TMI Blog2018 (1) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... Crores has been received as a sale’s consideration it need to be reduced from the principal amount of ₹ 5 crore as recorded in the scheme. Such plea was ignored. The scheme has now attained finality. The debt of respondent No.1 as recorded in the scheme is ₹ 5.00 Crores and 70% amount payable to respondent No.1 has been deposited by the applicant: but the respondent No.1 admittedly is not withdrawing said amount and continue to withhold the pledged shares, hence is acting contrary to the sanctioned scheme. The transfer of 40,48,200 shares by respondent No.1 appears to be fishy and hence its transfer is declared as non-est. Hence the remaining pledged shares above of the applicant be released to the registered owners - the investment companies. The respondent No.1 is also directed to collect the principal amount of ₹ 3.5 Crores already lying deposited with the Registrar General of this Court pursuant to the sanctioned scheme of compromise, including any interest accrued thereupon, if any. Further, the balance amount deposited in this Court be distributed for second tranche under the scheme of the compromise be also refunded to the applicant together with interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter corporate deposit of ₹ 5,00,00,000/- at interest rate of 20% p.a. to the Applicant (Spicejet) against the pledge of a total 55,60,000 shares of the Applicant, held by: a). respondent No.2 (34,00,000 shares), b). respondent No.3 (6,60,000 shares) and c). Respondent No.4 (15,00,000 shares) ii) In February 1997 the winding-up Petition C.P. No.68/1997 was instituted by Indian Oil Corporation against applicant. iii) In April, 1997 Respondent No.1 filed a Civil Suit bearing CS No.161-A of 1997, against the Applicant as well as Respondent Nos.2-4, before the High Court of Kolkata praying, inter alia: a) for decree of sum of ₹ 5,83,96,465/-; b) declaration that the shares of the Applicant standing in the name of the Respondents No. 2-4 are all hypothecated and/or pledged in favour of Respondent No.1; c) a declaration that the Respondent No.1 herein is entitled to sell the said shares by public auction and/or private treaty and realize the sale proceed thereof in satisfaction of its claim; d) a mandatory injunction directing Applicant and Respondent Nos. 2 to 4 to execute and furnish fresh blank transfer deeds in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it issued a separate letter each to Respondent No. 2-4 informing that the Respondent No. 1 had sold the pledged shares. No details of the alleged sale were averred in the said letter. The letter allegedly called upon the Respondent No. 2-4 to execute the fresh Transfer Deeds. xii) On 19.03.1999 Respondent No.1 alleged that the Respondent No.2 to 4 in turn furnished new sets of Transfer Deeds, in respect of the pledged shares along, with covering letters dated 15.03.1999. xiii) Further in 1999, three Companies namely, Twenty Four Carat Investment Pvt. Ltd., RR Stock Shares Brokers Ltd. and Prasad Co. Pvt. Ltd. (hereinafter referred to as the Alleged Purchasers ) thereafter applied to the Applicant Company for transfer and registration of 40,48,200 shares and enclosed the fresh Transfer Deeds dated 1999 allegedly issued by the Respondent No. 2 to 4. xiv) On 04.09.1999, Applicant Company did not affect registration of transfer on the following three grounds: a) original transfer deeds pledged to the Respondent No. 1 had expired; b) interim order dated 23.04.1997 passed by the High Court of Kolkata was subsisting and it restrained the Applicant and Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of The Securities Contracts (Regulation) Act, 1956 and for this reason additionally sale is null and void. Reliance is placed by the applicant upon the dictum of the Supreme Court in Bhagwati Developers Pvt. Ltd. vs. Peerless General Finance and Investment Company Ltd. Anr. 2013 (9) SCC 584. xviii) In September, 1999 one of the Alleged Purchasers - 24 Carat Investment Pvt. Ltd, allegedly holding 18,09,000 pledged shares filed a Co. Petition 12/11/99 under section 111A of Companies Act before the Company Law Board praying that Applicant be directed to register the transfer. However, on 13.01.2000 the said petition was dismissed by the Company Law Board vide its order dated 13.01.2000 on the grounds that: a) the transfer deeds, purportedly forwarded along with covering letters dated 15.03.1999, were held to be forged and not genuine; and b) letter dated 07.12.1998 was never received by the Respondent No. 2 to 4. The finding of the Company Law Board to this effect in its order dated 13.01.2000 passed in C.P. 12/111/99 has attained finality. xix) On 06.03.2000 an appeal was filed by Twenty Four Carats Investment Pvt Ltd bearing Co. A. No.2 of 2000 against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purchasers. xxvi) On 03.05.2001, appointment of Provisional Liquidator was recalled in C.P. No. 68 of 1997. xxvii) On 22.08.2001 an order was passed by the High Court of Kolkata in GA 2293/2001 holding the order of CLB was binding on transferees so long as the same was not set aside by High Court of Delhi and the Respondent No.1 was trying to get relief in indirect way. The Respondent No.1 filed an appeal against the order dated 22.08.2001 with APO No.317/2001 in APOT No.615/2001 in October, 2001 before the Division Bench of the High Court of