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Tarsen Kansil Vs. Dev Spinners Ltd. - Court Judgment

LegalCrystal Citation
CourtCompany Law Board CLB
Decided On
Judge
Reported in(2001)103CompCas835
AppellantTarsen Kansil
RespondentDev Spinners Ltd.
Excerpt:
.....transfer deeds in respect thereof nor has he received any consideration for the same. further, the share transfer committee of which respondent no. 3 was one of the members in view of section 300 of the act could not have approved the transfer of the shares being interested therein and the alleged board meeting dated september 19, 1997, wherein the said transfers were said to have been ratified was illegal as no notice of the said meeting was given to the petitioner and his presence was falsely recorded.3. respondents nos. 1 to 8 in their reply to the petition denied the allegations of the petitioner regarding fraud, forgery and collusion.they asserted that the transaction was perfectly valid. the share transfer deeds were not only signed by the petitioner but the signatures have also.....
Judgment:
1. By means of this petition filed under Section 111A(3) of the Companies Act, 1956 ("the Act"), Tarsen Kansil (the petitioner) has, inter alia, prayed for rectification of the register of members of the respondent-company, namely, Dev Spinners Ltd. (respondent No. 1) by declaring that the shares registered by the said respondent in the names of respondents Nos. 7 and 8 be declared as null and void and the name of the petitioner be restored in the register of members of the respondent-company as holder of the impugned shares.

2. The case of the petitioner as set out in the petition and as reiterated by Shri Anil K. Agarwal, practising company secretary, is that the petitioner was one of the promoter directors of respondent No.1 holding 1,52,410 equity shares. In June, 1997, all the said shares have been got fraudulently and collusively transferred in the name of respondents Nos. 7 and 8 and their names were recorded, behind the back of the petitioner without his knowledge. The said transfers were illegal and contrary to the provisions of Section 108 of the Act inasmuch as the petitioner continues in possession of the share certificates in original and, therefore, it could never be produced along with the transfer deeds. He never sold the shares, neither has he signed any transfer deeds in respect thereof nor has he received any consideration for the same. Further, the share transfer committee of which respondent No. 3 was one of the members in view of Section 300 of the Act could not have approved the transfer of the shares being interested therein and the alleged board meeting dated September 19, 1997, wherein the said transfers were said to have been ratified was illegal as no notice of the said meeting was given to the petitioner and his presence was falsely recorded.

3. Respondents Nos. 1 to 8 in their reply to the petition denied the allegations of the petitioner regarding fraud, forgery and collusion.

They asserted that the transaction was perfectly valid. The share transfer deeds were not only signed by the petitioner but the signatures have also been attested by the bankers. The petitioner was present in the meeting of the board of directors held on September 19, 1997, wherein the board had approved the resolution passed by the share transfer committee on June 6, 1997. The share transfer committee comprised a nominee director of the PSIDC (Punjab State Industrial Development Corporation) as well as Suni K. Kansil (respondent No. 3) before whom the original share certificates and the transfer deeds were placed and the transfers were duly approved by the said committee and the same was ratified by the board of directors in its meeting dated September 19, 1997. The petitioner had also duly received the agreed amount of sale consideration of Rs. 1,50,000 by means of two cheques drawn on the Punjab National Bank, Handiaya Bazar, Barnala, as evident from the banker's certificate. In fact after transferring his shares the petitioner had resigned from the board of directors with effect from March 6, 1998, and the necessary Form No. 32 had also been duly filed with the ROC. It was further pleaded that the petitioner as director of respondent No. 1 was responsible for maintaining the registers and records of the company and taking advantage of the registered office being at his residence, the petitioner appears to have taken possession of the original share certificates which he was retaining wrongfully and unlawfully, and on that basis has filed the present petition which deserved to be dismissed.

