Calcutta High Court
Farhat Sheikh vs Escman Metalo Chemical Pvt. Ltd. And ... on 29 November, 1989
Equivalent citations: [1991]71COMPCAS88(CAL)
Author: Umesh Chandra Banerjee
Bench: Umesh Chandra Banerjee
JUDGMENT Umesh Chandra Banerjee, J.
1. The relief as envisaged under Section 155 of the Companies Act, 1956, is discretionary in nature. This discretion, however, cannot be termed to be an uncontrolled one but can only be exercised in accordance with the known principles of justice, equity and fairplay and as such refusal to interfere in terms of the provisions of Section 155 can only be had where the facts do not justify the same. In other words, the law court while considering the matter for rectification within the meaning of Section 155 of the Act ought always to consider the facts and circumstances of each matter and on the basis thereof, come to its conclusion.
2. At this juncture, however, it would be convenient to briefly narrate the facts. The petitioner admittedly was the recorded shareholder of 975 equity shares of Rs. 100 each fully paid up and the annual return filed by the company up to June, 1984, records the petitioner's name as the registered shareholder of 975 equity shares of Rs. 100 each.
3. On the factual score, it, however, appears that in the annual return filed by the company in respect of the period up to June 27, 1985, the name of the petitioner has been shown as shareholder of the company in respect of only 415 equity shares and in her place and stead respondent No. 2 has been shown to be the registered shareholder in respect of 560 equity shares. Incidentally, it is to be noted that respondent No. 2 prior to such an entry in the annual return and up to 29th June, 1984, was shown as the registered shareholder in respect of 320 equity shares. It is this transfer of 560 equity shares standing in the name of the petitioner after 1984 which is under challenge as wrongful, illegal and void. The petitioner has also come out with a definite case of mala fides in the matter of transfer of the above named 560 equity shares in favour of respondent No. 2. The petitioner contended that this transfer was not known to the petitioner and it is only in February, 1987, on searches being made with the Registrar of Companies that the petitioner came to know of the above noted transfer.
4. Admittedly, the company being respondent No. 1 is more or less a family concern and the above noted 560 equity shares were originally standing in the name of the deceased father of the petitioner herein and after the death, the shares were transferred to the petitioner as evident from the annual return up to June, 1984, Respondent No. 2 through his constituted attorney, however, in the counter-affidavit stated : "The petitioner has suppressed from this hon'ble court the fact that after the death of her father, Sk. Mohd. Naqi, and thereafter, after the death of Ms. Qumar Naqi, there was a family settlement and/or arrangement and/or understanding between the members of the family with regard to various properties and assets belonging to them and/or their predecessor in interest and in pursuance of such settlement and/or arrangement, it was decided that 560 equity shares bearing Nos. 4531 to 4560, 5046 to 5135, 5541 to 5790, 5881 to 6000 in the company should be transferred by her to respondent No. 2 for a consideration of Rs. 19,880. In implementation of the said family settlement and/or arrangement with the consent and approval of the petitioner, Sk. Mohd. Naqi, my father and her duly constituted attorney, duly executed a deed of transfer of the said shares in favour of respondent No. 2 and received consideration money therefor against delivery of the share scrips by virtue and on the strength of a duly registered general power of attorney granted by the petitioner in his favour. Pursuant to the said transfer respondent No. 2 lodged the said shares for being transferred by the company, by deleting therefrom the name of the petitioner and inserting therein the name of respondent No. 2 in place and stead thereof. Similarly, thereafter, the company having considered the said document at a meeting of its board of directors held on October 18, 1984, resolved to register the transfer of the said share in the name of respondent No. 2."