Kolkata. xxviii) On 20.12.2001 an order was passed by this Court in CA 1889/2001 in CA 797/2000 directing that decrees/ final orders passed against the applicant company will not be executed, without leave of this Court. xxix) In March 2003, Applicant Company herein filed C.A. No.265 of 2003 in C.A. 797 of 2000 against Mr. S.K. Modi and Respondents No.24 Companies praying that board meeting dated 31.07.1996 wherein 11624472 equity shares (pledge shares) had been made fully paid up, be declared void. xxx) On 29.07.2003 this court observed that updated scheme in C.A. No. 797 of 2000 was bonafide and reasonable as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the scheme which was pending consideration and ultimately sanctioned on 15.07.2005 and that the effect of the sanction rendered the order dated 11.07.2005 otiose. Further S.L.P. No.17474 of 2005 was filed by the Applicant against judgment dated 11.07.2005 and by an Order dated 12.09.2005 the Supreme Court of India stayed the direction of the transfer of shares as contained in order dated 11.07.2005 of the Division Bench of Kolkata. xxxvi) On 26.11.2008 Memorandum of Settlement was executed between Modi Global Enterprises, Royal Holdings, Applicant and Mr. B.S. Kansagra. The dispute regarding rights shares including pledge shares being partially paid and whereby the parties to the said settlement agreed to settle inter-se their all disputes. It was agreed the pledged shares would be kept by the nominee of the Applicant in escrow till the time the issue of transfer of such share is decided by the Court. Pledge shares were treated as fully paid on investment companies agreeing to transfer 12 lakh shares to the nominee of the applicant for sale and realization towards payment of the call money. xxxvii) On 16.01.2009, C.A. 265 of 2003 was dismissed as withdrawn. Issue regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation preferred by the Respondent No.1 stating that no clarification was required in the Judgment dated 09.11.2012. xlv) On 10.11.2014, the Metropolitan Magistrate, Saket Court, New Delhi has allowed the release of the original share certificates of 40,48,200 shares and handed over of the same to the Respondent No. 2 to 4 on superdari. 3. Hence the issue now before this Court remain to be decided in this application is if the sale of the pledged shares by respondent no.1 to the alleged purchasers is non-est and if giving such a declaration would upset the finding dated 11.07.2015 of Division Bench of the Kolkata High Court. 4. The learned senior counsel appearing on behalf of the respondent No.1 argued the question of transfer of shares could not be agitated now as has already been adjudicated upon by the Division Bench of this Court in its judgment dated 09.11.2012 and if the present application is allowed, it shall be reopening of the same issue which has attained the finality in various court proceedings. The respondents No.2 to 4 should not be allowed to reopen the issues which have attained the finality. 5. The argument of learned Senior counsel for respondent s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter. It was argued the judgment dated 11.07.2005 noted the transfer deeds executed in the year 1995 were not in dispute and its revalidation was subsisting, hence consequential effect thereof ought to have been given and since issue of revalidation has not been challenged before any appropriate forum it could not be the subject matter of challenge in appeal. He also argued the objections raised by the respondents No.2 to 4 of the locus standi of respondent No.1 to defend the proceedings or the issue qua sale being bad for violation of Section 176 of the Indian Contract Act has since been rejected by the Division Bench of the Kolkata High Court in its judgment dated 11.07.2005 and the objection under Securities Contracts (Regulation) Act, 1956 too ought to have been raised only before such Court. 8. To appreciate this issue, the following observations of the Division Bench of Kolkata in its judgment dated 11.7.2005 seems relevant:- xxx As we have already indicated that the fresh transfer deeds, which were signed by K. Bhatnagar in 1999, is not an issue before this Court. The appellant before this Court is seeking an order on the basis of the revalidated transfer d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or registration of shares would be in New Delhi since situs of shares is in New Delhi, the respondent has relied upon the decision reported in AIR 1963 SC 21. In the said decision the Hon'ble Supreme Court while discussing as to which Court would be the competent Court in the facts and circumstances of the said case observed that the proper Court would be the Court where the situs of the shares lay. xxxxx We see no reason why this Court should be divested of its jurisdiction to pass appropriate orders. We have already indicated that the direction to transfer the shares would be consequential to the main orders as prayed for. Since the sale of shares has already been concluded the only thing remains is to perfect the sale. 9. It is alleged the order dated 11.07.2005 of the Division Bench of Kolkata High Court was based on a premise the sale is valid and the court proceeds from this point to make consequential orders. The Court did not consider issue of validity of sale of shares. The learned senior counsel for applicant rather submits the Division Bench ignored the fact such sale was never