TMI Blog2022 (12) TMI 1248X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to perpetual injunction relates to the title of share of the plaintiff. Section 58 and 59 of the companies Act, 2013 deals with refusal by company to transfer of shares but in this case before transfer of share it is to be declared that the recording of share in the name of the defendants have been made fraudulently. The specific case of the plaintiff is fraud and the said fraud is to be adjudicated upon adducing evidence by both the parties before the Civil Court only. Section 65 of the Insolvency and Bankruptcy Code, 2016 has no manner of application in the instant case as the challenge is against issuance of shares by the auditor of a company in derogation of his fiduciary with the company and whether the said act of the auditor is in contravention of the provisions of Company Act, 2013 is on act of fraud or not is to be decided by the Civil Court. This Court finds that NCLT is not competent to enquire into the allegation of fraud specifically when the plaintiff has prayed for declaration of recording the names of defendant no. 2 and 3 as share holders in the books and the register of defendant no. 4 fraudulently and also prayed for perpetual injunction against the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayer (a) and (b) of the plaint relates to declaring the recording the names of the defendant nos. 2 and 3 in the books and register of the defendant no. 4 as illegal, fraudulent, null and void and for delivery of cancellation of share certificate issued in favour of defendant no. 2 and 3 by the defendant no. 4. Counsel for the defendant relied upon Section 447 and 449 of the Companies Act, 2013 and submits that Tribunal had jurisdiction to decide the fraud as claimed by the plaintiff. Counsel for the defendant relied upon the following judgments : i. (2019) 18 SCC 569 (Shashi Prakash Khemka Ors. -versus- NEPC Micon Ltd. Ors.) ii. (2018) 7 SCC 709 (Adesh Kaur -versus- Eicher Motors Limited Ors). Learned Counsel for the plaintiff submits that Section 430, 56(4), 58(3) and Section 59 and Rule 70 (5) (a) National Company Law Tribunal Rules, 2016 are not applicable in the instant suit and the Tribunal cannot decide the fraud as the plaintiff has taken specific ground of fraud. Learned counsel for the plaintiff relied upon Section 65 of the Insolvency and Bankruptcy Code, 2016 and submits that if any person initiates the insolvency resolution process or liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endant nos. 2 and 3 are companies owned and controlled by him though the defendant no. 1 had knowledge of the said fact. (b) The defendant no. 1 suggested as a fact that the defendant nos. 2 and 3 were independent companies, which were not true and which the defendant no. 1 did not believe to be true. (c) The defendant no. 1 caused the defendant no. 4 to issue shares in favour of the defendant nos. 2 and 3 with an intention to deceive. (d) The defendant no. 1 knowing that as an auditor he was not entitled to acquire shares of and in the defendant no. 4 directly in his name actively concealed that the defendant nos. 2 and 3 were companies controlled and managed by him. (e) The defendant no. 1 while causing the defendant no. 4 to issue shares in favour of the defendant nos. 2 and 3 omitted to indicate that the said defendant nos. 2 and 3 were companies owned and controlled by him to deceive the lawful shareholders of the defendant no. 4. The plaintiff is unable to give full particulars of the fraud so perpetrated by the defendant nos. 1 to 3 and particularly by the defendant no. 1 until full discovery is made by the said defendants. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability and or grant relief to the petitioner. This Bench fails to understand why the petitioner should resort to a civil court in order to prove her title. Apart from her oral testimony and her original share certificates, there is little else to be adduced in evidence even in a civil suit. She has her original certificates in hand. The respondents are aware of the fraudulent acts perpetuated on her and have even initiated criminal proceedings. There is no reason for the petitioner to be deprived of her assets for the outcome of the criminal investigation or wait for the criminal to be brought to book. Her documents and her entitlement are not denied to by the respondents. Under such circumstances, vague denial to escape any liability and to suggest that the petitioner initiates a civil suit is viewed as an attempt not to redress the grievance which has primarily arisen out of the fraud played by the employees of the respondent Company or their agents. Apart from guidelines of Respondent 3 that unequivocally make the respondent Company liable for the acts of their Register-cum-Share Transfer Agents, the law on the point is clear that the principals are liable for the acts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition within a maximum period of two months from today. In the case of N. Ramji (Supra), the Hon ble Madras High Court held that : 28. From the provisions of the Companies Act, 2013 and 1956, it is clear that the Tribunal or Board as the case may be can decide only the rectification of register of members with regard to shares and connected incidental issues. In the present suit, a reading of the averments in the plaint as well as the relief sought for by the first respondent shows that to decide the issue raised by the first respondent, the title to the shares in question has to be considered. The first respondent has not only prayed for rectification of register of members by substituting his name in the place of the petitioner and issue share certificates to him, but also prayed for permanent injunction restraining the petitioner from claiming any title over the shares in question. Whether the first respondent is entitled to relief of permanent injunction and also payment of dividends and bonus in respect of the shares can be decided only when the title to the shares are decided. Only if the first respondent proves by acceptable evidence that he is the owner of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate debtor during the insolvency resolution, can be inquired into by the adjudicating authority under Section 66. Section 69 makes an officer of the corporate debtor and the corporate debtor liable for punishment, for carrying on transactions with a view to defraud creditors. Therefore, NCLT is vested with the power to inquire into (i) fraudulent initiation of proceedings as well as (ii) fraudulent transactions. It is significant to note that Section 65(1) deals with a situation where CIRP is initiated fraudulently for any purpose other than for the resolution of insolvency or liquidation . 52. Therefore, if, as contended by the Government of Karnataka, the CIRP had been initiated by one and the same person taking different avatars, not for the genuine purpose of resolution of insolvency or liquidation, but for the collateral purpose of cornering the mine and the mining lease, the same would fall squarely within the mischief addressed by Section 65(1). Therefore, it is clear that NCLT has jurisdiction to enquire into allegations of fraud. As a corollary, NCLAT will also have jurisdiction. Hence, fraudulent initiation of CIRP cannot be a ground to bypass the alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of shares but in this case before transfer of share it is to be declared that the recording of share in the name of the defendants have been made fraudulently. The specific case of the plaintiff is fraud and the said fraud is to be adjudicated upon adducing evidence by both the parties before the Civil Court only. Section 65 of the Insolvency and Bankruptcy Code, 2016 has no manner of application in the instant case as the challenge is against issuance of shares by the auditor of a company in derogation of his fiduciary with the company and whether the said act of the auditor is in contravention of the provisions of Company Act, 2013 is on act of fraud or not is to be decided by the Civil Court. This court finds that the judgment relied by the plaintiff is distinguishable and the judgment relied by the defendants are squarely applicable in the instant case. In view of the above, this Court finds that NCLT is not competent to enquire into the allegation of fraud specifically when the plaintiff has prayed for declaration of recording the names of defendant no. 2 and 3 as share holders in the books and the register of defendant no. 4 fraudulently and also prayed for perpetual in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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