1995 (12) TMI 403 - Board - Companies Law

Summary

Issues Involved:
1. Rectification of register of members under Section 111 of the Companies Act, 1956.
2. Alleged fraudulent transfer of shares.
3. Delay and laches in filing the application.
4. Payment and consideration for the transfer of shares.
5. Jurisdiction and nature of proceedings under Section 111.

Issue-wise Detailed Analysis:

1. Rectification of Register of Members under Section 111 of the Companies Act, 1956:
The applicants sought rectification of the register of members of the company concerning 40,000 equity shares for T. G. Veera Prasad and 50,000 equity shares for TMTL. They alleged that the shares were transferred without proper consideration and authorization. The company argued that the transfers were approved by the committee of directors and were in accordance with the necessary procedures. The company also contended that the applications were not maintainable due to delay and laches.

2. Alleged Fraudulent Transfer of Shares:
The applicants alleged that the second respondent fraudulently transferred the shares to Brilliant Investments Private Limited (third respondent) without consideration. They claimed that the shares, along with blank transfer forms, were entrusted to the second respondent for safekeeping and potential pledging but were misused. The second respondent denied these allegations, stating that the transfers were genuine and for valuable consideration. The third respondent also refuted the claims, asserting that the transfers were valid and that consideration was paid.

3. Delay and Laches in Filing the Application:
The company argued that the applications were barred by limitation as they were filed after three years from the date of the alleged fraudulent transfer. They cited various legal precedents to support their claim that the applications were not maintainable due to delay. The applicants countered this by arguing that the Limitation Act does not apply to proceedings before the Company Law Board and that there was no fixed period of limitation under Section 111(4) of the Act.

4. Payment and Consideration for the Transfer of Shares:
The applicants contended that no consideration was paid for the transfer of shares. They disputed the authenticity of documents presented by the respondents, which purportedly evidenced the payment of consideration. The respondents, on the other hand, provided letters and affidavits to support their claim that consideration was paid and that the transfers were legitimate. The applicants highlighted inconsistencies in the respondents' statements regarding the mode and nature of payment.

5. Jurisdiction and Nature of Proceedings under Section 111:
The respondents argued that the proceedings under Section 111 are of a summary nature and that the matter should be relegated to a civil suit due to the complexity of facts and allegations of fraud. They cited various legal precedents to support their claim that the Company Law Board should not adjudicate on such matters. The applicants, however, argued that the Company Law Board has the jurisdiction to entertain the applications and that it should exercise its powers to summon witnesses and conduct a thorough inquiry.

Conclusion:
The Company Law Board concluded that the applications involved complicated questions of fact that could not be decided based on affidavits alone. They noted the inconsistencies in the respondents' statements and the need for a proper trial with oral evidence. Given the summary nature of proceedings under Section 111, the Board decided not to proceed with the applications and dismissed them, advising the applicants to file a civil suit if they wished to pursue the matter further. The interim orders were vacated, and no order as to costs was made.