ordered by the High Court in Suit No.161 A (supra) and the reasonable notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration under Section 391(1) of the Act. This fact is also recorded and endorsed in the order dated July 15, 2005 sanctioning the scheme. It is submitted that although order dated July 29, 2003 was placed before the Hon ble Calcutta High Court in the appeal the same was not even considered in the impugned order and a finding is given on the bonafides of the Scheme for which the Calcutta High Court has no jurisdiction. The Hon ble Court also failed to appreciate that the order dated July 29, 2003 was not challenged by Respondent No.1 and was therefore binding on Respondent No.1. O. The Hon ble Court has by impugned order interfered with the working of the Scheme and dealt with the partly paid shares which are subject matter of Scheme and forfeiture and sale of the partly paid shares will decide the fait and successfulness of the working of the Scheme. xxx Q. the High Court of Delhi under its widest powers given to it under Section 391 of the Companies Act, while considering a scheme filed by the Petitioner, has given a finding that the shares under question are tainted and have been made fully paid by a stratagem device and that the votes in respect of the tainted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes: Issue notice. Pendency of the matters before this Court shall not stand in way of disposal of Civil Appeal No.265/2003 which is pending before the Delhi High Court. The direction of the transfer of shares is stayed. Learned counsel for the respondent is granted four weeks time to file counter affidavit. Thereafter learned counsel for the petitioner is granted three weeks time to file rejoinder affidavit. Call after eight weeks. 12. Further vide order dated 06.07.2009 the Supreme Court disposed of the SLP (Civil) No.17474/2005 noting:- By order dated 16th January, 2009 the Delhi High Court in C.M. Nos.1469-1470 of 2008 in Co.P. No.385 of 2003 observed that the question regarding forfeiture of shares is pending in the Supreme Court and it would be open to M/s Malanpur Steel Limited to make its submissions before the Supreme Court. Today when the Special Leave Petition came before this Court the above order was shown to us. We are of the opinion that the High Court should decide the said question in accordance with law. In the meantime, status quo as regards the transfer of shares shall continue till the High Court decides the matter exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y against our loan of ₹ 5.00 crores given to M/s Modi Luft Limited. These shares have since been sold by us and we request you to kindly give us fresh transfer deeds in the marketable lots for these shares at your earliest. The notice/letter above cannot by any stretch of imagination be said to be a reasonable notice for sale.It rather disclose the factum of sale of shares. No opportunity was ever given to the applicant to redeem the shares. 16. Moreso, the respondent No.1 could never prove the service of notice/letter dated 07.12.1998 by which he allegedly exercised its option available under Section 176 of the Indian Contract Act. This fact is duly noted by the Company Law Board in Company Petition No.12/11/1999 in its order dated 13.01.2000 as follows:- All the three letters were received by the said companies on the same day i.e. 10.12.98 and bear the stamps of Modiluft Ltd and the initials purported to be of Kuldeep Bhatnagar. It is significant to note that out of the three, Modi Overseas Investment Ltd. has its office at Hemkund Tower 98, Nehru Place, New Delhi whereas the other two associate companies have their office at the other two associates compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in possession of the respondent No.1 but had since expired in November, 1996 itself. 18. The alleged transfer/sale of the pledged shares by respondent No.1 was even otherwise, in violation of an interim restraint order dated 23.04.1997 passed by the learned Single Judge in Civil Suit No. 161A/1997 restraining the respondents No.2 to 4 herein from dealing, disposing of, alienating or otherwise encumbering any of the assets, including the pledged shares. As the respondents No.2 to 4 were restrained by Kolkata High Court from effecting any transfer of the shares of the pledged shares, the respondent No.1 could not have asked for issuance of the fresh transfer deeds in view of such restraint order. 19. Further the alleged sale of 55,60,000 plus shares by the respondent No.1 is also hit by the Securities Contracts (Regulation) Act, 1956 as the sale consideration from Twenty Four Carat Investment Limited to respondent No.1 was outstanding even on the date of filing of chargesheet by the police in case FIR No.31/2005 by respondent No.1. The chargesheet of FIR No.31/2005 records the shares were though sold by respondent No.1 to Twenty Four Carat Investment Limited and RR Stocks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant, therefore, can come out of the rigors of Section 16 of the Act only when it satisfies that the transaction comes within the definition of spot delivery contract . xxx 33. The second question, therefore, which falls for our determination is as to whether the contract in question is a spot delivery contract. This expression is defined under Section 2(i) of the Regulation Act. It reads as follows: 2. Definitions In this Act, unless the context otherwise requires, - x x x (i) spot delivery contract means a contract which provides for (a) actual delivery of securities and the payment of a price therefore either on the same day as the date of the contract or on the next day, the actual periods taken for the dispatch of the securities or the remittance of money therefore through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality; (b) transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository; x x x 34. