Company Law Board
Shri Praveen Bhargava And Ms. Manjari ... vs Calcutta Phototype Co. Ltd., Mrs. Ruchi ... on 21 May, 2007
Equivalent citations: (2008)1COMPLJ345(CLB)
ORDER
Vimla Yadav, Member
1. In this order I am considering Company Petition No. 102 of 2005 filed by Shri Praveen Bhargava and Ms. Manjari Bhargava against M/s. Calcutta Phototype Co. Ltd. and Ors. alleging certain acts of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956 (hereinafter referred to as 'the act').
2. The undisputed facts of the case are: M/s Calcutta Phototype Company Limited and Ors. the Respondent No. 1 company, having its registered office at 6, Jawahar Lal Nehru Road, Kolkata on 6.1.1949. Subsequently its name was changed to The Calcutta Phototype Limited pursuant to Section 23(1) of the Companies Act, 1956. The main object of the company was to take over as a going concern the business of inter alia, printers, stationers as general merchants, contractors, agents, importers, exporters actors, warehouseman, ship owners and carries by land and sea, etc. The company is a closely held company as majority of its shareholders come from the same family and have utmost trust, the confidence and good faith between the family members. In view of the trust, faith and confidence documents and agreement are executed and admitted on oral assurance. The shareholding of the respondent No. 1 company at the time of incorporation was Rs. 5 lac wherein the petitioner group was holding majority share calculating at 66.66% and the respondent No. 2 to 5 were holding 33.33%.
3. Shri U.K. Chaudhary, Counsel for the petitioners pointed out that the petitioner No. 1 Shri Parveen Bhargava son of late Shri P.N. Bhargava, Resident of 6, J.L. Nehru Road, Kolkata who is director as well as shareholder of the respondent No. 1 company holding 1245 equity share of Rs. 100/- each had executed a deed of assignment of shares in favour of respondent No. 2 namely Smt. Ruchi Bhargava (wife of Shri Vijay Bhargava, elder brother of the petitioner No. 1 thereby assigning the voting rights and other rights and entitlements in respect of his shareholding in favour of respondent No. 2 as the petitioner No. 1 was not able to devote sufficient time to look after the day to day affairs of the company and only on the persistent request of the respondent No. 2 expressing he interest to run the affairs of the company in a more efficient manner the petitioner No. 1 assigned his shares. He had utmost trust, the confidence and the good faith between the family members, in view of such trust, faith and confidence, documents and agreements were executed and admitted on oral assurance. It was further pointed out that the petitioner No. 2 Ms. Manjari Bhargava daughter of petitioner No. 1, is also a shareholder in the company holding 680 equity shares of Rs. 100/- each before execution of assignment deed dated 16.12.1997 executed by her father in favour of respondent No. 2. The petitioner No. 2 was holding the aforesaid shares as a minor under the guardianship of her father. It was, however, observed that the company's performance was deteriorating day by day so much that company's net worth got fully eroded as on 31.3.2004. The petitioner No. 1 sometimes in the year 2004 wrote to respondent No. 2 to return the shares to him. At this point, the petitioner No. 1 came to know that the respondent No. 2 fraudulently got the shares of the petitioners transferred in her name with malafide intention of taking control of the company. The petitioner No. 2 after attaining majority has come to know that the deed of assignment dated 16.12.1997 was executed when the petitioner No. 2 was a minor and her father has assigned the voting right only on the persistent request of the respondent No. 2 to run the affairs of the company efficiently. It was pointed out that a careful perusal of assignment deed (at page 87) would make it clear that the consideration amount was left blank as the consideration was to be paid on actual transfer of shares and execution of the transfer deeds. It clearly demonstrated, it was argued, that the blank space was filled up later on by the respondent No. 2 with malafide intention to get the shares transferred in her favour fraudulently. The petitioner No. 1 could not have chosen to remain a director in the company after selling the shares and also furnishing his guarantee to the bank. The purpose behind execution of deed was not to transfer the ownership rights of shares but only the right attached thereto. Moreover, the respondent No. 2 has evidently not paid any amount to the petitioner in respect of execution of assignment deed and, therefore, the execution of assignment deed being without consideration cannot have any legal effect. The transfer of shares held by the petitioners in favour of respondent No. 2 is illegal being without consideration and having been obtained by misrepresentation. It was pointed out that for sale of shares, either there is execution of transfer deed or an agreement to sell. As sale, except a spot delivery sale is prohibited by law under the Securities Contract Regulations Act, no agreement to sale could have been signed. Hence, deed of assignment was executed.
