TMI Blog1998 (6) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of these petitions are common, they are disposed of by this common order. 2. The facts, in brief, as stated in the petitions and reiterated by Shri A. Arul Rayan, counsel for the petitioners, are that the petitioners in C. P. No. 28/111/SRB/97, C. P. No. 29/111/SRB/97 and C. P. No. 30/111/SRB/97 being members of the company are holding 419 equity shares--95, 304 and 20 equity shares respectively--of ₹ 1,000 each. The petitioner in C. P. No. 29/111/SRB/97 is one of the promoters and directors of the first respondent-company. The petitioners, their relatives and associates together holding 561 equity shares which include 419 shares mentioned hereinabove either lost or misplaced the original share certificates and called upon the company by lawyer's notice dated October 27, 1995, to issue duplicate share certificates. The company did not obtain any indemnity bond from the petitioners for issue of duplicate share certificates. As per Rule 7(2) of the Certificate Rules, the relevant register of renewed and duplicate share certificates has not been filed by the company. The company in collusion with its managing director and the other respondents manipulated fraudul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions : (a) Subhash Chandra v. Vardhman Spinning and General Mills Limited [1995] 83 Comp Cas 641 (CLB) to state that (page 648) : . the provisions of Section 108 are mandatory and as such the company cannot register the transfer of the shares in violation of the mandatory provisions of the Act. (b) Malabar and Pioneer Hosiery P. Ltd., In re [1985] 57 Comp Cas 570 (Ker) to state that (headnote) : The conditions imposed or the formalities enjoined in connection with the transfer of shares of a private company as provided in its articles of association read with Section 108 of the Companies Act, 1956, are mandatory. (c) Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp Cas 185 ; AIR 1977 SC 536 to state that : The provisions contained in Section 108 are mandatory. (d) S. Sundaram Pillai v. P. Govindaswami [1987] 62 Comp Cas 414, 423 to state that : This provision (section 108) shows that a company is prohibited from registering the transfer of shares in the company, unless there is a proper instrument of transfer which is duly stamped and which is executed by or on behalf of the transferor and by or on behalf of the transferee is delivered to the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. (i) CIT v. Bharat Nidhi Limited [1982] 52 Comp Cas 80 (Delhi). (j) C. Kuppiah Chetty v. P. Saraswathi Ammal [1941] 11 Comp Cas 334 ; AIR 1941 Mad 769, to state that : An agreement to transfer shares in a company accompanied with the actual instrument of transfer which had not been completed so far as the transferor could complete it does not amount to a transfer deed sufficient to cause title to pass. By itself it would be nothing more than an enforceable agreement to convey and until the transfer endorsement is signed the shares would be unascertained goods and would not be in a deliverable state. 4. In the circumstances, the petitioners seek for rectification of the register of members of the company. 5. According to the company and its counsel, Shri R. Vidya Shankar, in his oral submissions, the paid up equity share capital of the company is of ₹ 25,00,000 divided into 2,500 equity shares of ₹ 1,000 each. Respondent No. 2 in C. P. No. 29/111/SRB/97, his wife and son along with their friends and relatives hold 1,658 equity shares constituting 66.32 per cent of the total paid up equity share capital of the company. The petitioner in C. P. No. 29/11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had signed the transfer deeds on January 10, 1996. Shri Vidya Shankar, emphasised that blank transfers are valid in law for which he relied upon- (a) The commentaries of Shri Ramaiya, on the Companies Act (14th Edition at page 911). (b) Vasudev Ramchandra Shelat v. Pranlal Jayanand Thakar [1975] 45 Comp Cas 43 (SC). (c) Howrah Trading Co. Ltd. v. CIT [1959] 29 Comp Cas 282 ; AIR 1959 SC 775. 7. He further summed up that the instruments of transfer were duly executed, stamped and cancelled in accordance with the provisions of the Act and also of the Indian Stamp Act, 1899. The duplicate share certificates (annexure R-9) contain the original share certificate numbers. It shows that duplicate share certificates were issued in lieu of the original share certificates. The impugned shares were transferred in favour of the existing members of the company at a mutually agreed price. The transferees constituted persons in management and control of the company and also directors even before execution of the memorandum dated November 16, 1995. In the circumstances, none of the articles has been violated. The transfer is valid, legal and duly supported by consideration. The petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transfer were falsified and fabricated. The mandatory provisions of Section 108 of the Act were not duly complied with. (c) The adhesive stamps on the instruments of transfer were not cancelled in accordance with Section 2(14) of the Indian Stamp Act, 1899. (d) The company failed to comply with the formalities specified in the articles of association of the company, before effecting the transfer of the impugned shares in favour of the transferees. The transfer of shares is violative of the articles. (e) The agreement dated November 19, 1995, had become infructuous due to breach of its terms and lapse of time. 11. If we examine the facts of this case, it is seen that notice asking for duplicate shares was issued to the company on October 27, 1995. After the issue of this notice, the petitioners entered into an agreement for sale on November 16, 1995, and further wrote to the company to act on this agreement by a letter dated November 18, 1995. They also handed over the blank transfer forms on November 18, 1995, to the auditor of the company and received consideration in respect of these shares. Therefore, not only expressing their intent to sell the impugned shares, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on March 31, 1996, further establish the transfer of the impugned shares as approved by the hoard of directors of the company. The facts stated in the annual return are prima facie evidence of correct and complete facts, as has been held in Rashmi Seth v. Chemon India (P) Ltd. [1992] 3 Comp LJ 89 ; [1995| 82 Comp Cas 563. Moreover, the contentious issues raised by the parties regarding fraudulent manipulation of the duplicate share certificates, fabrication of the transfer instruments and other records cannot be resolved in summary proceedings by the Company Law Board, as has been held in quite a number of cases, 13. With regard to the plea that the transfer is violative of the articles, it shall be seen whether Articles 5 to 8 being relevant have been complied with by the petitioners as well as the company. They read as follows : (5) A share may be transferred by a member or other persons entitled to be a member so long as any existing member or any person selected by the directors as one whom it is desirable in the interest of the company to admit to membership is willing to purchase the same at the fair value. (6) The persons proposing to transfer any share (hereinaft ..... X X X X Extracts X X X X X X X X Extracts X X X X
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