TMI Blog2005 (8) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... The allegations regarding (i) lodgment of the transfer documents with the Company; (ii) transfer entries appearing on reverse of the share certificates and (iii) return of the original share certificates to the petitioner are seriously disputed. Hence, the present company petition. 3. Shri R.Subramanian, learned Counsel, while initiating his arguments submitted that the petitioner being an investor in the capital and stock markets has been investing monies by way of loans to corporate and other bodies. The petitioner had advanced in August, 1995 a short term loan of ₹ 10 lakhs carrying interest at 21% per annum in favour of the Company for the period from 28.08.1995 to 23.10.1995 against collateral security of 1,30,000 equity shares of ₹ 10/- each of the Company held in the name of the second respondent, being Managing Director of the Company. This transaction was arranged through Vinmar Capital Markets Limited (VINMAR), a merchant banker, as borne out by their letter dated 25.08.1995 (Annexure A-2). Accordingly, the second respondent lodged with the petitioner the impugned shares together with duly executed transfer deeds by way of security. The Company failed to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rima-facie, what is pleaded is complicated question or not, without relegating the parties to a civil suit, as held by the Supreme Court in Ammonia Supplies Corporation (P.) Ltd. v. Modern Plastic Containers Pvt. Ltd. (1998) vol.94 310 . The CLB in Centurion Bank Ltd. v. Bellary Steels And Alloys Ltd. 2004 (vol. 120) CC 439 and Indian Bank v. Kiran Overseas Exports Ltd. 2001 (vol. 104) CC 320 ordered rectification of the register of members of the company in respect of the shares pledged with the bank as security for the financial facilities extended to the Company on the latter's failure to repay the outstanding loan amount, thereby recognizing the bank's entitlement to enforce its rights as pledgee, seeking registration of the pledged shares in its favour. In these circumstances, Shri R.Subramanian, learned Counsel sought directions against the Company to rectify its registers by entering the name of the petitioners in respect of the impugned shares. 4. Shri C. Kodandaram, learned Counsel for the Company submitted: The Company already repaid the entire loan amount in a number of instalments, but the petitioner under the premise of non-payment of the dues have retain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivas Kollipara for delivery of the share certificates; m) courier cover (Annexure A-24) in favour of VINMAR from the Company. The second respondent filed an application (CA 74/04) for production of the original documents in the petitioner's custody, but, the latter failed to produce any of them and the petitioner's explanation for non-production of those documents is liable to be rejected. The transfer entries, rubber stamp impression appearing on reverse side of the share certificates are fabricated. The rubber stamp impression on reverse of the share certificates and the rubber stamp impression contained in the communication (Annexure A-19) are not similar in size and they are procured to achieve the ends of the petitioner. The communications (Annexure A-19 A-20) show that 2000 shares covered by certificate Nos.4024 to 3043 were lodged with the Company as early as on 10.04.1996. At the same time, the same share certificates were found to be forwarded by the petitioner to the Company for effecting the transfer on 21.05.1999 in terms of his communication (Annexure A-29). The same certificates could never be lodged at different point of times to effect the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of facts arise, which could not be adjudicated upon and the controversy could be tested by a civil court alone, the Company Law Board would be reluctant to go into the matter but can relegate the parties to civil court. This Board in Tracstar Investments Limited v. Gordon Woodroffe Limited 1996 (vol.87) CC 941 held that the decision to relegate the parties in a petition under Section 111(4) to a civil court depends on the facts and circumstances of the case. It is not mandatory that whenever allegations of fraud are made, the parties should be relegated to a civil suit. However, the complicated questions of facts and serious controversies involved in the present company petition, necessitate a regular investigation and, therefore, the parties must be relegated to a civil suit. Therefore, these contentious issues cannot be decided in summary jurisdiction by this Board at this stage. Furthermore, the respondents have filed prior to the company petition a criminal case (Crime No. 1340/2003) before the Metropolitan Magistrate Court, Nampalli, Hyderabad, against the petitioner for the offences of forgery and cheating, which is already registered and pending. In view of this, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the