TMI Blog2009 (5) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... b) The second petitioner is the managing director of the first petitioner -company and is a subscriber to the memorandum of association of the second respondent -company and also a director and shareholder of the second respondent -company; (c) The first respondent -company was incorporated as a private company limited by shares on January 2,1998 and its authorised capital is ₹ 6 crores divided into 60 lakhs equity shares of ₹ 10 each; (d) The second respondent -company was incorporated as a private company limited by shares on July 1,1998 and its authorised capital is ₹ 10 lakhs divided into 1 lakh equity shares of ₹ 10 each; and (e) The third respondent is the managing director in both the first and second respondent -companies. The petitioners were holding 50 per cent, of the paid -up share capital in the first respondent -company and respondents Nos. 2 and 3 were holding balance 50 per cent, of shares. Currently, the holdings of respondent No. 2 and respondent No. 3 are shown as if they have acquired the entire holding of the petitioner -company. However, the petitioners have not received the agreed sale consideration for the sale of said sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) The aggregate consideration for the shares payable by the buyers or in the event that the shares are to be purchased by a nominee (s) of the buyers, such nominee (s) to the sellers collectively shall be an amount of equivalent to ₹ 500 lakhs only ; (b) On the signing date, the sellers shall transfer to the buyers or their nominee(s) 27,50,100 equity shares of the target company for a consideration of ₹ 500 lakhs and cause the register of members of the target company to be updated on August 16, 2006, itself; (c) On and up to the date hereof the buyers have paid the sellers towards the consideration a sum of ₹ 500 lakhs as follows: (i) On the date of signing of this agreement the buyers have paid the sellers towards the consideration a sum of ₹ 150 lakhs drawn on Corporation Bank, cheque No. 311704 dated August 16, 2006, the receipt of which sum the sellers do hereby admit and acknowledge; (ii) The balance consideration of ₹ 350 lakhs will be allotted in the form of built up space in the proposed construction at Congress grounds within six months from this date; (iii) The shares will be sold with full title guarantee free from all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end that the name of the second respondent has been entered in the place of the names of the first and second petitioners in the register of members. The above is confirmed by the annual return for the year ending March 31, 2006, filed by the first respondent with the Registrar of Companies, Tamil Nadu, Chennai. ( 8. ) The share certificates were not issued by the first respondent -company. However, the share transfers have been carried out and recorded in the annual return for the year ended March 31, 2006. The first respondent -company did not issue the original share certificates to them at the time of the allotment and therefore, they are not in receipt or possession of the same. Further, learned Counsel submitted that the second petitioner being a member of the board of directors of the first respondent -company had not attended any board meetings on June 1, 2006 and June 28, 2006, when the purported share transfers were approved by the Board and has not signed any attendance register in proof of his attending the alleged board meetings. The above acts amounts to fraud, oppression to the petitioners and mismanagement in the affairs of the company. The petitioners submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition on behalf of the first petitioner -company. The third respondent and his family own around 30 per cent, of the shareholding in the first petitioner -company and the third respondent is still a director of that company. There has been no board or general meeting to discuss this action and the second petitioner has conveniently arrogated to himself the authority to file the present action which is against the interest of the first petitioner -company. The respondents denied the allegations contained in the petition. ( 9. ) He submitted that the first petitioner -company and one M/s. Skyhigh Builders had entered into an agreement dated May 28, 1996, with the Tamil Nadu Congress Committee Charitable Trust for the joint development of the property situated at Mount Road, Madras, commonly known as Congress Grounds in Teynampet. On January 2, 1998, Mr. D. Basant Kumar Ranka, managing partner of M/s. Skyhigh Builders, a partnership firm, and this respondent promoted and formed a company, viz., M/s. Blue Pearl Developments P. Ltd. On January 18, 1999, M/s. Skyhigh Builders and the first petitioner -company herein assigned by way of agreement all their rights under the agreement d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilt up space in the proposed constructions in Congress grounds within six months from the date of the agreement. Upon receipt of the entire consideration of ₹ 500 lakhs in the above manner on August 16, 2006, the transfer of the shares was effected and the register of members of the first respondent -company was updated on August 16, 2006, itself as per Clause 1 of the agreement. The transfer of shares of the petitioners was signed and effected by the second petitioner by affixing his signatures on the reverse of the original share certificates and the share transfer forms. The second petitioner has also signed the reverse of the original share certificates for 100 shares of the first respondent, which were allotted to him. These signatures were affixed by the second petitioner on the same day of signing of the agreement. The petitioners deliberately suppressed the vital fact from this Bench in order to convince the Bench and obtain some ex -parte orders so that the respondents can be black mailed with the threat of stalling the Congress ground project. After a few days of this transfer of shares, the second petitioner approached the respondents and complained that the consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the second agreement, the second petitioner once again approached the third respondent claiming that his family members were still dissatisfied with the promise of getting ₹ 250 lakhs worth of built up area as and when the project commences and that they were demanding further outright payment of a few crores. This was not anticipated by the third respondent and it came as a shock that the second petitioner was trying to take advantage of his role in the large joint family to needlessly pressurise the third respondent to give into the further unreasonable demands. In fact, the third respondent reassured the second petitioner that as and when the project commences, all the family members would be rewarded irrespective of any written agreement and that there was no necessity to try and extract more and more funds from the respondents, since these funds and resources would be vital when such a huge project actually commences. The second petitioner approached the third respondent sometime in October, 2006, for a hand loan of ₹ 1 crore, but the third respondent could give only ₹ 25 lakhs which was promised to be repaid within 2 or 3 weeks. It is understood from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioners' stand