TMI Blog1995 (12) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... company was promoted by the reputed industrial house of the TGL group. The applicants are part of this group. For the project set up by this company, the cost was originally estimated at ₹ 22.71 crores and was later revised to ₹ 27.10 crores. While approving the revised cost, the term-lending institutions stipulated that the promoters' contribution should be ₹ 341 lakhs. Accordingly, the TGL group, its family and its concerns contributed about ₹ 200 lakhs towards equity contribution. The applicant in C, P. No. 2/111/SRB/91 and other concerns belonging to this group contributed ₹ 43 lakhs for 4,30,000 equity shares. All the share certificates belonging to the family of the TGL group together with blank transfer forms were entrusted to the second respondent in both the applications--herein, for the purpose of, if necessary, to pledge the shares with financial institutions, banks for raising finance. However, belying the confidence reposed on him, the second respondent floated a private limited company, viz., the third respondent in both the applications herein-Brilliant Investments Private Limited--(hereinafter referred to as Brilliant ) with his wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at too after a period of three years from the date of registration. Thus the applications are not maintainable due to delay and laches on the part of the applicants. Even though the number of shares was large, the company being a listed company, could not refuse the registration of transfer as none of the grounds under which a listed company could refuse registration under Section 22A(3) of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the SCR Act ), was satisfied. Accordingly, the company has prayed that the applications be dismissed. 5. The second respondent, in his reply, refuted the allegations in the applications and he has also adopted the reply of the company. He has refuted the allegation that the impugned shares were entrusted to him and kept by him as alleged as there was no need for pledging any securities for raising funds since all financial arrangements had already been tied up. He has further stated that the third respondent was incorporated by him with his family members, but the allegations that the third respondent company was formed for the purpose of getting the impugned shares transferred in its name is not correct. He has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny manner till the date of next hearing. At the next hearing held on September 4, 1992, while giving certain directions, we also restrained the third respondent from dealing with the shares held by them in any manner without our approval. 8. Initiating the arguments Shri Kannabiran, senior advocate, appearing on behalf of the petitioner in C. P. No. 2/111/SRB/91, T. G. Veera Prasad, stated that many of the documents which the respondents had relied on are not admitted by him and he would also like to call witnesses to substantiate his statement made in the application. On our suggestion that we would consider this request later, he initiated his arguments on this application. He submitted that the applicant never transferred the shares to the third respondent and the third respondent was not in a position to invest over ₹ 1.4 crores for purchase of the shares held by the TGL family when its paid-up capital was hardly ₹ 200. The shares along with blank transfer forms kept in the custody of the second respondent had been fraudulently shown as transferred to the third respondent which is under the ultimate control of the second respondent. He disputed the genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration. Shri Kannabiran also stated that the signature in the transfer deed for 50,000 shares was not the signature of T. G. Veera Prasad. Drawing our attention to the resolution of the transfer committee of the board of directors dated June 10, 1988, in which the committee decided to record the registration of transfer, he pointed out that the words T.G. Venkatesh interested director for Nos. 159, 161 to 188 had been clearly interpolated and this must have been done afterwards. Even the resolution does not say that he absented from voting on the resolution. Therefore, according to Shri Kannabiran, the entire transaction is vitiated with fraud and deserves to be set aside and the name of the applicant be restored in the register of members. He further argued on the point of limitation, to state that the Limitation Act is applicable only in the case of courts and there is no period of limitation fixed in the Act under Section 111(4). To state that the Limitation Act is not applicable, he relied on the decisions in Sakuru v. Tanaji , AIR 1985 SC 1279, Kotah Transport Ltd. v. State of Rajasthan [1967] 37 Comp Cas 288 (Raj), Mrs. Promila Bansal v. Wearwell Cycle Co. (India) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to pages 44 and 134 of the volume relating to C. P. No. 3 of 1991 he stated that while at page 134, the resolution specifically mentions the authority for investment relating to specific companies, there is nothing in the resolution at page 47 regarding the names of companies. He also stated that the transfer form/format had been changed by a Government of India Notification No. 479E some time in May, 1986, but the transfer forms relied on by the company are dated June 18, 1988, which are in the old format. Thus, Section 108(1A) has been violated. According to him, there is considerable variation in the form and mode of consideration alleged to have been received by the petitioners. The respondents have not been able to produce any receipt towards receipt of consideration. The alleged adjustment of dues is also not correct inasmuch as there was nothing to be adjusted and as a matter of fact in March, 1989, it was respondent No. 1 who owed more than ₹ 25 lakhs to the petitioner company. 