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                                (M.L. Arora) 
Dated 26/9/03                   S/o sh. BhagwanDass
                                Arora Apartment, Sec-
                                tor-13, Rohini New 
                                Delhi-110085

It was pointed out that the petitioner had signed the transfer deed and had handed over original shareholdings to the respondents confirming the sale of his shareholding by delivery of shares and receipt of full and final consideration. The Company had received instrument of transfer properly stamped and executed by transferor and transferee with original certificates and thus transferred the shareholding. This preliminary objection of the respondents has been refuted by the petitioner by producing the original share certificates during the course of hearing as per averment in the petition at para (ix) at page 12 stating that "the original share certificates are in physical possession of the petitioner and can be produced before the Hon'ble Board as and when required". It was pointed out by the petitioner that in early 2003 all the shareholders had decided to exit from the business and accordingly everyone was authorised to look for prospective buyers. Each of the groups had signed and executed the share transfer deeds, resignation of directors and other related documents and had handed over the same to each other only to reinforce the already existing mutual trust. Petitioner's shareholding was to be transferred to R-7. As per the representations of the respondents the petitioner had agreed to sell his shareholding for a consideration of Rs. 50 lacs as per their representation he had signed the share transfer deeds in respect of his shareholding. It was vehemently argued that the original share certificates are still in the possession of the petitioner, the Respondents had not complied with the provisions of Section 108 of the Act read with Article 50 of the Articles of Association of the company to give effect to the transfer of the shares and hence the purported transfer of shares allegedly effected by the respondents was void ab initio, it was done illegally, fraudulently with malafide in collusion and conspiracy with each other and with a view to defraud the petitioner. The petitioner also produced the original share certificates for my perusal and for inspection by the respondents. It was reiterated that despite several opportunities given to the respondents they had failed to produce the original share certificates to prove that the transfer had actually been given effect to. It has not been denied by the respondent company that the company in natural course had decided to consolidate its shares, therefore, it called for the original certificates from the shareholders which were cancelled and destroyed and in their place fresh certificates were issued to the shareholders. I find that the respondents have not been able to prove their case. Despite several opportunities provided instead of producing the original share certificates it was stated that original share certificate from the shareholders were cancelled and destroyed and in their place fresh certificates were issued to the shareholders which can no way can be in compliance with the provisions of Section 108 of the Act read with Article 50 of Articles of Association of the company. Further, their contention that the petitioner being its Managing Director he might have prepared certificates in duplicate and the other directors might have signed bonafide and in good faith without checking and verifying the certificates also does not establish their case. The petitioner has challenged the illegal transfer of shares. The Original share certificates are still in his possession. In these facts and circumstances of the case, there is no justification to hold that the petitioner does not have the requisite qualification under Section 399 of the Act and that he has no loucs standi to file the petition as he is neither a member nor a shareholder in the company on the date of filing of this petition. As regards the objection on maintainability of this petition in view of the necessary qualification under Section 399 of the Act, it is correct that in order to maintain a petition under Sections 397/398 the petitioner should hold either 10% or more shares of subscribed capital or should constitute 10% or more of total members in the company. In present case, the petitioner's shareholding is reduced below 10% or reduced to nil on account of illegal transfer of shares, the petition under Section 399 would be maintainable as the Company Law Board has taken a view that if the shareholding has been reduced below 10% due to allegedly illegal transfer of shares/further issue of shares which has been challenged in the Petition being one of the cause of action the petition cannot be dismissed at the threshold. As regards the respondents' next preliminary objection that the petition has been filed beyond the limitation period, having been filed three years and three months after the resignation and transfer of shareholding and it is bad for delay, latches and acquiescence, considering the argument of the petitioner in this behalf alleging illegal transfer of his shareholding the respondents' preliminary objection is not tenable because illegal transfer of the shareholding of the petitioner has permanent effect, it is continuous oppression. Hence, the argument regarding delay in filing this petition becomes irrelevant. The respondents' next preliminary objection is regarding the conduct of the petitioner. My attention was drawn to the fact that the petitioner had concealed the undertaking, relieving letter, release of his personal bank guarantee and collateral security by the bank upon his resignation as director of the company. The petitioner has also pointed out towards the unclean hands of the respondents stating that they had filed a false affidavit and that despite specific statement made by the respondents on oath, the original share certificates and the written settlement agreement claimed to have been in their possession were not produced even on specific direction in this regard. It was alleged that respondents are also liable for forgery for having fabricated several documents to prove their case, the original thereof were not available and that was the reason for non-production of the same. I agree that it is a settled proposition of law that the conduct of the parties is a very relevant factor to be considered in the equitable proceedings under Sections 397/398. The petitioner seeking equitable relief must come with clean hand and good conduct, failing which the petitioner would constitute a gross abuse of process of court and the petitioner is not entitled to any reliefs under Sections 397 and 398. However, in the present petition there are allegations and counter allegations. In this view of the matter, I find no justification to dismiss the petition at the threshold on account of untenable preliminary objections raised by the respondents in this case.