4. The counsel for the petitioners argued that the Deed of Assignment dated 16.12.1997 is liable to be annulled as also the transfer of shares of petitioners in favour of respondent No. 2 are to be cancelled and restored in favour of the petitioners for the following reasons:
a. No consideration has been paid pursuant to the Assignment of shares. A careful perusal of the assignment deed, it was argued, would reveal that the consideration of Rs. 1,92,500/- was inserted subsequently by way of interpolation by the respondent No. 2. Had the intention of petitioner No. 1 been to transfer the shares in favour of respondent No2, the petitioner No. 1 would not have agreed to sell the said shares at a price much below the book value of the shares at that point of time. This fact is verifiable from the certificate of the. Chartered Accountant at page 100 of the petition wherein the value of the shares of the Respondent No. 1 company as on 31.3.1997 was Rs. 1036.52 per shares. It was argued that the whole argument of the respondents that the consideration has been paid has no merit and the same is liable to be ignored. Further, the petitioner No. 1 could not have chosen to remain a director in the company after selling the shares. Thus, it is clear that the purpose behind execution of deed was not to transfer the ownership rights of shares but only the interest therein. In fact, no consideration was to be paid and it was to be paid if shares are eventually sold and/or transferred. On the ratio that in case no consideration is paid the transfer is void, the judgment of the Apex Court in the matter of John Tinson and Co., Pvt. Ltd. v. Surjeet Malhan AIR 1977 SC 1411 was relied upon wherein the Hon'ble Supreme Court has clearly stated that if a transfer is without consideration, then the agreement for transfer of shares is void (para 6 of the judgment refers). Therefore, it was argued that the present case when the value of the shares was more than 1000 per share, the same could not have been transferred at mere paltry sum of 100 per share. Therefore, the above consideration was no consideration in the eyes of law and in view of the judgment of the Hon'ble Supreme Court. Therefore the alleged transfer is liable to be set aside on this ground alone. In this regard, it is pertinent to mention here that the witness of the assignment deed namely, Mrs. Neelima Bhargava and Mr. Vijay Bhargava have also confirmed that there was no consideration paid. In this regard, the respondent have also argued if an affidavit in a proceeding has been filed in such case the witness who have signed the affidavit are required to depose. It was pointed out that the proceedings before this Hon'ble Board are in the nature of summary proceedings. Further, if the respondents had desired for cross examination then it was incumbent upon them to move an appropriate application for cross examination which the respondents have not done; therefore, it does not lie in the mouth of the respondents to argue regarding cross examination of the witnesses. Therefore, the above argument is liable to be ignored and rejected, b. It was argued that the deed of assignment was actually executed in view of inability of the petitioner No. 1 to participate in the affairs of the respondent No. 1 company and also because the respondent No. 2 being the wife of the elder brother of the petitioner No. 1 and requesting persistently to assign the voting rights so that the affairs of the respondent No. 1 company may be conducted more efficiently. In this regard, my attention was drawn to the letter dated 2.3.2002 and 3.11.1998 wherein the petitioner had clearly stated that he is not willing to undertake the day to day responsibility of the company and, therefore, he was assigning the shares in favour of respondent No. 2.
c. Further, it was argued that the execution of assignment deed was primarily because of misrepresentation caused by the respondent No. 2 who promised that she would run the affairs of the company more efficiently and honestly and thereafter the petitioners realized that the effort was only to procure ownership rights of the shares thereby taking control of the company and then siphon off funds which was evident from the subsequent performance of the respondent No. 1 company. In this regard, my attention was drawn to the Balance Sheet of the respondent No. 1 company for the year 2004-2005 at page 122 of the petition which clearly showed huge losses on account of mismanagement and non-performance by the respondent No. 2. Further, it was argued that the respondent No. 1 company has been declared a sick company and reference has been registered by the Hon'ble Board for Industrial and Financial Reconstruction. Further, the company's financial conditions has been deteriorating and the company is facing debts to the tune of Rs. 40 lakhs towards banks and institutions and another Rs. 45 lakhs towards other creditors.
d. It was argued that since the petitioners have not received any consideration for the alleged assignment of rights n respect of shares and the petitioners are filing affidavits of the witnesses who signed the deed of assignment as a witness to the effect that no consideration was actually paid.