petitioner being a pledgee to himself is void. The petitioner is a financier and the second respondent is a scientist not being aware of the statutory requirements. While according to the petitioner, the pledged shares stood transferred as early as in May 1996, yet the petitioner by his communication dated 21.05.1999 (Annexure A-29) forwarded 2000 shares covered under share certificate nos.4024 to 4043 to effect the transfer without furnishing the transfer folio nos. The petitioner by his communication dated 14.08.1996 (page 317 of petitioner's compilation) claimed from the Company the TDS certificate for the amount of tax deducted by the Company on 24.10.1995 in respect of the loan availed by the Company, even though the pledged shares stood reportedly transferred in May 1996 in the name of the petitioner. The Company had lodged a criminal complaint in November, 2003 prior to the date of company petition against the petitioner on the file of the Metropolitan Magistrate, Hyderabad for the offences of forgery and cheating. The criminal proceedings are under progress. The serious allegations of fraud and manipulation of transfer documents are being adjudicated in a competen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is entitled for the overdue interest till the impugned shares duly transferred in his favour are received by him and, therefore, justified to ask for the TDS certificates for the original interest payment. Though the respondents are vehemently contending that no amount is outstanding, yet the second respondent has forwarded to the petitioner a demand draft dated 03.03.2005 of ₹ 17.96 lakhs, being the balance due with interest and called upon him through a legal notice 30.03.2005, to return the share certificates in his possession. When the petitioner caused a reply notice dated 06.04.2005, challenging the demand for the shares certificates, the second respondent has filed in May, 2005 a civil suit in O.S. No. 14/2005 on the City Civil Court at Hyderabad against the petitioner, his wife being the second holder and the Company for redemption of the pledged shares and the suit is pending. In these circumstances, the petitioner does not intend to encash the demand draft forwarded by the second respondent. The original share certificates are in the petitioner's custody since the year 1995 and the respondents never took any action for retrieving the same, till the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he summary procedure prescribed by Section 111/111 A. The proper course in such cases of complexity, necessitating investigation is to relegate the parties to a civil suit. The full Bench of the Delhi High Court in Ammonia Supplies Corporation Pvt. Ltd. v. Modern Plastic Containers Pvt. Ltd. (supra) held that the jurisdiction exercised by the Company under Section 155 (now under Section 111/111 A) is discretionary and summary in nature. In exercise of its discretionary and summary jurisdiction, the company court can decline to entertain any petition for rectification of the register of members involving disputed and complicated questions requiring examination of evidence and would be justified to reject the petition and relegate the parties to a civil suit. The apex court, while affirming the judgment of full Bench of the Delhi High Court unequivocally observed that it would be appropriate, if the court would see for itself, whether the disputed documents are forged or fabricated and examine whether even prima-facie what is pleaded is complicated question or not without relegating the parties to a civil court. The Division Bench of the Karnataka High Court in Muniyamma v. Arathi Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 2,00,000/- by way of demand draft; (d) ₹ 5,00,000/- through Ashok Janani, Mumbai; and (e) ₹ 1,00,000/- by cash. The payment of ₹ 5,00,0007- through Ashok Janani and cash payment of ₹ 1,00,000/- are denied by the petitioner. The Company has not chosen to furnish the dates on which the disputed payments were made or the person(s) in whose presence those payments were made to the petitioner. The petitioner in his lawyer's notice dated 26.09.2003 (Annexure A-36) caused to the Company categorically stated that the loan amount was not repaid in full by the Company. But the Company in its reply dated 06.10.2003 (Annexure A-38) never pleaded that the loan amount was repaid in full to the petitioner and in particular failed to furnish the details of payment of ₹ 5,00,000/- reportedly made through Ashok Janani and the cash payment of ₹ 1,00,000/-. There is no other material other than the bare pleadings, evidencing discharge of the loan amount in full by the Company. Had the loan amount been repaid in full by the Company, I do not see any reason on the part of the second respondent to (a) send in March, 2005 in favour of the petitioner a demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same with the Company to effect transfer