TMI Blog2018 (9) TMI 1969X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent No. 5 Smt. Manjula Jhunjhunwala is not a valid transfer. It is also clear that there is manipulation in the alleged share transfer form. The share transfer form was not valid on the date when the share transfer form was executed. No validity can be extended of such document, which was invalid on the date of execution itself. The position would have been different if the validity of the document would have expired after execution of the document, the then Registrar of Companies was authorised to extend the validity either before the expiry of the validity or after the expiry of the validity of document under sub-section (1)(d) of section 108 of the Companies Act, 1956. But in this case, proper procedure has not been adhered by the Registrar of Companies, Kanpur and Form 7C was allowed even though form was incomplete. In the circumstances, we hold that the alleged transfer of 39,500 shares in favour of Manjula Jhunjhunwala is not valid. This issue is decided negative in favour of the petitioner. Whether the petitioner is not eligible to present this petition under sections 397 and 398 of the Act in view of bar provided under section 399 of the Companies Act, 1956? - HELD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of directors on the same day cannot be accepted. The respondent has manipulated the resignation letter of the petitioner from the post of executive director of the respondent No. 1-company. The respondents has wrongly stated that the resignation letter of the petitioner from the post of executive director was accepted in the board meeting dated December 17, 2010. The respondent has failed to file any document to show that the board meeting took held on December 15, 2010 and December 17, 2010. Since the board meeting was not, held on the alleged dates, therefore the question of granting validity to the alleged resolution passed in the meeting dated December 15, 2010 and December 17, 2010 does not arises - The respondent has also failed to prove that the petitioner herself gifted her entire shareholding in the company in favour of respondent No. 5 Ms. Manjula Jhunjhunwala. The removal of the petitioner from the post of executive director by manipulation of documents and preparation of alleged gift deed and transfer certificate of entire shareholding of the petitioner in the name of Manjula Jhunjhunwal, respondent No. 5 is clear result of the oppression and mismanagement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was accepted in the meeting of board held on February 1, 2007 (a copy of letter dated February 1, 2007 including minutes of the board meeting is annexed and marked as annexure A3) and in place of respondent No. 2, respondent No. 4 was inducted as director of the company with effect from February 1, 2007. (vii) The petitioner further submits that the company was running successfully in full co-operation and co-ordination from the date of its incorporation till 2010 and the petitioner toiled day and night for the progress of the company and admittedly as on September 25, 2010 as per Form 20B, the petitioner was holding more than 98 per cent. of the share- holding of the company by way of 39,500 equity shares in her name remaining 500 shares were being held by respondent No. 4. (viii) It is submitted that relation between the petitioner and respondent No. 2 turned sour in the year 2010 on account of matrimonial dispute. As a result respondent No. 2 cleverly and clandestinely, having obtained signatures of the petitioner on blank papers under threat and coercion and further, prohibited her from participating in any activity relating to the company. (ix) Initially, the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting held on June 20, 2011 the name of company was changed to Satori Global Ltd. (xv) That the complaints regarding having obtained signatures on blank documents, stamp papers and share transfer certificates was made to the concerned police station by the petitioner. A copy of the complaints dated February 8, 2011 and March 25, 2011 is marked as annexure A10. (xvi) Further, it is submitted by the petitioner that the list of the shareholders filed by respondent No. 1 under signatures of respondent No. 2 and respondent No. 3, as on September 24, 2011 the name of the petitioner has been shown as a shareholder of company holding about 98 per cent. of the total equity shareholding. As such, it is established beyond doubt that at all relevant times, the petitioner was the majority shareholder in the company. Furthermore, the shareholding of petitioner was close to 98 per cent. However, despite holding 98 per cent. of the shareholding, the petitioner had been ousted from the affairs of respondent No. 1 by the fraudulent act on the part of the respondents (Form 23AC and Form 20B for the financial year ending on March 31, 2011 and the list of shareholders of respondent No. 1 as on Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, nephew, niece or cousin. (xxiii) It is further submitted that the right to transfer the shares by way of gift or without consideration was limited to few defined categories of relatives as above, it is important to note that the aforesaid permissible limit does not feature mother-in-law. (xxiv) It is further stated that despite having being allotted 5,000 equity shares, which number was further increased to 39,500 in due course of time, the company never actually sent physical shares certificates to the petitioner, which continued in the possession of respondents Nos. 1 and 2. In due course of time, respondent No. 2 resigned from the directorship of respondent No. 1 and further ceased to hold any equity shares in the com pany, he never caused the company