4. The petitioner has filed a rejoinder reiterating his case as set out in the petition. It has been further stated that the petitioner was also holding shares in some listed companies and he intended to sell some of these shares through the stock exchange and in that context he signed some transfer deeds for delivering to the stock broker and it is not known how his elder brother respondent No. 3 could lay his hands on these transfer deeds. It was further stated that the signatures of the witness namely Mr. D. P. Bansal was obtained by misrepresentation by respondent No. 3 and the signatures of the petitioner on the transfer deeds were got attested by Mr. P. H. Rao, manager, Corporation Bank, Chandigarh, by respondent No. 3, though the petitioner was not present and neither did he sign in the presence of the bank manager. The petitioner has made a prayer that both Mr. D. P. Bansal and Mr. P. H.Rao, the manager of the concerned bank may be summoned and their statement be recorded. So far as the consideration for the shares is concerned it has been stated that the petitioner was having an account in the Punjab National Bank, Handiaya Bazar, Barnala of which account respondent No. 3 was also an authorised signatory. Taking advantage of the same the said respondent has got two cheques deposited in the said account for the sum of 1,50,000 and withdrew the same himself. It has been stated that it is inconceivable that the shares worth Rs. 15 lakhs would be sold by him for Rs. 1,50,000 only, and the entire transaction had been conceived and executed by respondent No. 3 fraudulently and mischievously and the petitioner had never been a party to the said transaction. The falsity of the alleged transaction for transfer of shares would also be evident from the fact that the petitioner had executed documents for a term loan for respondent No. 1 from the Industrial Investment Bank of India to the tune of Rs. 330 lakhs in August, 1997, and had he transferred his entire shareholding in respondent No. 1 there was no question of giving any personal guarantee for the repayment of the said loan. As soon as the petitioner came to know regarding the fraudulent and illegal transfer of shares he had brought the same to the notice of the chairman of the board of directors, namely, Shri S. K. Duggal by means of his letter dated January 15, 1998, and subsequent letters but there was no response thereto, hence he was constrained to file the present petition.

5. From the pleadings of the parties as set out above, it would be evident that the main question involved in the present case is whether the transfer of shares and the recording of the name of respondents Nos. 7 and 8 on the register of members was proper and valid or whether the same was the outcome of forgery, fraud, collusion and misrepresentation, which required rectification of the register by restoring the name of the peti tioner as owner of the impugned shares.

6. Shri Virendra Ganda, learned counsel for the respondent, has at the very outset contended that the question involved in this petition cannot be decided by the Company Law Board (CLB) in the exercise of its discretionary and summary jurisdiction as not only does it involve highly disputed questions but serious allegations also regarding fraud and forgery. In support of its submissions he has referred to the following decisions :Ammonia Supplies Corporation Private Ltd. v. Modern Plastic Containers Pvt. Ltd.Bipin K. Jain v. Savik Vijay Engineering Pvt. Ltd. [1997] 26 CLA 255 ; [1998] 91 Comp Cas 835 (CLB).Smt. S. Anuratha v. A.K.M.N. Cylinders Private Ltd. [1999] 95 Comp Cas 555 (CLB) ; [1999] 32 CLA 47.

