TMI Blog2016 (6) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... shares between the original holders to the new four joint holders (said to be the cotrustees of the trust after the purported resignations of Sulochana and DGK and cooption of Rohini and Gaurishankar in their place), as required by Section 108 of the Act. Apart from this glaring lapse, the CLB has also noted the following admitted position for holding the transfers to be in contravention of Section 108 : (i) There is no instrument of transfer as required by Section 108 produced on record by the answering Respondents; (ii) The answering Respondents did not produce the register of members of the company to controvert the Petitioner's case that the transfers did not actually take place; (iii) No minutes of the Board of Directors or of any transfer were placed on record in respect of the impugned transfers; (iv) The purported annual returns filed with the Registrar of Companies did not relate to the transfers claimed to have been executed; Based on these facts and applying the law laid down by the Supreme Court in the case of Mannalal Khetan Vs. Kedar Nath Khetan [1976 (11) TMI 135 - SUPREME COURT OF INDIA ] holding that execution of valid transfer deeds within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NY APPEAL NO.89 OF 2015 IN COMPANY APPLICATION NO.157 OF 2015 IN COMPANY PETITION NO.22 OF 2011 COMPANY APPEAL NO.90 OF 2015 IN COMPANY APPLICATION NO.158 OF 2014 IN COMPANY PETITION NO.23 OF 2011 COMPANY APPEAL NO. 91 OF 2015 IN COMPANY APPLICATION NO.159 OF 2014 IN COMPANY PETITION NO. 24 OF 2011 COMPANY APPEAL NO.92 OF 2015 IN COMPANY APPLICATION NO. 160 OF 2014 IN COMPANY PETITION NO.25 OF 2011 COMPANY APPEAL NO.93 OF 2015 IN COMPANY APPLICATION NO.161 OF 2014 IN COMPANY PETITION NO.26 OF 2011 JUDGMENT This company appeal impugns an order passed by the Company Law Board, Mumbai Bench, Mumbai ( CLB ) on petitions filed under Section 111(4) of the Companies Act, 1956 for rectification in the register of members. The petitions for rectification were filed in respect of eight different companies, who were arraigned respectively as Respondent No.1 in eight separate petitions. The facts of these eight petitions are more or less similar and considered hereinbelow in Company Appeal (L) No.41 of 2015 arising out of Company Petition No.19 of 2011 as a representative case. 2. The short facts of the Petitioner's case may be noted as follows : (i) The Petitioner Suloc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni and Sulochana started learning about the wrongdoings and illegalities committed by Rohini. With a view to maintain family amity and for other diverse reasons, including the deteriorating health of Dr. Kalyani, no legal action was initiated in the matter, though in January 2010, both Dr. Kalyani and Sulochana revoked two Powers of Attorney, which were earlier executed in favour of Gaurishankar and Rohini. (v) In or about February / March 2011, the matters reached the stage of full blown unrest, whereupon a search was caused to be taken in the records of various statutory authorities, including the Registrar of Companies, in respect of Kalyani family companies. Upon these inquiries, Sulochana claims to have gained knowledge of the following : (a) Annual returns of Respondent No.1 for the year ending 31 March 2008 revealed a purported transfer of shares owned by the trustees (as transferors) in favour of Dr. Kalyani (as transferee); (b) Annual returns of Respondent No.1 for the year ending 31 March 2009 revealed a purported transfer of the shares by Dr. Kalyani to Gaurishankar. (c) Sulochana was purportedly shown as having ceased to be a Director of Respondent No.1 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h would have thrown light for the just decision of this case. (ii) The petition was barred by the law of limitation, and also suffered from unexplained delay and laches. 4. In their cross appeal/objections, the Respondents contest the impugned order of the CLB on the merits of the controversy as also on various preliminary objections such as locus standi of the Petitioner, non joinder of necessary parties, etc., which were rejected by the CLB. 5. Going by the arguments advanced by the parties before me, the following questions arise for the consideration of the Court in the present matter: (a) Does the Petitioner have locus to maintain a rectification petition, as one of the four joint holders of the shares? (b) Is the petition liable to be dismissed for non joinder of necessary parties in the absence of the co trustees of the Petitioner? (c) Is the petition barred by the law of limitation or liable to be dismissed for unexplained delay or laches? (d) Is the Petitioner guilty of suppression of material and relevant facts or vital documents, calling for dismissal of the petition? and (e) Is the CLB justified in holding that the impugned transfers are invali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application to the CLB under Section 111(4), and two, what is the starting point of limitation whether it is the date of execution of the purported transfer documents or the date of knowledge as claimed by the Petitioner. 