1999 (6) TMI 392 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Court under Section 155 of the Companies Act, 1956.
2. Allegation of fraud in the transfer of shares.
3. Compliance with Section 108 of the Companies Act, 1956.
4. Non-joinder of Coromandel Indag (P.) Ltd. as a party.
5. Validity of the transfer of shares and rectification of the register of members.

Detailed Analysis:

1. Jurisdiction of the Company Court under Section 155 of the Companies Act, 1956:
The respondents argued that the Company Court's jurisdiction under Section 155 is summary and not suited for adjudicating allegations of fraud. The learned Single Judge rejected this, noting that the jurisdiction under Section 155 is discretionary and summary but does not preclude the Company Court from deciding disputed questions of fact. The judgment cited Ammonia Supplies Corpn. (P.) Ltd. v. Modern Plastic Containers (P.) Ltd., which sets guidelines but does not mandate that the Company Court must decline cases involving disputed facts. The Supreme Court's decision in Ammonia Supplies Corpn. (P.) Ltd. v. Modern Plastic Containers (P.) Ltd. further supported this view, stating that the Company Court has exclusive jurisdiction if the dispute is about rectification.

2. Allegation of Fraud in the Transfer of Shares:
The petitioners alleged fraud in the transfer of shares, claiming that the respondent No. 2 used blank share certificates and obtained signatures fraudulently. The learned Single Judge found no substantial issue of fraud, determining that the real question was whether the petitioners were the true transferees who had paid for the shares. The evidence presented, including testimonies from P.W. 1, P.W. 2, and P.W. 3, supported the petitioners' claim of legitimate transfer and payment.

3. Compliance with Section 108 of the Companies Act, 1956:
The respondents contended that the transfer was invalid due to non-compliance with Section 108, which requires a proper instrument of transfer. The court noted that the proviso to Section 108 allows for registration if the instrument is lost but proven to the satisfaction of the board. The evidence suggested that the instrument was either lost or suppressed by respondent No. 2, allowing the court to order rectification.

4. Non-joinder of Coromandel Indag (P.) Ltd. as a Party:
The respondents argued that the petition was not maintainable as Coromandel Indag (P.) Ltd., which had taken over the respondent company, was not made a party. The learned Single Judge dismissed this, stating that the relevant company at the time of filing the petition was a party, and the change in management did not affect the petition's maintainability.

5. Validity of the Transfer of Shares and Rectification of the Register of Members:
The court found that the petitioners were the rightful transferees of the shares, having paid the agreed amount. The evidence, including the meeting at the auditor's office and the issuance of demand drafts, corroborated the petitioners' claim. The refusal to register the transfer was deemed unjustified, and the court directed the respondent company to rectify the register to include the petitioners' names.

Conclusion:
The appeals were dismissed, affirming the learned Single Judge's decision to rectify the register of members to include the petitioners' names. The court noted that the issue had become academic due to the company's takeover, and the successful party would be entitled to the value of the shares. No order as to costs was made.

Final Judgment:
Both appeals were dismissed, and the petitioners' entitlement to the shares was upheld. The court ordered the rectification of the register of members to reflect the petitioners' ownership of the shares.