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2015 (10) TMI 955 - ANDHRA PRADESH HIGH COURT

2015 (10) TMI 955 - ANDHRA PRADESH HIGH COURT - TMI - Jurisdiction of CLB under Section 111A in case of Fraud Appellants contended that sales consideration for transfer of shares has not been paid in full Date of transfer of shares given by the Respondents clashes at different instances Appellant further contends that they did not cease to be the members Respondents contend that the appellants have played fraud against them with regard to share transfer Further holds that the Civil Cou .....

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pellants advised to approach the Civil Court for relief succeeding in the same it can then approach the CLB for rectification of the Register Decided in favour of the Respondents. - COMPANY APPEAL No.11 of 2014 - Dated:- 11-3-2015 - SRI JUSTICE C.V.NAGARJUNA REDDY, J. For The Appellant : Sri Ch.Venkat Raman For The Respondent : Sri C.Raghu, Sri S.Ravi, senior counsel Sri K.Ramakrishna and Sri C.Sai Vishnu JUDGMENT: This company appeal arises out of the order, dated 13.12.2013 of the Company .....

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2,50,000 shares were allotted to him and his relatives in the year 2008 and that on 04.02.2008, share transfer deeds were executed in favour of respondent Nos.3 to 5. The appellants have, however, approached the Company Law Board at Chennai, by way of C.P.No.34 of 2011 under Sections 397 and 398 read with Section 111A, 108, 237, 402 and 403 and Schedule XI of the Companies Act, 1956 (for short the Act) for multiple reliefs, the main relief being to declare that the acts of respondent Nos.2 to 6 .....

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e issue of maintainability of the company petition as a preliminary issue and dismiss the company petition, and to punish the appellants for contempt for suppressing the material. By order, dated 13.12.2013, the Company Law Board has allowed C.A.No.165 of 2011 and dismissed C.P.No.34 of 2011. Shorn of avoidable details, the main plea on which C.A.No.165 of 2011 was filed by respondent Nos.2 to 6 and allowed by the Company Law Board is that in pursuance of the agreement, dated 30.07.2006, all the .....

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as the contesting respondents have failed to pay the balance sale consideration of about ₹ 8 to 9 crores. He has further submitted that as admittedly share transfers have purportedly taken place on 04.02.2008, the contesting respondents have to explain as to how to a tune of 5,70,065 shares were allotted in favour of appellant Nos.1 and 2 on a subsequent date i.e., 06.03.2008. Learned counsel has also invited this Courts attention to the information furnished by the new management to the R .....

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nd 2 have ceased to be the members of respondent No.1 company is contrary to the record produced by respondent Nos. 2 to 6 themselves. Sri S.Ravi, learned senior counsel, appearing for the respondents, submitted that the appellants have filed the company petition on the premise that they continued to be the members of respondent No.1 company, which claim is contrary to the record. He has further submitted that the appellants have played fraud against respondent Nos.2 to 6 with regard to share tr .....

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the appellants to the competent civil Court. The learned senior counsel has relied upon the judgment of the Supreme Court in Ammonia Supplies Corpn. vs. Modern Plastic Containers (P) Ltd. in support of his submission that the civil Court alone has jurisdiction to enquire into the allegations of fraud. I have carefully considered the submissions of the learned counsel for the parties and perused the record. Section 111A (3) of the Act conferred jurisdiction on the Company Law Board to entertain a .....

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97(1) of the Act, any member(s) of the company can complain if the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member(s). Section 399 of the Act adumbrates conditions to be satisfied for making an application either under Section 397 or 398 of the Act. Under this provision, in the case of a company having a share capital, not less than 100 members of the company or not less than 1/10th of the total number of its members, .....

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oncerned. To maintain an application under Section 397 or 398 of the Act, the applicant must satisfy that he is a member of the company besides the other requirements stipulated in Section 399 of the Act. In the case on hand, it is not the pleaded case of the appellants that they filed the application in any capacity falling under Section 399 of the Act. There is a serious dispute about the appellants continuing as members of respondent No.1 company, let alone their holding 1/10th of the issued .....

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fer records which purportedly contain the signatures of appellant No.1. Appellant Nos.1 and 2, however, denied such share transfer taking place. Thus, in effect, the dispute between the parties mainly centers around whether appellant Nos.1 and 2 have ceased to be the members of respondent No.1 company and whether the alleged share transfers are valid or respondent Nos.2 to 6 played fraud against the appellants in respect of the purported share transfers. Unless this aspect is conclusively adjudi .....

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ges. As we are concerned with Section 111A (1) to (3), it is relevant to note that, that part of the Section was incorporated by the Depositories Act, 1996 with effect from 20.09.1995 and thereafter, the proviso to Section 111A (2) was incorporated by the Depositories Related Laws (Amendment) Act, 1997 with effect from 15.01.1997. With a view to examine whether the judgment in Ammonia Supplies (supra) has a bearing on the case on hand, the provisions of Section 155 and Section 111A of the Act ne .....

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member of the company, or the company, may apply to the Court for rectification of the Register. Section 111A of the Act, to the extent it is relevant, reads: 111A. (1) In this section, unless the context otherwise requires, company means a company other than a company referred to in sub-section (14) of Section 111 of this Act; (2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable; Provided that if a company wit .....

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shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), or any other law for the time being in force, within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of the transmission was delivered to the comp .....

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hile dealing with Section 155 of the Act, the Supreme Court held that if the question raised before the Court was truly one of the rectification, all matters raised in that connection should be decided by the Court under the said provision and that if it finds adjudication of any matter not falling under it, it may direct a party to get his right adjudicated by the Civil Court and that unless the jurisdiction is expressly or implicitly barred under the statute, for the civil Court would have jur .....

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