7. This controversy with regard to the scope of jurisdiction of the company court (now the Company Law Board) in respect of rectification of the share members register has now been set at rest by the apex court in Ammonia Supplies Corporation Private Ltd. v. Modern Plastic Containers Pvt. Ltd. [1998] 94 Comp Cas 310 ; [1998] 4 CLJ 211 (SC). In para. 26 of the said judgment the apex court observed as follows (page 325) : "There could be no doubt that on any question raised within the peripheral field of rectification, it is the court under Section 155 alone which would have exclusive jurisdiction. However, the question raised does not rest here in case any claim is based on some seriously disputed civil rights or title, denial of any transaction or any other basic facts which may be the foundation to claim a right to be a member and if the court feels such claim does not constitute to be a rectification, ... its discretion to send a party to seek his relief before the civil court first, for the adjudication of such facts, it cannot be said that such right of the court has been taken away merely on account of the deletion of the aforesaid proviso. Otherwise under the garb of rectification, one may lay claim to many such contentious issues for adjudication not falling under it. Thus, in other words, the court under it has discretion to find whether the dispute raised is really for rectification, or is of such a nature, unless decided first, it would not come within the purview of rectification." 8. Subsequently, the court went on to observe that the facts of each case have to be examined whether an application is for rectification or something else. If it is truly for rectification all matters in that connection should be decided by the company court now (CLB) and if it finds adjudication of any matter ant fulling under it, it may direct a party to get his right adjudicated by the civil court. The ratio of the judgment of the apex court in Ammonia Supplies Corporation Private Ltd. v. Modern Plastic Containers Pvt. Ltd. [1998] 94 Comp Cas 310 was applied by the Bombay High Court in National Insurance Co. Ltd. v.Glaxo India Ltd. [1999] 98 Comp Cas 378 ; [1999] 34 CLA 30 and it was observed as follows (page 383) : "If issues which have to be answered are not peripheral to rectification but issues regarding the title, etc., then such other issues will have to be decided by the civil court .... If issues arise whether the applicant is the owner of the shares ; whether there is fraud or forgery in holding the shares or the very title to the shares then such issues will be beyond the jurisdiction of the company court and will have to be decided by the civil court, . ." 9. Applying the above-noted tests in the facts of the present case at hand it would be evident that there are serious allegations of forgery, fraud, collusion, manipulation and misrepresentation. The petitioner is claiming that the original share certificates are in his possession and could not have been delivered to the respondent-company along with the transfer deeds whereas the case of the respondents is that the originals were placed before the share transfer committee and have subsequently been removed from the records of the company by the petitioner as it was kept at his residence which was the registered office of respondent No. 1 at the relevant time. Similarly the meeting of the board of directors in which the said resolution was approved is said to have been attended by the petitioner and his signature obtained therein whereas the petitioner's case is that his presence has been fraudulently shown. The petitioner has further alleged that his signature on the resignation letter resigning from the post of director of the respondent-company has also been forged. The share transfer deeds which were used for the purpose of showing that the petitioner had transferred the impugned shares were not meant for transfer of the said shares but were meant for transfer of shares of some other listed companies and respondent No. 3 has fraudulently used the said blank and signed transfer deed for getting the impugned share transferred and also managed to get the petitioner's signature attested on the said transfer deed by the bank manager and witnessed by Shri D. P. Bansal by misrepresentation. With regard to consideration paid for the said shares the petitioner's case is that respondent No. 3 fraudulently got an amount of Rs. 1,50,000 deposited in the bank account of the petitioner by means of two cheques and being the authorised signatory of the said account withdrew the said amount on the very next day and, therefore, the shares having a face value of Rs. 10 per share was alleged to have been sold for Rs. 1 per share and even the said consideration was not received by the petitioner. As noted above, the said allegation made by the petitioner have been denied by the respondents.

10. From the above, it is apparent that the matter which is for consideration involves highly disputed questions of fact regarding fraud, forgery misrepresentation and manipulation. As held by the Bombay High Court in National Insurance Co. Ltd. v. Glaxo India Ltd. [1999] 98 Comp Cas 378 such disputes cannot be a case exclusively pertaining to rectification which could be decided by the CLB. The petitioner himself has made a request that the signature of the petitioner on the disputed documents may be sent to an expert for comparison. He has also prayed that the bank manager who had attested the signature on the transfer deed and Shri D.P. Bansal who is said to be the witness be summoned and their statement be obtained. We are of the opinion that such matters cannot be decided by us in this summary jurisdiction and if the petitioner is so advised he could approach the civil court.

11. In view of the above we refrain from making any observation regarding the merits of the other arguments raised by learned counsel for the parties so that the case of the parties are not prejudiced.


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