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditor in the scheme and now that an amount of ₹ 1.39 Crores has been received as a sale s consideration it need to be reduced from the principal amount of ₹ 5 crore as recorded in the scheme. Such plea was ignored. The scheme has now attained finality. The debt of respondent No.1 as recorded in the scheme is ₹ 5.00 Crores and 70% amount payable to respondent No.1 has been deposited by the applicant: but the respondent No.1 admittedly is not withdrawing said amount and continue to withhold the pledged shares, hence is acting contrary to the sanctioned scheme. 21. Admittedly on 15.7.2005 this Court sanctioned the Scheme of Compromise being C.P.No.385 of 2003. The objections of respondent No.1 to the scheme of compromise were dismissed. As per the scheme: a. The respondent No.1 was held to be entitled to only receive 70% of the principal amount advanced to the applicant company. b. Respondent No.1 was directed to return the shares deposited with it as security to the Court. The Division Bench of the Calcutta High Court in its judgment dated 11.07.2005 did not and could not have considered the effect of the scheme sanctioned on 15.7.2005. No title in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orfeiture of the shares and did not disturb the finding of the Division Bench of Kolkata High Court qua validity of the sale of pledged shares. 26. I disagree. Admittedly the SLP CA No.17474/2005 was filed by the applicant against the judgment dated 11.07.2005 of the Division Bench of Kolkata and it rather challenged the validity of alleged transfer of shares. The question of forfeited shares was never raised by the applicant in the said SLP. The Supreme Court stayed the judgment dated 11.07.2005 passed by the Division Bench of Kolkata High Court and than finally passed an order dated 06.07.2009. It is pertinent to say prior to 06.07.2009, by an order dated 16.01.2009, CA No.265/2003 was dismissed as withdrawn in terms of the memorandum of understanding dated 26.11.2008 and the issue of forfeiture of the shares was put to rest. The respondent No.1 at that stage too had contended there is no impediment in transfer of shares in the name of the transferees and the Company Court granted it liberty to raise such objections before the Supreme Court. However such objection was not accepted and the Supreme Court directed this Court to decide the issue of transfer of shares in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the donor, the donation of the right to get the share certificate transferred in the name of donor became irrevocable by registration as well as by delivery. Either was sufficient. The actual transfer in the registers of the companies constituted more enforcement of this right to enable the donor to exercise the rights of the shareholder. The more fact that such transfers had to be recorded in accordance with the Company Law did not detract from the completeness of what was donated. Referring to Regulation 18 of the first schedule to the Companies Act of 1913 which prescribed the mode of transfer of shares, it was observed by the court that there was nothing either in the Regulation or elsewhere to indicate that without strict compliance with some rigidly prescribed form, the transaction must fail to achieve its purpose. It was said, the subservience of substances of a transaction to some rigidly prescribed from required to be meticulously observed, savours of archaic and outmoded jurisprudence. The Court referred to the passage in Buckley on the Companies Acts XXXI Edn. Page 813 : Non registration of a transfer of shares made by a donor does not render the gift imperfect , and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st as a distinct corporate entity, but is yet being defended under the name of M/s Malanpur Steels Limited. 29. Thus the following facts culled out from the above discussions clinches the issue in favour of the applicant herein:- i) Respondent no.1 sought a direction in CS No.161 A/1997 to sell the pledged shares but could not get the same; ii) prior to the day of alleged sale of pledged shares, a company petition No. 68/1997 was admitted against the applicant and the Official Liquidator was appointed; hence alleged sale even otherwise is bad per Section 446 of Companies Act, 1956; iii) sending of notice informing sale of shares under Section 176 of Indian Contract Act was even doubted by CLB in its order dated 20.01.2005; the appeal against it was also dismissed, hence attained finality; iv) transfer deeds dated 1999 were held to be forged by Company Law Board; v) order dated 23.04.1997 was passed by Kolkata High Court in Civil Suit no. 161 A/97 restrained respondents no.2 to 4 in dealing with, disposing of, alienating, encumbering assets, such shares etc; vi) prayer qua liberty to sell pledged shares was never allowed in CS 161 A/1997; vii) the sal ..... 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