e. It was contended that the transfer of shares is illegal if it is done without completing the formalities of proper transfer form and if the intention would have been to transfer the shares the same could have been done by filing the share transfer form and not by Deed of Assignment. It has been argued by the Respondents that assignment of deed is a transfer and Section 108 does not bar any other method of transfer. In this regard, it has been stated that in case a person dies then succession takes place which has been affirmed even by the Hon'ble Supreme Court. It was pointed out that the provisions of Section 108 of the Companies Act, 1956 regarding transfer of shares are mandatory in nature and all the compliances are to be strictly followed before any shares are to be transferred in the company. Reliance was placed on the judgment of the Apex Court in the matter of Manna Lal Khaitan AIR 1997 SC 536 is relevant to Court wherein the Apex Court has clearly held that provisions of 108 regarding transfer are mandatory in nature and any transfer in violation of Section 108 will be void. In case of death of a person, the same are not transfer of shares but transmission of shares, which is a totally independent and separate right. Further, the transfer of shares by the existing shareholders to other shareholders also is required to be followed Transfer in a particular manner as held by the Hon'ble Calcutta High Court in the matter of Bhubneshwar Singh and Anr. v. Kanthal India Ltd. and Ors. 1986 59 CC 46 wherein it has been held 'that the only way in which the shares could be transferred wherein transferor has consented to such transfer and waived their preemptive rights. Such consent or waiver had to be given by each individual shareholder and could not be inferred from the presence of any shareholder as representing a group at a Board Meeting or even by his implied assent". Therefore, there is no legal and valid transfer in the eyes of law and the same is liable to be ignored.
f. The transfer is otherwise also invalid under the Securities Contract Regulation Act, as sale, except a Spot delivery. Sale is prohibited by law under the Securities Contract Regulation Act, no agreement to sale could have been signed. Hence, the deed of assignment was executed to transfer rights in shares, pending execution of transfer deed and payments of consideration for spot delivery of shares. Deed of assignment is executed for transfer of rights and not goods. As shares are goods under the Sale of Goods Act, the same cannot be sold by deed of assignment and requires sale agreement between the parties. Hence, deed of assignment is not a sale agreement or an agreement to sell, and if so treated it will be void under the provisions of Securities Contract Regulation Act.
g. It was argued by the respondents that the witnesses who has signed the assignment deed at pg.90 of the petition have not deposed and as per the various decisions of the Hon'ble Supreme Court if an affidavit is filed and no cross examination is done, the affidavit is nullity. It is submitted that the above argument have no merit as the petitioners have already established from the various reasons mentioned above and also the various reasons provided at page 13 of petition that the assignment deed does not amount to transfer of shares. Further, if the respondents desired to cross-examine the witnesses who have signed the assignment deed, then it was incumbent upon the respondents to more appropriate application before this Hon'ble Board for cross-examination of the witnesses. However, no steps were taken by the respondents and it does not lie in the mount of the respondents to argue the same at this stage when they themselves failed to take steps in this regard. Therefore, there is no merit in the above argument and the same is liable to be ignored and rejected, h. It was also argued by the respondents that the company has received an affidavit and form 1 from the petitioner dated 6.1.1998 for declaration in terms of Rule 3(1) and Section 187C(1) of the Companies Act, 1956. The said documents were handed over by the counsel or the respondent No. 2 at the time of hearing. Thereafter, the requirements in terms of the Section 187C for Form Ii and Form III were also completed by the company. The above argument further strengthens the argument of the petitioner that the said shares were only assigned in favour of the respondent No. 2. It is pertinent to note, that if we assume the arguments of the respondents that the said shares were legally and validly transferred in favour of the respondent No. 2, then in such a case their was no need to file Form I, II and III in terms of Section 187c, because the filing of form I, II and III is only required when there is only a beneficial interest in the company. Therefore, it was argued, it is clear the compliance of Section 187C was followed by the company and there was only a beneficial interest of the respondent No. 2. in the shares of the petitioner and no transfer as alleged by the respondent No. 2. Therefore, the alleged transfer is liable to be set aside on this ground alone.
