2025 (4) TMI 891 - Tri - Companies Law

Rightful shareholder of 100 equity shares in the respondent company or not - rectification of register of members to reflect the appellant as a shareholder holding 100 shares - time limitation - HELD THAT - It is observed that Section 59 of the Companies Act 2013 does not specify a limitation period. However Section 433 makes the Limitation Act 1963 applicable. Therefore Article 137 prescribes a three-year period from the date of knowledge of the cause of action. In the present case the share transfer was recorded in 2016. The Appellant s failure to act until 2020 when he issued a notice and subsequently filing the appeal in 2021 is beyond the three-year limitation period. The Appellant s argument of fraud lacks corroborative evidence. Shareholding details in the Annual Return for 2016 were publicly available and no objections were raised within a reasonable time. The challenge to the share transfer through this Appeal filed by the Appellant is barred by the limitation in view of the orders of the of the Hon ble Supreme Court and the order of the Hon ble NCLAT as referred above the shares were transferred in the name of the Respondent on the basis of the share transfer deed dated 02.05.2009 on 20.02.1016. Any Appeal was to be filed for the Share Transfer under section 59 of the Companies Act 2013 within the 3 years as per the Article 137 of the Limitation Act 1963. Whereas the present Appeal is filed on 29.01.2021 which is beyond the period of 3 years of Limitation. Conclusion - The present Appeal is time barred as it was filed beyond the three-year limitation period prescribed under Article 137 of the Limitation Act 1963. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The Tribunal considered the following core legal questions:

- Whether the appellant is the rightful shareholder of 100 equity shares in the respondent company, including shares issued during corporate actions and dividends declared since 2015.

- Whether the respondent company is obligated to rectify its register of members to reflect the appellant as a shareholder holding 100 shares.

- Whether the appeal filed by the appellant is maintainable, particularly considering the procedural compliance regarding verification and affidavit requirements under the National Company Law Tribunal Rules, 2016.

- Whether the appeal is barred by limitation and laches, given the alleged share transfer occurred in 2016 and the appeal was filed in 2021.

- The validity and authenticity of the share transfer deed dated 02.05.2009, which was purportedly acted upon in 2016.

- Whether the appellant's claims of usurpation of shares and non-transfer constitute sufficient cause for relief under the Companies Act, 2013.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Rightful Ownership and Rectification of Register of Members

Legal Framework and Precedents: The appeal was filed under Sections 58 and 59 of the Companies Act, 2013, which govern the rectification of the register of members. The appellant sought a declaration of rightful ownership and a direction to the company to rectify its register accordingly.

Court's Interpretation and Reasoning: The Tribunal noted the appellant's assertion that prior to 2015, the appellant's family held 2,590 shares, which were allegedly usurped by another family's members by 2016. The appellant contended that the respondent company failed to reflect the appellant's shareholding in its register and did not respond to a legal notice issued in 2020.

Key Evidence and Findings: The appellant relied on publicly available Annual Returns filed with the Registrar of Companies for 2015 and 2016, a share transfer deed dated 02.05.2009, and other documents arising from family disputes. The respondent company submitted that the share transfer was effected in 2016 based on the 2009 deed and approved by a Board resolution dated 20.02.2016.

Application of Law to Facts: The Tribunal observed that the appellant's shares were recorded as transferred in the Annual Return for 2016, indicating knowledge of the transfer. No timely objection was raised by the appellant following the transfer. The appellant's claim of rightful ownership was thus undermined by the recorded transfer and lack of prompt action.

Treatment of Competing Arguments: The appellant challenged the validity of the 2009 share transfer deed, citing discrepancies in signatures and the delayed use of the deed in 2016. The respondent company argued the transfer was valid and duly approved. The Tribunal found the respondent's evidence regarding the Board resolution and Annual Returns persuasive, weakening the appellant's claim.

Conclusion: The Tribunal concluded that the appellant's claim to rectify the register was not maintainable due to the recorded transfer and lack of timely objection.

Issue 2: Procedural Compliance Regarding Verification and Affidavit Requirements

Legal Framework and Precedents: The Tribunal considered Rule 23 and Rule 26 of the National Company Law Tribunal Rules, 2016, which require that appeals be accompanied by duly certified and verified documents, supported by affidavits. The respondent company challenged the appeal on grounds of defective verification and non-compliance with these procedural rules.