to issue physical shares certificates to the petitioner and continue to enjoy the exclusive physical possession of share certificates for the 39,500 equity shares allotted to the petitioner in due course of time. (xxv) That respondent No. 2 is the husband of the petitioner and the parties are caught up in bitter matrimonial dispute over the period from 2010 onwards. In the year 2006, the relation between the parties wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent No. 2 inducted respondent No. 3 as an independent additional director in the company by apparent appointment dated December 15, 2010. Form 32 filed by respondent No. 1 is annexed as annexure A6. (xxxiii) A resolution was passed by the company without even sending any notice of meeting to the petitioner, which was signed by respondent No. 4. It is further submitted that the resolution has been passed without obtaining any consent from the petitioner and without even bringing it to the knowledge of the petitioner about the said board meeting. (xxxiv) After that, a resignation of the petitioner was then prepared by way of fabricating the documents and using the blank signed documents of petitioner. The petitioner is shown as resigned from the company on December 17, 2010 even without any knowledge of the petitioner and more particularly given the fact that the relations of the parties were not cordial at the relevant time, thereby ruling out any charity or sympathetic consideration for the respondents at all. (xxxv) It is further submitted that the petitioner had never agreed to transfer her shares to respondent No. 5 and as a matter of fact, never transferred the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made and calls were due as under : Sl. No. Particulars Name of Date of No. of shares Face value Pre-mium Total paid-up share capital 1. Private placement 1. Laffan software Ltd. 31-3-2007 1,00,000 7.50 40.00 7,50,000 2. Logic Infotech Ltd. 31-3-2007 1,00,000 7.50 40.00 7,50,000 3. Ramkrishna Fincap Ltd. 31-3-2007 1,00,000 7.50 40.00 7,50,000 4. Clifton Securities P. Ltd. 31-3-2007 1,00,000 7.50 40.00 7,50,000 5. Jagdishwar Pharmaceutical Ltd. 31-3-2007 1,00,000 7.50 40.00 7,50,000 6. Stocknet International L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration the annual return of the company till 2013 are correct. It is wrong to say that the respondent fraudulently acting in collusion with each other has transferred the shares from petitioner to respondent No. 5. It is denied that share certificates were not handed over to the petitioner as the petitioner herself was whole-time director of the company and was responsible to hand over the share certificates to each shareholder including herself. (iv) That the petitioner was the first director of the company till she resigned from the directorship, i.e., with effect from December 17, 2010. It is not a case of the petitioner that she did not sign the resignation letter. It is not a case of the petitioner which she did not sign transfer deed and gift deed. Thus, there is no allegation and pleading that the signature appearing on transfer deed and gift deed as well as on the resignation letter is forced. But, use of the word fraudulently, collusive is brainchild of the petitioner. (v) The words wrongfully and illegally are false and false to know ledge of petitioner. The fabrication of documents is denied as the petitioner has not placed before the hon'ble board any evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 17, 2010. It is further submitted that the documents above has been created by the respondents subsequently, using the signatures of the petitioners which were taken on blank papers under threat and coercion for which FIR was lodged in this regard. 11. It is further submitted the resolution of respondent No. 3 on December 15, 2010 is under challenge in this petition. The notice of the alleged board meeting was never received by the petitioner which is in contradiction to clause 16 of the articles of association. 12. It is further submitted that the alleged resolution dated December 15, 2010 is in contradiction to clause 53 of the articles of association which provides that the corum necessary for transaction of the business at a board meeting shall be two . The alleged resolution was passed by respondent No. 4 alone, therefore, the appointment of respondent No. 3 is void ab initio. 13. It is further submitted that article 38 of the articles of association clearly states that when the shares are forfeited, the person whose shares are forfeited seizes to be member. Therefore, after forfeiture of the shares on March 20, 2009 the membership again got limited only two me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er mother in law, is valid ? (iv) Whether the alleged resignation letter dated December 17, 2010 of the petitioner from the post of executive director of respondent No. 1- company is valid ? (v) Whether the alleged board resolution dated December 17, 2010 regarding acceptance of the alleged resignation of the petitioner from the post of executive director of the company is valid ? 20. Heard learned counsel for the petitioner and perused the record. Decision on issue No. 3 will be determinative factor for deciding the maintainability of the petition thus firstly we are taking issue No. 3. 