5. It was further argued by the counsel for the petitioners that the assignment deed is also liable to be ignored due to fact that the petitioner has clearly intended only to assign the shares in favour of Ruchi Bhargava and the same did not amount to any transfer of shares. It was argued by the respondents that the petitioners have signed the annual return as well as the endorsement of transfer of shares at the back of the share certificates and they were aware of the said transfer at all times. It was pointed out that the above documents were signed in good faith and are also after receiving instructions from the respondent No. 1 company that the signing of the annual return does not amount to transfer of shares as they are held in trust by Ruchi Bhargava and the title of the petitioners were undisputed. Therefore the petitioner No. 1 signed the Annual Return and other documents in good faith and after receiving confirmation from the respondent No. 1 company that the above does not amount to transfer. Therefore the respondents cannot argue at this stage that the petitioners were aware of the transfer and thus the above argument is liable to be ignored.
6. It was argued that the title of the petitioners in respect of the shares is also confirmed from the register of members maintained by the respondent No. 1 company wherein the above shares were clearly shown in the name of petitioner No. 1 and petitioner No. 2 respectively. It was pointed out that a bare perusal of the register of members clearly shows that the shares still remain in the name of petitioner No. 1 and petitioner No. 2 and an endorsement regarding the assignment of shares has been clearly marked in respect of the shares wherein it is clearly mentioned that the above shares are only assigned to Mrs. Ruchi Bhargava and the above shares remained in the name of petitioner No. 1 and petitioner No. 2. Therefore, the Register of Members of the respondent No. 1 company which is a prima facie evidence in terms of the Companies Act, 1956 is to be relied upon and the shares in question are still in the name of the petitioner No. 1 and 2 respectively.
7. Furthermore, it was argued by the counsel for the petitioners that the respondent No. 2 has failed to run the affairs of the company efficiently and has brought the company to the stage of a sick company after grossly mismanaging the affairs of the company, it was pointed out that the respondents No. 2 and 3 on another occasion had played a fraud with the R-4 company when on 17.12.1998 the respondent No. 2 and 3 got transferred the shares in the name of respondent No. 4 company in their favour. The R-4 filed a company petition being CP No. 266 of 2001 before the Hon'ble Company Law Board, Eastern Region Bench, Calcutta and the Hon'ble Board vide order dated 28.2.2002 directed the respondents to cancel the transfer and restore the shares in favour of respondent No. 4 company and restore back the monitory benefits taken by the alleged transferees. It was pointed out that it was argued by the respondents in this regard that in the above proceedings all the respondents including the petitioner were parties and they are also responsible for the consequences thereof. It was further argued that the main benefit of the said transfer was attributed to daughter of R-2 (Ms. Shreeti Bhargava) only, which was done on behest of the R-2 only which clearly shows the malafide intention and acts of the R-2.
8. It was argued that the gross acts of oppression and mismanagement on the part of the R-2 is also evident from the fact that despite the various letter as written by P-1 and 2 to inform them regarding the status of the company and also to provide inspection of the statutory documents of the company were not respondent by the R-2. My attention was drawn to Annexure G&H at pages 147 to 155of the petition wherein the petitioners time and again requested the respondents to provide inspection of statutory documents, information regarding the status of the company including the status of the shares held by the petitioners. However, the respondents failed to respond to any of the correspondences of the petitioners.
9. Further, it was argued that the petitioner No. 1 has been writing letters to the respondent No. 1 company regarding the breach of fiduciary relationship comitted by respondent No. 2 and the fraud played by respondent No. 2 in transferring the shares belonging to the petitioner on false pretext thereby depriving them of their lawful rights and thereafter mismanaging the affairs of the company and taking undue advantage. However, no response was given by the respondents and the petitioners were left with no other choice but to approach this Hon'ble Board for appropriate relief under Section 397/398 of the Companies Act, 1956.
10. It was argued that from the above facts and circumstances, it is clear that the respondents are adversely affecting the rights and interests of the petitioners and acting in a manner which is highly oppressive of the petitioners as director and shareholders of the company and the respondent No. 1 company is being mismanaged. It was reiterated that the action of the respondents are in clear departure from fair dealing and probity in the conduct of the affairs of the R-1 company and the treatment to the petitioners and shareholder of the company, by attempting to transfer of the company, by attempting to transfer the shareholding of the petitioners in the R-1 company.