8. The applicability of the Limitation Act generally to proceedings before the CLB depends on the central question as to whether the CLB is a Court within the meaning of Section 3 read with Sections 4 and 5 of that Act. The proposition that the Limitation Act only applies to proceedings before 'Courts' is not seriously contested by the Respondents. What the Respondents submit is that the CLB is indeed a 'court' within the meaning of the Limitation Act. The Supreme Court in Kerala State Electricity Board vs. T.P. Kunthaliumma (1976) 4 Supreme Court Cases 634, whilst analysing the provisions of Article 181 of the old Limitation Act (the 1908 Act) and Article 137 of the present Act (the 1963 Act), both of which are residual entries, has affirmed that the words any other applications under Article 137 do not imply only applications under the Civil Procedure Code other than those mentioned in Part I of the third division; that any other applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , those bodies of men who are appointed to decide controversies arising under certain special laws. Among the powers of the State is included the power to decide such controversies. This is undoubtedly one of the attributes of the State and is aptly called the judicial power of the State. In the exercise of this power, a clear division is thus noticeable. Broadly speaking, certain special matters go before tribunals, and the residue goes before the ordinary Courts of civil judicature. Their procedures may differ, but the functions are not essentially different. The expression 'court' used in different Acts has been interpreted by the Supreme Court and various High Courts in a number of cases. In Union of India vs. R. Gandhi5 the Supreme Court explained the term 'courts' thus: 38. The term courts refers to places where justice is administered or refers to Judges who exercise judicial functions. Courts are established by the State for administration of justice that is for exercise of the judicial power the State to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Code Civil Procedure only where it is required, and without being restricted by the strict rules of the Evidence Act. Our Court in a Full Bench decision in the case of Gangwani and Co. vs. Mrs. Saraswati wd/o Maniram Banewar 2001(3) Mh.L.J. 6 put the matter thus : 19. Even otherwise, the word Court used in Section 115 of the Code of Civil Procedure has a restrictive meaning and referrable only to the Civil Court in the normal hierarchy of the Courts and does not include in its ambit forums, which are constituted under the special Acts and exercising special jurisdiction. As stated hereinabove, by and large the essential features of the Court and special forums are quite similar in regard to exercising judicial powers of the State. Their decisions are binding in nature. The procedure is almost similar except in case of special forums, the same need not be strictly followed as in the case of Courts. The approach also needs to be adopted by both is also more or less same. The distinguishing feature between Court and Tribunal or special forum is that a Court is constituted by the State as a part of the normal hierarchy of Courts of Civil Judicature maintained by the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginally with the High Court under Section 155 prior to the amendment to the Act. He relied on the Supreme Court decisions in Canara Bank Vs. Nuclear Power Corporation of India Ltd. 1995 Supp (3) Supreme Court Cases 81, P. Sarathy Vs. State Bank of India AIR 2000 Supreme Court 2023 and our Court's decision in Raju Grover vs. Kalati Constructions Pvt. Ltd. Company Appeal No.12/15 in Company Petition No.6/14 in support of his submission. 12. In Canara Bank's case (supra), the Supreme Court was considering the question as to whether or not the word 'court' used in Section 9A of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 included the CLB exercising powers under Section 111 of the Companies Act. Section 9A dealt with the jurisdiction, powers and authority of a Special Court constituted under that Act. It inter alia provided that on and from the commencement of that Act, every suit, claim or other legal proceedings (other than appeal) pending before any court answering the description under Section 9 A shall stand transferred to the Special Court. The Supreme Court, after considering the case law on the subjects, held as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notified was involved has already been stated. In these circumstances, it is proper to attribute to the word 'court' in Section 9 A(I) of the Special Court Act, not the narrower meaning of a court of civil judicature which is part of the ordinary hierarchy of courts, but the broader meaning of a curial body, a body acting judicially to deal with matters and claims arising out of transactions in securities entered into between the stated dates in which a person notified is involved. An interpretation that suppress the mischief and advances the remedy must, plainly, be given. Such is not the position with a general statute like Limitation Act. There is nothing in the statute or its context to ascribe a broader meaning to the expression 'court' used in it so as to include within it all courts and tribunals dealing with curial or judicial matters and thereby include the CLB within it. 13. In P. Sarathy's case (supra), the Supreme Court was dealing with the question as to whether the expression 'court' in Section 14 of the Limitation Act includes only 'civil courts'. Section 14 allows exclusion of time of proceeding bona fide in a court withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of each case. In the facts of the present case, there is no warrant for holding that there is any inordinate or unexplained delay for any reason disentitling the Petitioner to the discretionary relief of rectification of the register. There are no equities arising in favour of the Respondents as a result of any delay. So also, there is no case of acquiescence, waiver of estoppel against the Petitioner. In fact, as I have particularly noted Bellwood, if one takes the correct date of accrual of the course of action in the present case, there is no inordinate or unexplainable delay or laches. 