21. Issue No. 3 : Whether the alleged transfer of 39,500 equity shares dated December 17, 2010 by way of gift deed by the petitioner to her mother in law, is valid ? The petitioner has alleged that : (i) She had never signed the transfer form. It is submitted that even on December 17, 2010 the alleged date of signing of the share transfer form, the said transfer form was invalid. (ii) On perusal of the transfer form, it appears that the said form has been revalidated by the Registrar of Companies on or about November 12, 2011. It is also submitted that respondent No. 1 has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the documents are procured and used to mislead the authorities and this conduct itself amounts to oppression and total mismanagement by respondents Nos. 1 to 4. (viii) Further in the application of maintainability filed by respondent No. 5 before this hon'ble Tribunal shows a Form 7C which has been filed by respondent No. 5 before the Registrar of Companies in which the reason for delay in filing the transfer form is given as misplaced . The form mentions of the loss/misplaced of the transfer forms, gift deed and shares certificates to request the concerned authorities (the Registrar of Companies) to condone the delay and revalidate the transfer forms. On perusal of the alleged gift deed dated December 17, 2010 the petitioner submits that the said alleged gift deed has not been signed by her. It is further submitted that the petitioner had already left the city of Faizabad on December 16, 2010 for Kolkata and was not present on December 17, 2010 to execute the alleged gift deed before the notary public. On perusal of the alleged gift deed, the recitals mention there being two donees and very conveniently the name of respondent No. 5 has already been said, and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to demonstrate that the criminal court which is a competent court has recognised or accepted or taken cognisance and found respondent No. 2 guilty of force and coercion to get the blank paper signed. It is again respectfully sub mitted that this is not a forum where in a proceeding under sections 397 and 398 a case of coercion and force or any other nature has to be proved. Once a signature appears, the document cannot be ignored, which has been held by the apex court also in judgment of Grasim Industries Ltd. v. Agarwal Steel [2010] 1 SCC 83. The third last paragraph of the said judgment is reproduced herein below (page 84) : In our opinion, when a person signs a document, there is a presumption, unless there is a proof of force or fraud, that he has read the document properly and understood it and only then he has affixed his signature thereon. Otherwise no signature on a document can ever be accepted. In particular, businessman, being careful people (since their money is involved) would have ordinarily read and understood a document before signing it. Hence the presumption would be even stronger in their case. There is no allegation of force or fraud in this case. Hence it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed the copy of the gift deed, which contains the signature of petitioner along with the signature of two witnesses of the gift deed. The petitioner has not denied her signature on the alleged gift deed but has stated that the gift deed was signed under coercion and threat. The petitioner further claims that witnesses of the alleged gift deed are Mr. Sachin Srivastava and Mr. S. N. Sharma, both are employees of Yash Paper Ltd., of which respondent No. 2 is the majority shareholder and managing director. It is further said that she never handed over the share certificate to respondent No. 5 at the time of alleged transfer, as she never had them in her possession. The petitioner has relied on the specific bar in the articles of association of the company for transfer of her share in favour of respondent No. 5 being the mother-in-law. Clause 16 provided for transfer of shares by way of gift or without consideration. Clause 16 permitted any member to transfer by way of gift, for or without any pecuniary consideration, the whole or part of his holding in the company to his wife, husband, son, daughter-in-law, son-in-law, father, mother, brother, sister, uncle, nephew, nie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift was made by the donor and donee where respondent No. 1-company has no role to play while the gift deed was made because it is a transaction between donor (the petitioner) and donee (respondent No. 5). The gift deed, certified copy of gift deed and transfer deed in original and share certificate were lodged with the company in November, 2011. On said date, the company was a public limited company and the law applicable on the date on which the transfer deed and other documents were placed before the board was November 10, 2011. Therefore, the document by the company or any other authority has to be seen the law applicable on the date of lodgement of the document. Since the shares of the public limited are freely transferable and no restrictive article can be contained in the articles of association of the public limited company. Learned counsel for respondent No. 5 has contended that clause 16 of the articles of association is not in prohibitory terms inasmuch as it only illustrates that gift can be made only in favour of persons who fall in the category of close relative. It does not say that no gift can be made except those mentioned in clause 16. It does not contain an exh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecutive director Ujjwal Agarwal respondent No. 3. In this list at serial No. 1, the name of the petitioner Shailja Krishna is mentioned, and equity shares held by Shailja Krishna is shown as 39,500. It is also important to mention that up to September 24, 2011 respondents Nos. 2 and 3 accepted that Shailja Krishna was having 39,500 shares in her name in respondent No. 1-company. The said respondent No. 1 has filed the copy of board resolution dated November 10, 2011 which shows that the board of directors approved the transfer in its meeting held on November 10, 2011. The share transfer form has stamp of the Registrar of Companies dated October 1, 2010 ; it also appears that its validity has also been extended by the Assistant Registrar of Companies up to November 12, 2011 but it is not mentioned that when the validity of this document was extended by the Assistant Registrar of Companies. If the contention of the respondent is accepted for a moment, then it is clear that up to November 10, 2011 the petitioner was member/shareholder of respondent No. 1-company having 39,500 shares. 