11. It was pointed out by the counsel for the respondents that the respondent No. 2, with her zeal to work, worked with the petitioner No. 1 shoulder-to-shoulder and was primarily instrumental in setting up the operations of the company. In the year 1997, the petitioner No. ;l expressed his desire to transfer 1245 equity shares held by him in the R-1 company as also 680 shares held by his daughter, the P-2 who was minor at the relevant time. R-2 agreed to purchase the said shares for valuable consideration. The P-1 for himself and on behalf of the P-2 consequently executed deed of assignment dated 16.12.1997, while acknowledging the receipt of consideration of Rs. 1,95,000/- assigning and transferring all right, title, interest and claim whatsoever in respect of 1925 shares, in favour of the R-2. Upon the receipt of consideration, as was duly acknowledged by the P-1 for himself and as guardian of the P-2 the said 1925 shares were transferred in favour of the R-2 on 6.1.1998. The original share certificates were handed over to the / R-2, The transfer of the said shares was duly reflected in the Annual Return of the R-1 company for the year 1998 and thereafter. The said Annual Returns for the year 1998 to 2004 were signed by the P-1 himself.
Reference was made to the Annual Return for the year 1998 at page 50 at 60,62 and 63 and Annual Return for the year 1999 at page 64 at 79 of the reply filed by Respondent.
12. Responding to the petitioners allegation that the petitioners had only assigned the voting rights and other rights to the R-2 to enable the R-2 to run the affairs of the R-1 company in an efficient manner as the P-1 was not able to devote sufficient time to look after the day to day affairs of the company, the counsel for the respondents argued that this allegation has been made relying upon the alleged letter dated December 16,1997 written by the P-1 to the Respondent company in this respect. It is submitted that the P-1 have been actively participating in the affairs of the company and been attending the factory on daily basis. The balance sheet and annual returns have always been and are still being signed by the P-1.
13. Responding to the petitioners contention that P-1 came to know of the said transfer only in the year 2004, the counsel for the respondents argued that the petition is barred by delay, laches and acquiescence. The allegations made in the petition relate to the year 1997 duly ratified by the petitioners over the years and the petition has been filed in the year 2005, it is thus manifestly clear that there has not been any oppression as falsely alleged. Besides, the Petitioner No. 2 attained majority in the year 2003, yet the P-2 took two years to file the present proceedings which show that the present petition is malafide and an after thought. The transfer of the said shares was duly reflected in the Annual Return of the R-1 company for the year 1998 and thereafter. The said Annual Returns for the year 1998 to 2004 were signed by the P-1 himself. It was further pointed out that the said shares were transferred by the R-2 on June 15,2002 and were transferred back in the name of the Respondent No. 2 on October 21,2002. All these transfers including subsequent transfers were duly endorsed by the P-1 on reverse of share certificates as also duly reflected in the Annual Return. Pages 26-49 of Reply of respondents were referred to categorically shows, it was argued, that the P-1 was aware of the facts ever since the Transfer of shares took place in 1997. Reference was made to Judgment of High Court in the matter of Maharani Yogeshwari Kumari v. Lake Shore Place Hotel P. Ltd. reported in (1995) 3 Comp LJ 418 at page 422.
14. Replying to the petitioners' contention that the consideration amount was left blank in the assignment deed and blank space was filled up later by R-2, the counsel for the respondents argued that the Deed of assignment is on stamp paper, which shows that the consideration was settled and duly paid before the shares were transferred. It is registered document and it would not have been registered had there been any blanks. One of the witness to the deed of assignment is wife of the P-1, thus her affidavit stating that no consideration passed is irrelevant being obtained by the P-1. With respect to the affidavit of Mr. Vijay, it was explained that he is the brother of the P-1 and divorce proceedings between the R-2 and Mr. Vijay are going on and it is on this account that false affidavit has been given by the witnesses. It was further argued that the witnesses can depose only to the effect that the documents was executed. They cannot depose with effect to the contents of the documents. Both the witnesses have not denied the execution of the document.
15. It was further argued that Section 84 of the Companies Act, 1956, provides that share certificate shall be prima facie evidence of the title of the member to the said shares. Further, it was contended that Section 164 of the Companies Act, 1956 also records that annual returns and certificates are also prima facie evidence of the matters directed or authorized to be inserted therein. In the present case, the annual return reflecting the said shares in the name of the R-2 was signed by the P-1 himself. The petitioner himself has endorsed the share certificates. The Register of members is in possession of the petitioners, they have produced the same before this Hon'ble Board and have manipulated the same. It was pointed out that an assignment is not required to be mentioned in Register of Member, only transfers are recorded. Reference was made to judgment of CLB in the matter of Mrs. Rashmi Seth v. Chemon India Pvt. Ltd. reported in (1992)3 Comp LJ 89 at page 90 wherein it has been held that annual return are prima facie evidence of correct and complete facts.
