TMI Blog2013 (1) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... ceased to be a member on 27-3-1999 as his 100 shares which he was holding were sold on 27-2-1999 & there is no other transaction of 27-2-1999. The submission of the petitioner that 52,470 shares were transferred in his name on 27-2-1999 is not borne out form the record. The register of share transfer forms also reflects four transactions between 1998 to 1999. As Section 108 lays down the procedure for the transfer of shares it is a mandate upon the company not to register the transfer of shares of the company unless the instrument of transfer was duly stamped; this is the first requirement. It must also be completed in all respects. In the instant case the share transfer forms (relied upon by the applicant shows that they were unstamped. They are also admittedly only a photocopy of the original forms which is even otherwise not stamped. The mandate and requirements of section 108 have not been met. The company could not register the unstamped shares in favour of the petitioner. Thus transaction in non-compliance of section 108 would be void Thus to conclude rights as a member could be exercised by applicant qua the company only if his name had been entered into the Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh; as a counter guarantee respondent No. 6 had given the original share transfer deed dated 01.03.1998 of 52,470 equity shares (52.47% of the equity) of the company and this was confirmed vide letter dated 02.03.1998 (page 395 of the paper book); it was agreed that if this payment of Rs. 2.5 crores is delayed beyond a reasonable time, it would be paid with 2% interest per month or in the alternate the said shares would be transferred in favour of Gopal Kishan. 4. This letter has been heavily relied upon by the petitioner/applicant. His submission is that he was admittedly a shareholder of the company and this has been confirmed by the Managing Director of the company Devender Kumar Dua in this letter dated 02.03.1998. Attention has been drawn to the Annual Return of the company (Annexure-5) in the record of the Registrar of Companies (ROC); this document shows several transactions conducted on 27.02.1999. Transactions No. 4 5 are relevant to decide this controversy. Transaction No. 4 shows that Gopal Kishan (the applicant) had transferred 100 equity shares to the transferee Bushan Dua on 27.02.1999; transaction No. 5 shows that 52,470 equity shares had been transferred by Kris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to inform the applicant that the company M/s Tony Electronics Ltd. was to be merged with Super Cassettes Industries Ltd. Further submission being that it was only in the year 2002 when certain properties of the company were to be sold that he learnt that this company was no longer in existence; it had been dissolved by the order dated 20.09.1999 sanctioning the scheme. The present application filed on 22.07.2002 seeks a setting aside of the aforenoted sanction. 5. The respondents have opposed these submissions; their primary contention is that the present application is not maintainable. Submission being that this application has been filed under Rule 9 of the Company (Court) Rules invoking the inherent powers of this Court which are to be exercised by the Court only if there is no other alternate remedy available to the petitioner which is not so in the instant case. Attention has been drawn to Section 391(7) of the Companies Act (which admittedly stood repealed in November, 2003); submission being that this remedy was available to the petitioner at the time when he filed this present application which was on 22.07.2002; the right of appeal was available to him on 22.07.2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the petitioner not having been entered in the register of members for 52,470 shares (of which the original share transfer deeds were even as per the petitioner lying with him), he does not deserve any relief. Further submission being that the original share transfer deeds have not seen the light of the date till date. Attention has also been drawn to prayer 'C' of the aforenoted application wherein the prayer is specifically to the effect that a direction be given to the company that formalities should be completed by the respondents to get the 52,470 shares transferred in the name of the petitioner; submission being that even as per the prayer the petitioner has asked for the relief of the transfer of these shares in his name thereby admitting the argument of the respondents that on the date of filing of the petition (22.07.2002) the aforenoted 52,470 shares were not in his name. Since the name of the petitioner was not entered in the register of members, he was not entitled to any notice of the aforenoted scheme. It is submitted that the fraud which is alleged by the petitioner is not only to be specifically stated but also to proved; it cannot be a fraud inter se between the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dies even after 20.09.1999 and reference in this regard has been made to the letters dated 20.10.1999 (written by M/s Tony Electronics to the Account Officer, Noida), 06.01.2000 by M/s Tony Electronics to New Okhla Industrial Development Authority, 07.08.2000 again on behalf of M/s Tony Electronics to Okhla Development Industrial Area all seeking processing of the transfer application qua the property No. G-22, Section-11, Noida, UP in favour of Rajni Dua w/o Gopal Kishan. To support this submission on fraud, attention has also been drawn to the resolution passed by M/s Tony Electronics on 20.03.1999 (pages 415 418 of Volume II of the paper book); submission being that although on both the aforenoted pages, the resolution is the same yet the contents of the two are different; this is another example of the callous attitude of the company to inter-change documents according to their suitability; it being yet another glaring example of the fraud being perpetrated upon the Court; there being no explanation as to why and how the two documents both of which speak of a resolution passed by the company on 20.03.1999 yet the contents are different. Submission being that all efforts were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn 1998-99. Vehement submission of the petitioner that 52470 shares stood transferred in his name on the same day vide transaction No. 5 has been disputed by the respondent. 