5. It is to be noted, however, that on behalf of the company, one Zaved Zaki has affirmed an affidavit and stated that on October 18, 1984, respondent No. 2 lodged 560 equity shares of Rs. 100 each fully paid up of the company along with the duly executed transfer deed for being registered in his name and the said application for transfer was duly considered by the board and at its meeting dated October 18, 1984, the register of members was duly rectified by deleting the name of the petitioner and inserting the name of respondent No. 2 as the holder of 560 shares. The photocopy of the transfer form depicts the signature of the constituted attorney of the petitioner herein. On the factual score as regards the power of attorney by the petitioner herein in favour of Sk, Mohd. Zaki being the brother of the petitioner, it appears that the same was executed on August 11, 1975. The power of attorney, inter alia, provides ;
"... to enter into sale agreement to sell and transfer and assign to mortgage release relinquish and its claim any property or properties belonging to me for valuable consideration for more beneficial use therefor for me on such terms and conditions as my said attorney will consider fit and proper and for that purpose to exclude all deeds and documents and sign all papers in connection with and to present the same for registration to the registering authorities concerned and to admit execution for me and on my behalf and to get the same registered and to pay all necessary charges and fees in connection therewith and to receive such deeds, documents from the registering authorities and to grant factual receipts for the same . . .
to invest any amount in Government securities and any other business or businesses of the private parties and to acquire shares of any company for the purpose to sign or negotiate all documents and to receive interest and dividends from the authorities and companies concerned and to grant receipt for the same and to look after and manage my business to enter into contracts and to attend to all dealings and transactions in connection therewith . . .
. . . and generally to do and perform all and every such further or other lawful and reasonable acts, deeds and this touching and concerning the matters and premises aforesaid as fully and factually to all intents and purposes as I might or could do if personally present."
6. On the basis of the narration of facts as above it appears that the power of attorney was executed in the year 1975 by the sister in favour of her elder brother to do what is considered to be in the interest and beneficial for the petitioner herein. Admittedly, the petitioner was not available in this country by reason of which the power of attorney was executed in favour of her elder brother. In February, 1984, after the death of the father, the abovenoted shares were transferred in favour of the petitioner but the petitioner has been in the city of Calcutta since July, 1984, and the power of attorney was cancelled in December, 1984. On the other factual aspect, in the family settlement after the death of the father and the payment of a sum of Rs. 19,880 in lieu of the shares as recorded in the transfer form itself, admittedly, the payment, if any, has been received by the constituted attorney. There is no averment as to making over of the money to the petitioner herein. Significantly enough the constituted attorney being the elder brother of the petitioner herein has not pledged his oath before the court. Respondent No. 2 also has pledged his oath through his constituted attorney and introduced the family settlement in the counter-affidavit as detailed above. There is no data either by way of even any approximation or anything in writing produced before this court. A bare statement has been made in regard to the transfer of 560 equity shares effected by the constituted attorney for a consideration of Rs. 19,880. It appears on record that the petitioner's father being the registered holder of the abovenoted 560 equity shares died in 1981 and the shares were transferred in the name of the petitioner in February, 1984. Under what circumstances the family settlement was effected has not been made known to this court ; neither the point of time. Three years after the death of the father in February, 1984, the shares have been transferred in favour of one of his heirs and by October, 1984, the constituted attorney agrees to transfer the share in favour of respondent No. 1. Under what circumstances such transfer has taken place also has not been made known. What has happened to the consideration money also is not known. In that perspective, I am unable to give any credence to the family settlement as narrated by the constituted attorney of respondent No. 2. Up to June 24, 1984, the shares were standing in the name of the petitioner. On October 18, the shares were transferred. Incidentally, it is to be noted that shares were lodged on October 18 for transfer and transfer was effected on October 18 itself rather in haste.
7. Mr. Mukherjee, appearing for the respondents, however, submitted that the petition ought to be dismissed in limine by reason of gross suppression of facts and in any event the constituted attorney or the agent did act within the authority granted and as such the question of rectification of the share register in the absence of fraud with particulars thereof which is absent in the pleadings, cannot be accepted. Mr. Mukherjee further submitted that no order should be passed on this application by reason of delay or acquiescence on the part of the petitioner and no exception can be taken to the family settlement though oral but being reasonable.
8. As regards the family settlement, I have already expressed my views that no reliance can be placed thereon since there is no sufficient evidence on record as to its authenticity nor has the constituted attorney being the elder brother of the petitioner herein pledged his oath on that count.
