pending criminal proceedings, which are prior in point of time, are known, it would be premature to intervene at this stage, as held in similar circumstances, by this Board in Durga Finance Ltd. v. Rungta Irrigation Ltd. (2005) 66 CLA 36 (CLB). Furthermore, the allegations of forgery, manipulation of records and various controversial matters of complexity set out hereinabove could not be resolved on the strength of the averments made in the affidavits filed by the parties and further for want of proper explanation on a number of inconsistencies discussed elsewhere, which, in my considered view, could only be decided on trial by evidence. I am, therefore, constrained to refuse the relief of rectification of the register of members of the Company under Section 111A as claimed by the petitioner and relegate the parties to a civil suit. Ordered accordingly. The parties having been relegated to a civil suit for resolving the controversies, I do not find any need to go into any of the other decisions cited by the learned Counsel in relation to inter-alia, the enforcement of securities; validity of the transfer of shares impugned in the company petition etc. With these directions, the company petition and the company application (CA 74/05) calling for certain documents from the petitioner stand disposed of. No order as to costs.