Court's Interpretation and Reasoning: The Tribunal reviewed the affidavits and documents submitted by the appellant and noted the respondent's objections that the affidavits did not verify the documents properly and that the copies were uncertified secondary evidence.

Key Evidence and Findings: The respondent cited Supreme Court precedents emphasizing the importance of proper verification of affidavits to ensure authenticity and responsibility for allegations. The appellant countered that the documents were publicly available and did not require verification, and that the respondent itself failed to verify its documents adequately.

Application of Law to Facts: While recognizing the procedural deficiencies, the Tribunal held that these were not determinative of the substantive rights of the parties. The Tribunal did not dismiss the appeal solely on procedural grounds.

Treatment of Competing Arguments: The appellant's argument that the respondent's objections were technical and intended to avoid substantive issues was noted. The Tribunal balanced the procedural requirements against the need to address the core dispute.

Conclusion: Procedural irregularities were acknowledged but did not bar the Tribunal from adjudicating the appeal on merits.

Issue 3: Limitation and Laches

Legal Framework and Precedents: Section 59 of the Companies Act, 2013, does not specify a limitation period. However, Section 433 of the Act incorporates the Limitation Act, 1963, for proceedings before the Tribunal. Article 137 of the Limitation Act prescribes a three-year limitation for appeals to civil courts, which has been held applicable to appeals under the Companies Act. The Tribunal relied on precedent from the Hon'ble Supreme Court and the National Company Law Appellate Tribunal affirming this principle.

Court's Interpretation and Reasoning: The Tribunal observed that the share transfer was recorded in 2016, and the appellant filed the appeal in January 2021, well beyond the three-year limitation period. The appellant was deemed to have knowledge of the transfer from the Annual Returns filed in 2016.

Key Evidence and Findings: The Annual Returns for 2016, the share transfer deed, and the Board resolution approving the transfer were critical evidence. The appellant's delay in initiating proceedings and failure to respond promptly to the share transfer were noted as laches.

Application of Law to Facts: Applying Article 137, the Tribunal held the appeal was time-barred. The appellant's argument that the respondent should also be estopped from relying on the 2009 deed due to limitation was rejected as the respondent's actions were recorded and publicly available, unlike the appellant's delayed challenge.

Treatment of Competing Arguments: The appellant contended ignorance of the transfer until 2020, but the Tribunal emphasized that the information was publicly accessible. The respondent's reliance on limitation was upheld.

Conclusion: The appeal was dismissed as barred by limitation and laches.

Issue 4: Allegations of Fraud and Usurpation of Shares

Legal Framework and Precedents: Allegations of fraud require clear and convincing evidence. The appellant alleged wrongful usurpation of shares by the family of another shareholder.

Court's Interpretation and Reasoning: The Tribunal found the appellant's assertions of fraud unsubstantiated by corroborative evidence. The publicly available Annual Returns and the absence of timely objections weakened the claim.

Key Evidence and Findings: No direct evidence of fraudulent conduct was presented beyond the appellant's assertions. The respondent's documentation of share transfers and approvals was accepted as prima facie valid.

Application of Law to Facts: Without sufficient evidence, the Tribunal could not infer fraud or illegal usurpation.

Treatment of Competing Arguments: The appellant's reliance on family dispute documents was insufficient to establish fraud.

Conclusion: The fraud allegations were dismissed due to lack of evidence.

3. SIGNIFICANT HOLDINGS

- "No period of limitation is provided in Section 59 of the Companies Act, 2013. But Section 433 of the Companies Act says that the provisions of the Limitation Act, 1963 shall, as far as may be, apply to proceedings of appeals before the Tribunal or the Appellate Tribunal, as the case may be... Article 137 of the Limitation Act, 1963 will apply to any Appeal or application under any act to a Civil Court."

- The Tribunal emphasized that "the present Appeal is time barred" as it was filed beyond the three-year limitation period prescribed under Article 137 of the Limitation Act, 1963.

- The Tribunal held that "challenge to the share transfer through this Appeal filed by the Appellant is barred by the limitation" and that "the shares were transferred in the name of the Respondent on the basis of the share transfer deed dated 02.05.2009 on 20.02.2016."

- Procedural deficiencies in verification and affidavit compliance, while noted, "are not determinative of substantive rights" and did not warrant dismissal of the appeal on those grounds alone.

- The Tribunal concluded that "the appellant's failure to initiate timely action, despite public availability of the shareholding details, precludes them from seeking relief."

- Final determination: The appeal was dismissed as time-barred under the Limitation Act, with no order as to costs.