2012 (12) TMI 886 - HC - Companies Law

Rectification of the Register of Members - loss of shares - Held that - An appeal under Section 10 F of the Companies Act can be filed only on a question of law, a mis-interpretation or mis-reading of document is question of law. There is no dispute that in this case a question of law has arisen as the submission of the appellant is that the correspondences exchanged between the parties were not appreciated by the CLB in its correct perspective. CLB should have returned a finding that no active steps had been taken by respondent No. 1 up to 2009 (when the present petition was filed) and the petition was barred by limitation - Record does not substantiate this submission of the appellant, respondent no. 1 was pursing his case right from the inception and correspondences are prima facie evident of this fact. It is also not the argument of the appellant that respondent No. 1 had not purchased the shares from him, his whole argument is bordered on the issue of limitation, submission being that because of the inordinate delay on the part of respondent No. 1 in taking active steps, the present petition under Section 111 of the Companies Act is liable to be dismissed. Case of the respondent all along has been that he had purchased these shares on 20.05.1992 but they were lost on the same date, accordingly it had been prayed that in the absence of the original documents i.e. share certificates and the share transfer forms a direction be given to the Company to rectify the Share Register entering his name in the list of share holders qua these 100 shares. As noted out of the 200 shares which had formed part of the transaction dated 20.05.1992 Company has already transferred 100 shares in favour of respondent No. 1. Discriminatory attitude of the Company qua respondent No. 1 has been correctly noted by the CLB. In this background, impugned order directing rectification of the Share Register in favour of the respondent No. 1 qua these 100 shares as also for additional bonus shares with a direction to pay the unclaimed dividend to respondent No. 1 calls for no interference.

Summary

Issues:
1. Rectification of Register of Members
2. Delay in approaching Company Law Board
3. Barred petition under Section 111 of the Companies Act
4. Ownership declaration in the petition under Section 111

Analysis:

Issue 1: Rectification of Register of Members
The appeal challenged the Company Law Board's order directing M/s Hero Honda Motors Ltd. to rectify the Register of Members by entering the name of M/s Jagan Nath Syal & Co. for 1250 equity shares. The respondent had lost 200 shares in 1992 and made continuous efforts for rectification. The appellant argued discrepancies in distinctive numbers but failed to prove malafide intent. The Court upheld the CLB's decision based on sound discretionary principles, noting the respondent's diligent pursuit of the matter.

Issue 2: Delay in Approaching Company Law Board
The appellant contended that the respondent unreasonably delayed approaching the CLB from the loss in 1992 until 2009. However, the respondent's actions, including filing a civil suit and continuous correspondence seeking rectification, demonstrated timely pursuit. The Court found the delay justified given the circumstances and rejected the appellant's argument of limitation.

Issue 3: Barred Petition under Section 111 of the Companies Act
The appellant claimed the petition under Section 111 was barred due to the withdrawal of a previous suit. However, the Court clarified that Section 111 proceedings are distinct from a suit and not subject to res judicata. The respondent's persistent efforts for rectification post-suit withdrawal were deemed valid, and the appellant's inaction in pursuing re-registration was noted.

Issue 4: Ownership Declaration in the Petition under Section 111
The appellant argued that the petition sought an ownership declaration, not permissible under Section 111. However, the respondent's prayer primarily focused on rectifying the Share Register for the lost shares, supported by the transfer of 100 shares by the Company. The Court upheld the CLB's order for rectification and payment of unclaimed dividends to the respondent, dismissing the appeal.

In conclusion, the High Court upheld the Company Law Board's decision, emphasizing the respondent's diligent pursuit of rectification and rejecting the appellant's arguments of delay and ownership declaration. The judgment affirmed the rectification of the Share Register in favor of the respondent and the payment of unclaimed dividends, dismissing the appeal.