12. In regard to the allegation that there have been laches on the part of the petitioner, he stated that the petitioner came to know about the transfer only in June, 1991, on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. It is further stated that Section 3 of the Limitation Act provides for a duty on the court to dismiss a petition if the same is barred by the Limitation Act. Shri Raghavan further stated that the proceedings before the Company Law Board under Section 111(4) are of summary nature as decided by the Full Bench of the Delhi High Court in Ammonia Supplies Corporation Pvt. Ltd. v. Modern Plastic Containers Pvt. Ltd . [1994] 79 Comp Cas 163 and as such the matter should be relegated to a suit as it involves complicated questions of law and facts which cannot be decided without full enquiry. 14. He further stated that the entire petition has been based on the basis that blank transfer forms had been handed over to respondent No. 2 only for safe custody by various shareholders and unless otherwise this statement is proved by leading evidence, the petition cannot stand. There are no details as to who were the members who entrusted the share certificates with blank transfer forms, whether any receipt was obtained for the same, etc. While there were so many shareholders who were reported to have entrusted the share certificates, the others have not supported the petition other than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed which was filed with the Registrar of Companies in August, 1988, he stated that the petitioners have not been shown as the members in respect of the impugned shares, clearly indicating that this transfer had actually taken place and these documents being public documents could have been perused by the petitioners in the office of the Registrar of Companies. (We find that this document was taken on record only in 1993). 17. As far as the change in the format of the transfer deed as pointed out by Shri Raju, Shri Raghavan stated that non-compliance with Section 108(1A) does not vitiate the transfer. On this proposition, he cited Muhundlal Manchanda v. Prakash Roadlines Ltd. [1991] 72 Comp Cas 575 (Kar). Even otherwise Shri Raghavan stated that as per the judgment of the Madras High Court in Kothari Industrial Corporation Ltd. v. Lazor Detergents P. Ltd. [1994] 81 Comp Cas 699 ; [1994] 4 Comp LJ 341, the provisions of Section 108 are not applicable to listed companies. He further stated that TMTL adopts Table A of the Companies Act. Regulation 71 prescribes that an attendance register for all board meetings is to be maintained. If the attendance register is produced it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Law Board. The other argument is that under Section 155 of the Act before amendment in 1988, courts have held that the period of limitation in respect of applications under Section 155 was three years and, therefore, even assuming that the Limitation Act is not applicable to proceedings before the Company Law Board, if a right to sue had become barred by the provisions of the Limitation Act then in force on the date of coming into force of a new Act or amendment, then such a barred right is not revived by application of a new enactment. For this he relied on Ramanathan Chettiar v. Kandappa , AIR 1951 Mad 314. As far as the first argument is concerned, it has to be borne in mind that the Supreme Court, in Canara Bank v. Nuclear Power Corporation of India Ltd, [1995] 84 Comp Cas 70 ; [1995] 2 SCALE 43, interpreted the term court with reference to the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. While doing so, in paragraph 35, the Supreme Court observed that (at page 91 of 84 Comp Cas) : The word (court) must be read in the context it is used in the statute ... Again, in paragraph 42, the Supreme Court observed (at page 95 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a matter of fact, according to the applicant, there was no board meeting of TMTL on that date, while the respondents have produced a copy of the resolutions. The applicant also questions the adjustments made towards payment of consideration on the basis of an alleged letter dated June 18, 1988, from TMTL. The authenticity of the letter is questioned. While the applicant disputes the genuineness of the signature of Shri T. G. Veera Prasad on the transfer instruments, two persons who witnessed the alleged signature have filed affidavits confirming that the transfer instruments were signed in their presence by Shri T. G. Veera Prasad. As far as C. P. No. 2/111/SRB/91 is concerned, the contention of the applicant is that the family members of the TGL group had entrusted blank transfer forms for safe custody which had been misused by respondent No. 2. Admittedly, out of 29 such transferors, only three are before us and five had impugned the transfer in the High Court of Andhra Pradesh. The whole understanding is alleged to have been oral. No written documents have been produced before us to evidence such understanding. Though Shri Kannabiran wanted to lead evidence through the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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