in favour of the petitioner. It is, therefore, far from doubt that the transfer deeds were neither stamped nor signed by the petitioner, while they were received by VINMAR for lodging the transfer documents with the Company. It is, however, observed from copies of the transfer deeds (Annexure A-16) that they were stamped; signed and executed by the petitioner and his wife on 25.03.1996, after parting possession of the share certificates and the transfer deeds by the petitioner in favour of VINMAR. This discrepancy remains unresolved. VINMAR had forwarded by hand delivery at Hyderabad on 29.03.1996, (Annexure A-17) 864 share certificates together with 48 duly executed and stamped transfer deeds in respect of 86,400 shares and not 1,05,200 shares to the Registrars and Transfer Agents of the Company for registration of transfer in the name of the petitioner as well as his wife and requested for return of the share certificates duly transferred in their names at their address furnished therein. The Transfer Agents by their letter dated 09.04.1996 (Annexure A-18) advised the petitioner that they stopped their services for the Company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Company by one Rajesh Gupta, out of which one could only be possible. This communication does not bear the signature of the petitioner and his wife and further does not disclose as to how the petitioners at Bombay got back possession of the share certificate from the Transfer Agents at Hyderabad. This communication is not in the letter head of VINMAR but in plain paper, hile the rest of communications of VINMAR, save Annexure A-25, are found to be on its letter head. Thus, this communication is full of contradictions, without any explanation. The last page of the communication (Annexure A-19) contains the rubber stamp impression of the Company with initial of someone from the Company, of whom no details are available. The rubber stamp impression is smaller in size when compared to the rubber stamp impression appearing on reverse of the share certificates (Annexure A-26 series). However, the communication dated 10.04.1996 (Annexure A-20) of the Company reveals that it had acknowledged receipt of the share certificates from Rajesh of VINMAR. I find that these communications (Annexure A-19 and A-20) run parallel to each other. The communication dated 10.04.1996 (Annexure A-20) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il of VINMAR (Annexure A-19) forwarding the share certificates to the Company for effecting the transfer and the communication dated 02.05.1996 (Annexure A-25) of VINMAR, sending the share certificates to the petitioner after duly effecting the transfer in his name, which are the most important ones, are only in plain paper, which is not only unusual but also improbable. Though the share certificates (Annexure A-26 series) in respect of the impugned shares indicate the transfer folio number, yet it is emphatically contended by the Company that they are manipulated transfer entries. According to the Company, no transfer entries were made on reverse of any of the share certificates. This plea gains support from the communication dated 21.05.1999 of the petitioner (Annexure A-29) requesting the Company to effect the transfer of 2,000 shares covered by share certificate Nos. 4024 to 4043. While the said communication gives the distinctive numbers of the shares, it does not furnish the transfer folio number of those shares sought to be transferred. The petitioner claims that 1,000 shares out of 1,05,200 shares were sold on 26.02.1999 in the open market, through the Bombay Stock Exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istered members/shareholders of this company which fact disentitle both of you for any transaction in your favour. Further, the transfer entries appearing on the instruments of share certificates are totally different in all respects with that of the normal procedure being adopted by our Share Transfer Agents M/s Ikon Visions Private Limited, Hyderabad, who were solely authorised to undertake all such transfers etc. pertaining to shares. Therefore, it is informed that we are retaining the said shares with the company in view of the fact that your claim is a fraudulent and also not genuine and advise both of you to return all those documents in your possession immediately. The Company has taken the plea as early as in June, 1999 that the transfer entries as appearing from the share certificates are not genuine and the rubber stamp impressions on reverse of the share certificates are forged. This communication of the Company forming part of the complaint filed under Section 200 of Criminal Procedure Code before the court of Metropolitan Magistrate, Hyderabad has not been questioned. The criminal compliant lodged by the Company is pending before the court of Metropolitan Magistr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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