23. It is important to point out certain documents which are attached with Company Application N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p to November 12, 2011 by application submitted before the Registrar of Companies, Kanpur. 26. The alleged Form 7C which is the proper pro forma of the application under the provision 108(1D) of the Companies Act, 1956 does not contain that mode and particulars of the payment and date of payment of the application fees, whereas it is specifically mentioned in the form that particulars of the payment with date is to be mentioned in column 10. Why column 10 is left blank itself, creates the doubt on the activity of the then Assistant Registrar of Companies, Kanpur who has extended the validity of form. It is also important to point out that the share transfer form which is basis of transferring shares of the petitioners contains particulars that distinctive numbers of the shares and corresponding share certificate numbers. There is manipulation and overwriting apparent in the photocopy itself, in the column which contains the particulars of distinctive number of shares and corresponding number of shares certificates. It is apparent from the share transfer form itself that distinctive number of shares, and corresponding shares numbers has been filled after erasing the original figu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is overwriting, and manipulation regarding the distinctive number of shares and corresponding share certificate numbers. Therefore, the alleged share transfer form and its extension of its validity is completely doubtful, which needs thorough inquiry by the Department of the Ministry of Corporate Affairs, regarding the conduct of the officials who has extended the validity of share transfer form. 27. The petitioner's share in respondent No. 1-company has been transferred by way of gift deed dated December 17, 2010. It is also undisputed that on December 17, 2010 respondent No. 1-company was a private limited company. This gift is by the petitioner in favour of her mother-in- law, without any consideration. Clause 16 of the articles of association of the company specifically permits gift in favour of relation member's wife, husband, son, daughter-in-law, son-in-law, father, mother, brother, sister, uncle, nephew, niece, or cousins . Transfer in favour of mother-in-law by way of gift is not permitted under the articles of association of the company. The hon'ble Supreme Court V. B. Rangaraj v. V. B. Gopalakrishnan [1992] 73 Comp Cas 201 (SC) ; [1992] 1 SCC 160 has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of maintainability of this petition given specific provision of section 399 of the Companies Act, 1956. The respondents have stated that section 399(1)(a) provides that in case of a company having a share capital not less than 100 members of the company or not less than, one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares . The respondents claims that provisions contained in section 399 of the Companies Act, 1956 regarding the maintainability is mandatory. In the present case, petitioner has stated that she has filed this petition in the capacity of director and shareholder of the company holding 39,500 equity shares of ₹ 10 each which ought to amount to almost equivalent to 98 per cent. of the issued and paid-up share capital of the company. Thus the petitioner claims that she has right to apply under section 399 of the Act for reliefs under sections 397 and 398 of the Act. The respondent further claims that in paragraph 1C of the petition petitioner has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve paid all the calls on the shares held by him/her. In other words, if the applicant has not paid all the calls on the shares allotted to him/her, and when such calls were made, he or she is not entitled to present a petition under sections 397 and 398 of the Act, and there is a bar against him. At the same time, if the literal interpretation put forth by respondents Nos. 1 and 3 is accepted, even if such person who has not paid all the calls on his shareholding, when such calls are made can still go ahead and block the chances of other shareholders to present a petition under sections 397 and 398 of the Act. The shareholders whose shares stands forfeited has no role to play in the affairs of the company and cannot be termed as associated with the company or its affairs to examine the eligibility of the applicant for filing petition under sections 397 and 398 of the Act, number of forfeited shares cannot be counted, unless the allotment has been made against the forfeited shares. The expression one-tenth of the issued share capital ought to be interpreted purposefully to achieve the objective of the section. The expression issued share capital should not be interpreted literally b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner and against the respondents. Issue Nos. IV and V : Whether the alleged resignation letter dated December 17, 2010 of the petitioner from the post of executive director of respondent No. 1-company is valid ? Whether the alleged board resolution dated December 17, 2010 regarding acceptance of the alleged resignation of the petitioner from the post of executive director of the company is valid ? 