2004 (7) TMI 374 - HC - Companies Law

Summary

Issues:
1. Appeal against dismissal of suit for declaration and injunction.
2. Failure to prove loss of share certificates and transfer deed.
3. Entitlement of the defendant to pay dividends to shareholders.
4. Requirement of informing company about share transfer.
5. Failure to make shareholders or brokers party in the suit.
6. Suit deemed bad for not including brokers and shareholders as parties.

Analysis:
1. The appellant filed an appeal against the dismissal of the suit for declaration and injunction regarding the purchase of shares from M/s. Sidharth Tubes Ltd. The appellant claimed to have purchased 11,000 shares and alleged that all share certificates were stolen from his office. The trial court dismissed the suit for failure to prove the loss of share certificates and transfer deed, stating that the defendant was entitled to pay dividends to the shareholders in whose name the shares were issued.

2. The trial court's decision was based on the lack of evidence regarding the loss of share certificates and transfer deed. It held that the defendant company had the right to pay dividends to the rightful shareholders unless informed otherwise. The court emphasized the importance of proving the loss and following proper procedures for share transfers.

3. It was established that the plaintiff had purchased shares from both shareholders and brokers without informing the defendant company about the transfers. The court highlighted that the defendant could only transfer shares to the plaintiff upon receiving written consent from the original shareholders. The failure to involve the shareholders or brokers in the suit was deemed a critical flaw.

4. The trial court correctly concluded that the plaintiff was not entitled to the relief sought due to procedural shortcomings. It emphasized the necessity of including all relevant parties in the suit, particularly the shareholders and brokers involved in the share transactions. The court highlighted the risks associated with transferring shares without proper consent from the original shareholders.

5. Ultimately, the appeal was dismissed as lacking merit. The court reiterated that the suit was flawed for not including the necessary parties, namely the brokers and shareholders who were crucial to the share transactions. Each party was ordered to bear their own costs, and a decree was to be drawn up accordingly, bringing the legal proceedings to a close.