that the respondents acquired the petitioners' shareholding fraudulently is highly misleading and mischievous considering the fact that the second petitioner himself effected such a transfer. The allegation that the petitioners have not been invited to the board or general meetings is irrelevant, since the petitioners were not shareholders of either the first respondent -company or the second respondent -company, and hence were not invited to the board or general meetings. On August 16, 2006, the second petitioner had submitted his resignation from the board of the first respondent -company and this was duly accepted. Form No. 32 was filed on January 11, 2007. The present application has been filed by the petitioner without requisite number of shares and indeed neither of them hold even a single share. Hence, the complaints of mismanagement and oppression are blatantly false and deliberately made to fit the false case. The object of the present petition is to black mail the respondents by jeopardising the prestigious and pioneering project to be carried out by the first respondent -company. ( 11. ) The allegation that the petitioners hold share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the second respondent, is sufficient enough to disentitle the petitioners to any relief. In the absence of any shred of evidence to show that the transfer of the shares should be after payment of the sale consideration under the first agreement, the terms of the agreement and the delivery of the share transfer forms with the share certificate would certainly entitle the updating of the first respondent register of members. He submitted that the agreement to transfer does not constitute transfer, would not apply to the facts of the case. The petitioners have not merely handed over transfer forms but they have signed and delivered the share certificates to the second respondent. The allegations that transfer is not valid if full consideration is not paid does not apply in the instant case. The payment of valid consideration has been substantiated, proper lodgement of documents has been done and this is not a case where the cheque issued by the transferee was dishonoured. Hence, there is no reason to rectify the register of members of the first respondent. The petitioners do not require any notice of meetings conducted in respect of the first respondent -company since they do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as never subscribed his signature on the reverse of the original share certificate. The second petitioner, no doubt, signed the blank transfer forms to meet the statutory requirement and the blank transfer forms signed by the second petitioner have been misused by the respondents. The share certificates were never issued as on August 16, 2006. Further, the petitioner denied the allegation that he approached the third respondent at any point of time with any claim much less as alleged. ( 16. ) In view of the clear denial made in the rejoinder, the petitioners prayed this Bench to allow the petition by rectifying the register of members of the first respondent -company in the interests of justice. Heard learned Counsel for the parties, perused the pleadings, documents filed in support thereof. After hearing Counsel, the only issue fell for consideration is whether the petitioners are entitled to relief as prayed for, more particularly the setting aside of the alleged fraudulent transfer of shares and the consequence thereof. ( 17. ) The respondents filed type set of documents along with the counter affidavit. The board minutes of the first respondent -company dated March 31, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sellers towards the consideration a sum of ₹ 150 lakhs vide cheque No. 311704 dated August 16, 2006 and the sellers admitted and acknowledged the same. As a sub -heading of the share purchase agreement, the sale and purchase of shares, the balance consideration of ₹ 350 lakhs will be allotted in the form of built up space in the proposed construction at Congress grounds within six months from this date. Further, the sellers shall cause delivery of the following to the buyers: (a) The written resignation of all the nominee directors of the sellers on the board as directors, in each case acknowledging that he has no claim against the target company (whether for loss of office or otherwise); (b) A true and certified copy of the resolution of the directors of the target companies approving the transfer of the sale of shares, accepting the resignation of the directors referred to above and appointing all persons nominated by the buyer as directors of the target companies. ( 18. ) The first petitioner -company vide its board minutes dated August 7, 2006 authorised the second petitioner to discuss, negotiate, and finalise the price, terms, and execute share selling ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 500 lakhs in lieu of the area allotted anytime. The petitioners and respondents admittedly signed this agreement. It binds them unless and otherwise nullified/modified or declared void. Admittedly, the petitioners have transferred the shares vide agreement dated August 16, 2006 and subsequently signed the share transfer forms. The only grievance of the petitioner is that the respondent has failed to pay the balance consideration as mentioned in the agreement dated August 16, 2006. Having transferred the shares, the petitioners cannot seek revocation of shares already recorded on the grounds of failure to pay the consideration by the respondent. The petitioners, if at all, have any grievance for non -payment of the agreed sale consideration as per the agreement dated August 16, 2006, at best, may ventilate their grievances before the competent civil court having jurisdiction over the matter. This Bench, prima facie comes to a conclusion that the grievances of the petitioners are better in nature of breach of agreement rather than oppression and mismanagement as alleged by them. ( 19. ) A beneficial is drawn from the judgment dated November 18, 2004, of this Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Q2 are the disputed signatures and S1 to S4 are the admitted signatures. In view of the inconclusive report of the FSD, this Bench is not in a position to give any finding on the disputed signatures. ( 21. ) Learned Counsel for the respondents submitted orally that the procedure of signing on the reverse of the share certificates (endorsement of share transfer) can be done by any authorised official of a company whose shares have been transferred. In this case, he informed that the second petitioner was holding the office of director in the company also on the relevant date (i.e., August 16, 2006) and hence he had signed on behalf of the company as an authorised official and not as a seller. ( 22. ) The fact remains that the second petitioner has admitted his signatures on the share transfer forms and the resignation letter dated August 16, 2006, in pursuance of the agreement dated August 16, 2006 and hence the veracity of the signatures on the reverse side of the share certificates has no relevance to the share transfer having been effected in pursuance of the agreement. Hence, I negate the allegation of illegal and fraudulent transfer of shares as levelled by the petitio ..... 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