16. It was further argued by the counsel for the respondents that Section 187 C provides for declaration to be made by the person who holds the shares in his name but somebody else holds the beneficial interest. In the present case the said affidavit and form were executed by the P-1 as also the R-2 and filed with ROC. It is pertinent to mention here that had the shares not been transferred and only voting rights had been transferred then there was no need to file form under Section 187 C as beneficial interest mean all right, title and interest and not voting right. It is an admitted fact that R-2 is the beneficial owner of the impugned shares and this fact has also been admitted by the P-1.
17. Further, the counsel for the respondents argued that R-2 purchased the shares for valuable consideration, consequent whereupon the shares were transferred in the name of the R-2. The annual return reflecting the said shares in the name of the R-2 was signed by the P-1 himself. Admittedly, transfer of shares by the petitioners themselves, it was argued, cannot be found to be a cause for petition under Sections 397/398 of the Companies Act, 1956, when the deed of assignment and consequent transfer was done by the P-1 himself. It was pointed out that no instances of alleged Oppression and/or mismanagement have been mentioned. Admittedly, there is no mismanagement by the respondents. Thus, Petition under Section 398 of the Companies Act is not maintainable. Besides, the petitioners do not hold 10% of the share capital.
Reference may be had to judgment of this Hon'ble Board reported in (1994) 3 Comp LJ 529 at page 530.
18. With respect to transfer of 3450 shares of the R-1 company held by Calcutta Security Printers Ltd. and order of Hon'ble Company Law Board, it was pointed out that R-2 was neither a party to the said proceedings nor the said order was passed against the R-2.
19. I have considered the pleadings and the documents filed therewith as well as the arguments of the parties. The petitioners' case is that they had assigned only the voting rights in respect of 1925 shares to R-2 to run the affairs of the R-1 company in an efficient manner as the P-1 was not able to devote sufficient time to look after the day-to-day affairs of the company; the assignment being termed as transfer by the respondents, the so-called transfer is void as no consideration was paid; the execution of assignment deed was primarily because of misrepresentation caused by respondent No. 2,that she would work with zeal but the petitioners' faith was breached as the performance of the company deteriorated due to mismanagement and siphoning off funds leading to the declaration of R-1 as a sick company and reference had to be registered by BIFR; the so-called transfer by the respondents is invalid under the Securities Contract Regulation Act as sale is prohibited by law, except the spot delivery, no agreement to sale could have been signed; shares are goods under the Sale of Goods Act, the same cannot be sold by deed of assignment, hence deed of assignment is not a sale agreement or an agreement to sell; no consideration amount was mentioned in the assignment deed, the respondents by interpolation filled up consideration amounting to Rs. 1,192.500/- which was not even adequate; since no consideration was received, affidavits of witnesses were filed to support the case; respondents' argument that without the cross examination of witnesses their affidavits are a nullity, has no merit as the petitioners have established from the various other reasons that the assignment deed does not amount to transfer of shares; Form Nos. I, II and III in terms of Section 187C were filed as beneficial interest of R-2 was being created; the annual returns and endorsements at the back of the transfer deed forms were signed only in good faith; title of the petitioners is confirmed from the register of members maintained by R-1; the respondents have breached fiduciary relationship; the respondents have not replied to various letters of the petitioners hence oppression and mismanagement to the petitioners is caused; since such acts of the respondents have affected the rights and interest of the petitioners and R-1 is mismanaged, respondents action being departure from fair dealing and probity in the conduct of the affairs of the company, petition under Sections 397 and 398 of the Act is the only option available with the petitioners. The respondents' case is that the petitioners themselves had expressed their desire to transfer the impugned shares to the respondents for valuable consideration which was paid and acknowledged assigning and transferring all rights, title, interest and claim whatsoever in respect of 1925 impugned shares of the respondent company; the original share certificates were handed over to R-2 duly endorsed on the transfer deeds; the transfer of the said shares was duly reflected in the annual returns of the R-1 company for the year 1998 and thereafter; the said annual returns for the years 1998 to 2004 were signed by Petitioner No. 1 himself; for the contention that only voting rights were assigned, the petitioners had relied on their letter dated 16.12.1997 to the company; whereas the fact is that these shares were transferred even by R-2 on 15.6.2002 and were again transferred back in the name of R-2 on Oct 21st 2002 and all these transfers