17. That takes us to the question of the time of accrual of a cause of action for claiming rectification of register. The cause of action, in a case of fraud or misrepresentation in the matter of transfer of shares, would naturally arise when the fraud or misrepresentation is noticed by the aggrieved party. Even here, the CLB has clearly erred in the present matter. The impugned order proceeds on the footing that the cause of action has arisen in the present case on the date of execution of the purported documents of transfer by the Petitioner. The Petitioner's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner to the Board of Trustees of N.S. Trust tendering her resignation as a trustee, (ii) Declaration of relinquishment executed by the Petitioner on 7.7.2007 in respect of all benefits in the income and corpus of the trust, (iii) Letter dated 7.7.2007 addressed by the Petitioner to Dr. Kalyani and SNI inter alia requesting the latter to act as trustees and without considering her as a beneficiary, (iv) Letter dated 10.7.2007 addressed by Dr. Kalyani inter alia co opting Gaurishankar and Rohini on the Board of Trustees and nominating Rohini to be the chairperson of the Board, (v)Resignation dated 22.6.2007 by DGK resigning from the trust, (vi) Minutes of Board of Trustees dated 12.7.2007 accepting the resignation of the Petitioner and DGK, and (vii) Letter dated 20.7.2007 addressed by SNI to the Board of Trustees conveying his consent to distribute/transfer the income/corpus to the sole beneficiary of the trust, viz. Dr. Kalyani. Apart from these documents, it is said that the share certificate which bears the signature of the Petitioner shows her knowledge of (i) transfer of shares to Dr. Kalyani as far back as on 17.9.2007 and (ii) further transfer from Dr. Kalyani to Gaurishan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of illiteracy and to other contracts in writing. In most of the cases in which this defence was pleaded the mistake was induced by fraud; but that was not, perhaps, a necessary factor, as the transaction is invalid not merely on the ground of fraud, where fraud exists, but on the ground that the mind of signor did not accompany the signature' in other words, that he never intended to sign, and therefore, in contemplation of law never did sign, the contract to which his name is appended. 13. Authorities drew a distinction between fraudulent misrepresentation as to the character of the document and fraudulent misrepresentation as to the contents thereof. It was held that the defence was available only if the mistake was as to the very nature or character of the transaction. 14. In Foster V. Mackinnan, Mackinnon, the defendant was inducted to endorse a bill of exchange on the false representation that it was a guarantee similar to one he had signed on a previous occasion. He was held not liable when sued even by an innocent endorsee of the bill. Byles, J. said: ... The defendant never intended to sign that contract or any such contract. He never intended to put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e difficulty is to be resolved on a case by case basis on the facts of each case and not by appealing to any principle of general validity applicable to all cases. Chitty on Contracts [ General Principles 25th edn, para 343, page 194] has this observation to make on Sauders decision : ....It was stressed that the defence of non est factum was not lightly to be allowed where a person of full age and capacity had signed a written document embodying contractual terms. But it was nevertheless held that in exceptional circumstances the plea was available so long as the person signing the document had made a fundamental mistake as to the character or effect of the document. Their Lordships appear to have concentrated on the disparity between the effect of the document actually signed, and the document as it was believed to be (rather than on the nature of the mistake) stressing that the disparity must be 'radical', essential , fundamental , or very substantial. In the instant case prima facie appellant seems to proceed on the premises that she cannot ignore the sales but that the sales require to be set aside before she is entitled to possession and other conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such defence also implies actual knowledge of the contents of the executed documents and a deliberate non disclosure based on such knowledge, is clearly impermissible. It would clearly lead to miscarriage of justice. 22. The error committed by the CLB in not considering the plea of non est factum simply on the basis of a so called admission of the Petitioner's signatures on the subject documents, without going into the defence of fraud and misrepresentation, is an error of law which has vitiated the impugned order. 23. The same can be said even of the Respondents' plea of deemed knowledge of the registered document (i.e., the gift deed). Deemed knowledge may at best support a case of binding nature of the document but cannot sustain a plea of actual knowledge and deliberate suppression based on such actual knowledge. 24. Coming now to the merits of the determination by the CLB of the illegality of the transfer itself under Section 111 read with Section 108 of the Act, it is pertinent to note that there are two transfers in the present case one, from the four joint holders, namely, Dr. Kalyani, Sulochana, DGK and SNI, to Dr. Kalyani as a sole holder and two, from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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