13. On 13.01.2003, counsel for the respondent had filed in Court certified copies of certain documents obtained from the ROC. To determine the authenticity of these documents, Advocate Arjun Bhandari had been appointed to inspect the record of the ROC. The annual return of the company dated 11.10.2002 (Annexure V) had been initialled by him. The Court Commissioner had filed his report dated 27.01.2003. The Commissioner had noted the missing pages in the file of the company which had prevented the ROC from giving a certified copy of the documents on that day itself. 14. This report had been disputed by the respondent company; objections were filed. This was by way of affidavit of Mr. Amit Bansal (the director of the company) whose affidavit has been accompanied by the report of the Chartered Accountant disputing this report. Objections to the manner in which the record was being maintained in the ROC were also raised. These objections read as under:- "5. The return was personally prepared by me and the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Local Commissioner had examined the record of the company on two occasions. On 18.02.2003, he visited the office of the company at Sector-16A, Film City, Noida along with the respective counsels of the parties. The statutory record of the company which included (i) Register of members, (ii) Register of share transfer, (iii) Minutes book (iv) Original transfer deed for the financial year 1998-99 were examined by him. The photocopy of the return filed by the company before the ROC was also placed before him. (hereinafter referred to as Annexure 'A'). On inspection of the record it was noted that there were nine shareholders of the company as per the Register of members; name of the petitioner Gopal Kishan did not find mention in this list. This Register maintained in the company records had been initialed as way back as on 24.07.2002 i.e. when the Local Commissioner Advocate Geeta Sharma had been appointed by the Court and she had visited the office of the company on the same day itself. This visit being on the same day when the order of the Court had been passed, the possibility of the record of the company being tampered with is excluded; there could be no manipulation. Annexure- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with this report have also been perused. Annexure 'B' is the Register of members maintained by the company from its inception i.e. on 03.06.1982 which evidenced that Gopal Kishan had been registered as a member on 03.06.1982; he ceased to be a member on 27.03.1999; his 100 shares which he was holding were sold on 27.02.1999 to Bhushan Dua; there is no other transaction of 27.02.1999. The submission of the petitioner that 52,470 shares were transferred in his name on 27.02.1999 is not borne out from the record. This is also being clearly stated by the Local Commissioner. At the cost of repetition, this bound Register of members maintained in the company had been signed by the Advocate Geeta Sharma as early as on 24.07.2002; this was in fact the first day when the petition was filed; there is no possibility of manipulation of the record of the company. Annexure 'C' is the Register of share transfer forms which also reflects four transactions between 1998 to 1999. Vide T-4 dated 27.02.1999 100 shares had been sold by Gopal Kishan to Bhushan Kumar. Annexure 'D' is the share transfer form which show that on 27.02.1999 Gopal Kishan had lodged the share transfer forms for transferrin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares could be effected only if instrument of transfer is duly stamped and accompanied by the certificate of the shares proposed to be transferred or such other evidence as the director may require to prove title of the transferor or his title to transfer the shares. 23. In the present case the share transfer forms (relied upon by the petitioner) shows that they were unstamped. They are also admittedly only a photocopy of the original forms. The originals have not been filed. Pleadings of the petitioner are relevant. In para 14 of this application it has been pleaded that the petitioner had submitted these share transfer forms with the Company so that the formality of registration could be completed; the petitioner was given a letter dated 02.03.1998 informing him that he would continue to hold shares as a security; a photocopy of this share transfer deed was retained by Darshan Kumar, (Managing Director of the Company). This letter has been heavily relied upon by the petitioner. It is addressed by Darshan Kumar, to the petitioner. Para 2 of this letter clearly states that Darshan Kumar had given the original transfer deed (dated 01.03.1998 of 52470 equity shares) to Gopal Kri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e insistence of compliance with the provisions of the Act. (See State of Bihar v. Maharajadhiraja Sir Kameshwar Singh of Darbhanga K. Pentiah v. Muddala Veeramallappa of 1975 and Additional District Magistrate, Jabalpur v. Shiakant Shukla) Negative words are clearly prohibitory and are ordinarily used as a legislative device to make a statutory provision imperative. In Raza Buland Sugar Co. Ltd. v. Municipal Board