35. It is contended by the respondent that the petitioner on December 17, 2010 resigned from the post of executive director of respondent No. 1-company. The petitioner has submitted that she has never tendered her resignation. It is submitted that no board meeting was held on December 17, 2010 and the notice of alleged board meeting was not given to the petitioner. 36. The petitioner has alleged the resignation letter of the petitioner was tendered by the respondents by using fabricated documents. It appears that the alleged resignation of the petitioner was accepted in the board of director's meeting dated December 17, 2010, i.e., the date on which the alleged resignation was tendered. 37. The petitioner has contended that she had never tendered her resign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a photocopy of the minutes of the alleged meeting of the board of directors said to have taken place on October 24, 1994. As per the photocopy, the minutes appear to be signed by Ramanujam as chairman. The presence of Suresh Babu as a director of the company has been shown in the minutes. However, there is no evidence of the presence of Suresh Babu in the said meeting. Article 36 of the articles of association of the company requires that a notice convening the meetings of the board of directors shall be issued by the chairman or by one of the directors duly authorised by the board in this behalf. Suresh Babu filed an affidavit in the proceedings before the Company Law Board wherein he has categorically stated that at no point of time was he involved in the affairs of the company and in running the business of the company. Further, he has stated in the said affidavit that at no point of time was he informed that he had been appointed as director of the company. He had never received any notice of any board meetings nor had he ever attended any board meeting. In view of this categorical denial by Suresh Babu about attending any meetings of the board of directors of the company, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors attending meetings of the board of directors was not maintained, it was in clear violation of article 38 of the articles of association of the company. The Company Law Board without going into these relevant aspects, proceeded on an assumption that a meeting of the board of directors did take place on October 24, 1994. This assumption of the Company Law Board is clearly without any basis. (b) When no meeting of the board of directors of the company was held on October 24, 1994, the question of validity of the meeting does not arise. On the relevant date Suresh Babu was the only other director of the company. He denies having attended any meeting of the board of directors of the company. There is nothing to rebut this stand of Suresh Babu. In his absence no valid meeting of the board of directors could be held. 40. In the light of law laid down by the hon'ble Supreme court in the above mentioned cases, it is clear that notice of board meeting is an essential element for the validity of the resolutions passed in the alleged board meeting. The respondent claims that board meeting took place on December 17, 2010. But the respondent has not filed any document to rebut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12, it is clear that without production of the minutes of the board meeting, question of validity of the board meeting does not arises. It is pertinent to mention that the respondent has filed the copy of the dispatch register, the notice of board meeting dated June 24, 2011, explanatory statement attached with the notice with their reply to the petition. For the board meeting August 16, 2011, every document has been filed to show that the notice was given to shareholder Shailja Krishna on August 17, 2011. It is also written in the dispatch register that Shailja Krishna holds 39,500 equity shares. But the respondent has failed to file any document to prove the alleged board meeting, dated December 15, 2010 and December 17, 2010. It is also important to point out that on both the dates the petitioner Shailja Krishna was a member shareholder and executive director of the company. Therefore, without any notice to the petitioner-Shailja Krishna, no decision could have been taken regarding acceptance of resignation of the petitioner from the post of executive director and the appointment of respondent No. 3 as additional director. Thus, it is clear that the alleged resignation letter da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid and of no consequence. 44. Respondent No. 1 is further directed to delete the name of respondent No. 5 as owner of 39,500 equity shares from the register of shares and include the name of the petitioner as the lawful and exclusive owner of 39,500 equity shares issued by respondent No. 1. Respondent No. 5 is further directed to handover the physical possession of the share certificates containing 39,500 shares to the petitioner within 15 days from date of order. 45. We have found that there is overwriting and manipulation in the share transfer form, copy of which is attached with Company Application No. 14 of 2016. We have also observed that the share transfer form was issued by the Registrar of Companies on October 1, 2010 which was valid only up to December 1, 2010 but, the share transfer form was allegedly executed on December 17, 2010. We have also observed that the Registrar of Companies was having no power to extend the validity of share transfer form under section 108(1D) of the Companies Act, 1956, when the form was invalid on the date of execution of document itself. Under the above provision, validity could have been extended only in case where validity of the do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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