including subsequent transfers were duly endorsed by the P-1 on reverse of the share certificates as also duly reflected in the annual returns; the deed of assignment is on stamp paper which shows that the consideration was settled and duly paid before the shares were transferred, it is a registered document and it would not have been registered had there been any blanks as contended by the petitioners; the witnesses affidavits are a nullity as these were not cross examined and further that witnesses cannot depose with effect to the contents of the documents, and furthermore one of witnesses is petitioner's wife and the other witness is respondents' estranged husband who is the elder brother of the petitioner No. 1; statement in Form I, II and III in terms of Section 187C are required to be filed only when beneficial interest is held by the shareholder and beneficial interests means all rights, title and interest and not only voting rights; the register of members is in possession of the petitioners who have manipulated the same in their interest; the petition is not maintainable under Sections 397 and 398 of the Act as no case has been made out for oppression and mismanagement; the petitioners' do not have 10% shareholding to be eligible to file petition under Section 397 and 398 as required under Section 399 of the Act; the petition is barred by delay, latches and acquiescence, the allegations made in the petition relate to the year 1997 and the petition has been filed in the year 2005, even P-2 whose 680 shares are included in this transaction had attained majority in the year 2003, yet P-2 took two years to file the present proceedings of which P-1 was aware of the facts ever since the transfer of shares took place in 1997; annual returns and certificates/statements filed with the ROC are prima facie evidence for the matter in terms of Section 164 of the Act; share certificates shall be the prima facie evidence of title in terms of Section 84 of the Act; assignment is not required to be mentioned in register of members, only transfers are recorded; as regards transfer of 3450 shares of R-1 company held by Calcutta Securities Calcutta Securities Printer Pvt. Ltd. and order of the CLB, R-2 was neither a party to the said proceedings nor the said order was passed against R-2.
20. The facts, the circumstances, the legal position all are on the side of the respondents in the case. Even the preliminary objections raised are tenable. By no stretch of imagination the scope of Sections 397 and 398 can be extended to cover the issue whether the impugned shares were assigned with voting rights only or transferred. Personal dispute between the petitioner and estranged wife of his elder brother over the title of shares can by no means be considered in a petition under Sections 397 and 398 of the Act. Furthermore, the petitioner does not have the eligibility criterion fulfilled as required under Section 399 of the Act. And then there is uncondonable delay, latches and lack of due diligence, and then acquiescence. The issue relates to the year 1997. It is unbelievable that a director would year after year sign the annual returns, statements to the ROC, endorsements on the transfer form and would then wake up in 2005 and file a petition under Sections 397 and 398 to make a futile effort to do damage control or try his luck in the guise of oppression and mismanagement. The petitioner has failed miserably to make a case under Sections 397 and 398 of the Act. Preliminary objections are tenable. Even on merits, the petitioner has no case under Sections 397 and 398 - no acts of oppression and mismanagement have been proved. It is unbelievable that an assignment deed allegedly exploited as transfer by filling up blank space by mentioning consideration in favour of 'X' from 'Y' has ended up in deterioration of the health of a company which has become sick and hospitalised with BIFR because of this act of R-2. Further, it is not possible to get an assignment deed registered with blank space for consideration. Then, the fact of filing of Forms I, II and III in terms of Section 187C of the Act with the ROC is uncontroverted. The legal position that the witnesses cannot depose in respect of the contents of the document witnessed by them in the process of registration/execution. And in this case the witnesses are closely related family members who would conveniently depose in favour of the petition to help him recover his shares. The petitioner No. 1 as well as petitioner No. 2, who had even became major in 2003, have failed to rebut the arguments of the respondents in response to the allegations made. The Register of Members is in the possession of the petitioners still shortly the petitioners as members does not prove the petitioners case. The R-2 who has the shares and the voting rights has not bothered to get it changed, it still being a closely held company with members of the family as members. The petitioners have not been able to prove the breach of fiduciary duty - qua whom?
21. In view of the foregoing, I find no justification to allow the petition. This petition is not even maintainable on account of the rightly raised preliminary objections. Even on merits no case has been made out.
22. The company Petition No. 102/05 is hereby dismissed. No order as to cost. All CAs stand disposed off. All interim orders stand vacated.