Rampur, this Court referred to various tests for finding out when a provision is mandatory or directory. The purpose of which the provision has been made, its nature, the intention of the legislature in making the provision, the general inconvenience or injustice which may result to the person from reading the provision one way or the other, the relation of the particular provision to other provisions dealing with the same subject and the language of the provision are all to be considered. Prohibition and negative words can rarely be directory. It has been aptly stated that there is one way to obey the command and that is completely to refrain from doing forbidden act. Therefore, negative, prohibitory and exclusive words are indicative of the legislative intent when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Section 610(3) of the Companies Act which reads as follows. "610 (3) A copy of, or extract from, any document kept and registered at any of offices for the registration of companies under this Act, certified to be a true copy under the hand of the Registrar (whose official position it shall not be necessary to prove), shall, in all legal proceedings, be admissible in evidence as of equal validity with the original document." 32. The company cannot take shelter under this provision Section 610(3) only states that a copy of, or extract from, any document kept and registered at the offices for the registration of companies under this act certified to be a true copy under the hand of the Registrar shall in all legal proceedings be admissible in evidence as of equal validity with the original document. However where the document which is on record of the ROC is itself disputed, the certified copy of such a disputed document can have no evidentiary value. This legal position had also been rightly noted by the bench of the Company Law board in Kobian Pte Ltd. v. Kobian India (P.) Ltd. [2005] 59 SCL 608 (Chennai). 33. The whole foundation of the case of the objector is based upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to receive the dividends, notwithstanding that he has already parted with his interest in the shares. However, on the transfer of shares, the transferee becomes the owner of the beneficial interest though the legal title continues with the transferor. The relationship of trustee and 'cestui que trust' is established and the transferor is bound to comply with all the reasonable directions that the transferee may give. He also becomes a trustee of the dividends as also of the right to vote. The right of the transferee 'to get on the register' must be exercised with due diligence and the principle of equity which makes the transferor a constructive trustee does not extend to a case where a transferee takes no active interest 'to get on the register'. Where the transfer is regulated by a statute, as in the case of a transfer to a non-resident which is regulated by the Foreign Exchange Regulation Act, the permission, if any, prescribed by the statute must be obtained. In the absence of the permission, the transfer will not clothe the transferee with the right to 'get on the register' unless and until the requisite permission is obtained. A transferee who has the right to get on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the fact that the transferor bank has been dissolved and struck off the register creates procedural difficulties as to making a defunct company a party to any proceeding and as to service of any notice or process on it. The doctrine of the Court's inherent power, like that of public policy, should be sparingly used, for otherwise there is a great risk of all rules of procedure evolved out of the experience and practical wisdom of the past being set at naught by the varying idiosyncrasies and notions of justice of individual Judges." 39. It is clear that on the date of the filing of the present petition which was on 22.07.2002, the remedy of appeal was open to the applicant; this provision having been deleted only in November, 2003. The inherent powers of the Court are to be used sparingly and with circumspection only to prevent miscarriage of justice and where an independent remedy is available to an applicant on the date when he had filed the petition, inherent powers of the Court could not have been resorted to; such a power being available to a party only where there is no other remedy available. 40. Even on merits as noted and discussed supra the objections of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. The powers under Section 392 of the Companies Act is the power to supervise the carrying out of the revival scheme and also in the course of implementation of the scheme, if the court is of the view that the scheme cannot be carried forward in the manner in which it was envisaged or it is not being implemented in terms of the sanction it has wide powers to give such directions in regard to any matter relating to the scheme or make such modifications in the said compromise or arrangement as it may consider it necessary for the proper working of the said compromise/arrangement. 42. This is however not the position in the instant case. The body of the petition does not in any manner raise any objection to the implementation or working of the scheme; the objections are bordered only on the submission of the applicant/objector that notice of the scheme had not been given to him although he was a holder of majority shares and which amounted to a fraud. The allegations of fraud made by the petitioner are unsubstantiated. It is true that there may not always be direct proof of fraud which will have to be gathered from the various circumstances which have been brought to the notice of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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