9. Turning to Mr. Mukherjee's next contention as regards the authority of the agent in terms of the power of attorney in my view the same would be best dealt with after analysing the facts in a little more greater detail on the assumption however that the constituted attorney had the authority to deal with the shares in terms of the power of attorney executed. The relationship between the parties being that of brother and sister ought to be noted--the sister, even during the lifetime of the father, in 1975 executed a power of attorney in favour of the elder brother because of her temporary absence from the country. Father's death takes place in 1981 the situation continues as it is and it is only in February, 1984, the shares were transferred in the name of the sister. Admittedly, the sister being the petitioner herein was in the city of Calcutta at the time of transfer of father's shares in her favour. Subsequent thereto, the sister goes out again for a short while and comes back to the city in July, 1984. In the meantime in June, 1984, the annual report filed by the company duly evidences the holding of the father's shares in the name of the petitioner. Subsequently, however, there is a board meeting on October 18, 1984, in which transfer deeds were lodged in respect of 560 equity shares standing in the name of the petitioner. The board of directors approved the same on the same date and the share register was rectified on October 18, 1984, itself--the acts seem to be rather in hot haste and both lodgment, approval and rectification were effected on the same day. Needless to say the petitioner was available in the city of Calcutta at that juncture in October, 1984, when the shares were supposed to have been transferred.
10. Assuming that the power of attorney did authorise the constituted attorney to sell the shares, it does not justify transfer of shares even without a whisper and without intimation to the petitioner by reason of a supposed family settlement at a supposed consideration.
Can it be said to be fair, reasonable or in accordance with law ? In the wake of the facts as narrated above, in my view, it cannot be said to be just fair and reasonable--why such undue haste, why no intimation to the petitioner ?--the relationship is that of brother and sister and the transfer has been effected in favour of the nephew of the petitioner--does that amount to an illegal gain or can it be termed to be a genuine transaction ? Formalities were complied with and to give a colour of genuineness, the power of attorney has been taken recourse to but that by itself does not make the transaction a genuine transaction though an attempt has been made to give it a colour of genuineness. In my view, there is a concerted effort for depriving the petitioner as otherwise some intimation and some information ought to have been given to the registered holder of the above noted 560 equity shares. In a way the transaction seems to be totally surreptitious in nature keeping the petitioner completely in the dark in regard to the transfer episode--why didn't the constituted attorney try to write to the petitioner even after the transfer of shares as regards this particular transfer ? Had it been so, one would have understood the fairness aspect of it but that is not so. On the contrary there exists a delightful silence on the part of the constituted attorney and discovery of such a transfer takes a long time for the petitioner.
11. Delay or acquiescence has been said to be a bar in the matter of directing rectification in terms of the statutory provisions. Assuming there exists some delay, can it even then be said that the petitioner is not entitled to any relief. In the facts and circumstances of the matter in issue, in my view, assuming there is some delay still that by itself cannot deprive the petitioner of the right to obtain the relief sought for. Technicality cannot by itself defeat the cause of justice unless such a technicality goes to the root of this matter. Justice is supreme and the law courts exist therefor--to do so is a plain exercise of judicial function and the law courts would fail in their duties in the event they cannot rise up to the occasion to do complete justice to one who seeks it. In the facts and circumstances of the matter in issue, however, in my view the question of delay defeating the cause of justice does not and cannot arise. Further there is no scope for taking into consideration any acquiescence on the part of the petitioner herein.
12. As regards the authority of the agent and acting within the scope of the power of attorney, I am unable to accept the contention of Mr. Mukherjee that the constituted attorney acted within the ambit of the power of attorney. The main thrust of the power and reading the document as a whole is for beneficial use and beneficial enjoyment for the petitioner. Can it be said that this transfer of shares and rectification has been effected for the beneficial use or beneficial enjoyment of the petitioner ? The answer is in the negative.
13. It is to be noted that the relief as envisaged in the statute is discretionary and as such dependent upon the facts and circumstances of the matter under consideration. The decisions cited from the Bar in my view do not really advance the case any further and as such I need not dilate much on that score.
14. In the view I have taken as above, the application for rectification thus succeeds and as such there shall be an order in terms of prayer (a) of the petition. The petitioner is entitled to the costs of this application assessed at Rs. 2,000.