TMI Blog2017 (8) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... I was within its right to sell the same to the respondent No.1. This court does not find any infirmity in the sale. There is no material on record to show that the 30,00,000 (thirty lakh) preference shares (RCCP and CCP) were not subscribed by ICICI and that those preference shares were offered as security for the loan. Therefore, if the shares had been purchased for value in the first place, either as a source of finance or by any other means of finance, there is no provision in the Companies Act, 1956 or in the Contract Act, 1872 to prohibit the owner of such shares to deal with the same and/or to sell it. Therefore, the inevitable conclusion of this Court is that the validity of the sale of those 30,00,000 (thirty lakh) Preference shares (i.e. RCCP and CCP) is not impeachable on the basis of materials on record. Moreover, this court cannot be influenced by the value in which the said preference's hares were sold because in a sale transaction, only the contracting parties may at all be the one aggrieved and it was certainly not open to the appellant to challenge the sale on account of low value. - Co. App. 2/2016 - - - Dated:- 12-7-2017 - MR. KALYAN RAI SURANA, J. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of CP 89/ 2011 is available on record, there is no necessity to call for the records of the said CP No. 89/2011 and the learned counsel for both the parties have preferred to argue the matter on the basis of materials on records. 5) The facts relevant to this appeal i s that for setting up the appellant s factory for manufacturing polyester yarn, the appellant availed finance from various banks and financial institutions by issuing 81,46,250 Redeemable Preferential Shares having face value of ₹ 100/- each. Out of those , 30,00,000 such Redeemable Preference Shares were issued to the erstwhile Industrial credit and Investment Corporation of India Limited (ICICI). The said shares are the subject matter of the present appeal. 6) In this regard, a Subscription Agreement dated 08.04.1996 was signed between the appellant and the ICICI and accordingly, 8,67,000 Redeemable Cumulative Convertible Preference Shares (RCCP) was issued to the said ICICI under Share Certificate No.4 dated 07.12.1996 bearing Distinctive No. 3338001 to 42 05000. A similar agreement was signed on 08.04.1996 for issuing 20,58,000 RCCP for the interest which accrued on project finance availed. Thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bscription Agreement dated 08.04.1996 was rendered forceless an d it got scrapped and/or diluted because as per the agreement dated 08.04.1996, those RCCP were issued against interest. b. It is further projected that on assignment of loan by ICICI to Standard Chartered Bank, no part of loan was pending with ICICI as the said 30,00,000 RCCP and CCP shares were linked with the loan. Thus, the ICICI, having assigned the loan, had no right over the said RCCP and CCP shares or any part thereof. c. Therefore, the ICICI could not have sold and transferred 3000000 Preference shares to the respondent No. 1. d. It is submitted that the ICICI sold those 30,00,000 RCCP and CCP having face value of ₹ 100/ - each for ₹ 3,90,000/- at a price of ₹ 0.13 paisa per share. e. It is submitted that having illegally purchased the said thirty lakh preference shares, the respondent No. 1 approached the appellant on 14.05.2010, for transfer of the said 3000000 shares in their favor. However, as per the Appellant Company, the respondent No.1 could not have purchased the said preference shares, the said request was refused and, as such, the respondent No. 1 had filed a petition b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Standard Chartered bank and similarly, the Standard Chartered bank could not have sold those shares to the respondent No. 1. It is submitted that the entire transaction of transfer of preference shares was illegal and the shares valued at ₹ 100/- per share was sold for almost free at ₹ 0.13 paisa per share. 14 ) It is further submitted that in any case, the 20,58,000 RCCP shares were issued in lieu of accrued interest and, as such, with the acceptance of the CDR proposal by the ICICI on 21.07.2004 nothing survived on the said RCCP shares. 15 ) It is also submitted that as this Court had allowed the cancellation of all Preference Shares, the respondent No. 1 cannot maintain a claim in respect of those 30,00,000 shares being cancelled and there was a consequential reduction of all 81,46,25,000 Redeemable Preference Shares. It is further submitted that the appellant was justified in requesting the return of 30,00,000 shares sold to the respondent No. 1. Hence, when the refusal was by assigning was caused it cannot be alleged that the refusal to transfer those shares was without sufficient cause and, as such, the Company Law Board had no power under section 111 (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it is submitted that the subject matt er of assignment of debt by ICICI to Standard Charter Bank did not include the preference shares and, as such, the Standard Chartered Bank did not get any right whatsoever in respect of the said 30,00,000 (thirty lakh) preference shares. f. It is submitted th at the preference shares are freely transferable commodity and, as such, in the absence of any conditions attached thereto, the appellant Company, being a public limited company cannot have any restriction on the transfer of its said shares. g. It is submitted that the shares were transferred in physical form and was accompanied with valid transfer forms and, as such, the refusal of transfer gave the respondent No.1 the cause of action to approach the CLB , which is the appropriate forum to agitate the grievances as provided in Section 111A of the Companies Act, 1956. h. It is submitted that before the preference shares including those transferred to the respondent No.1 was cancelled, those shares existed in the books of the appellant and duly reflected in its annual accounts. i. It is submitted that the preference shares purchased for valuable consideration by the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his court does not find any infirmity in the sale. 22 ) There is no material on record to show that the 30,00,000 (thirty lakh) preference shares (RCCP and CCP) were not subscribed by ICICI and that those preference shares were offered as security for the loan. Therefore, if the shares had been purchased for value in the first place, either as a source of finance or by any other means of finance, there is no provision in the Companies Act, 1956 or in the Contract Act, 1872 to prohibit the owner of such shares to deal with the same and/or to sell it. Therefore, the inevitable conclusion of this Court is that the validity of the sale of those 30,00,000 (thirty lakh) Preference shares (i.e. RCCP and CCP) is not impeachable on the basis of materials on record. 23 ) Moreover, this court cannot be influenced by the value in which the said preference s hares were sold because in a sale transaction, only the contracting parties may at all be the one aggrieved and it was certainly not open to the appellant to challenge the sale on account of low value. 24 ) In view of the foregoing discussions, this Court does not find any infirmity in the impugned order dated 05.05.2017 (signed on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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