Company Law Board, Mumbai Bench
Perennial Trading (P.) Ltd.
Pankaj Extrusions Ltd.
CP NO. 11 OF 2009
OCTOBER 27, 2011
1. The present petition is filed under section 11(4)(a)(ii) of the Companies Act, 1956 (‘the Act’) seeking directions to the respondent-company to cancel the transfer entries in the name of R3 for 7,81,500 shares and restore the said shares to the petitioners in their respective ledger folios and make suitable entries in the register of members.
2. Shri M.S. Bhardwaj, learned counsel, appeared on behalf of the petitioner submitted the brief facts. He submitted that as per the annual return filed by the company after the AGM held on 5th August, 2005 the petitioners are holding 7,81,500 shares of Rs. 10 each of the company. The annual returns filed by the company after the annual general meeting (‘AGM’) held on 10th May, 2006 and 29th September, 2007 did not contain the list of shareholders. The share capital of the company had gone up from Rs. 454.98 lakh as on 31st March, 2005 to Rs. 800 lakh as on 31st March, 2006. The petitioner was not allotted any additional equity. In view of the above oppressive actions of the respondents, some of the parties filed a petition under sections 397 and 398 of the Act on 7th May, 2008 with this Bench. Despite being shareholders, the petitioner did not receive any copy of the annual report as well as notice for the AGM, etc., during the last three years. Therefore, the petitioner issued a requisition dated 24th December, 2008 to the company asking it to hold an extraordinary general meeting (‘EGM’) to consider the special resolutions for removal of all the existing directors including R2 and appointment of new directors. This requisition was received by the company on 1st November, 2008. As the Board did not make any steps to proceed to call the EGM within 21 days of receipt of the requisition, the requisition issued a notice dated 4th December, 2008 to the company requesting it to furnish within a week the particulars of all the members and their addresses in order to issue a notice for convening the EGM. The respondents filed a petition under sections 169, 397 and 284 of the Act on 16th January, 2009 in CLB, Mumbai praying that the CLB may restrain the requisitionist from holding the proposed EGM as the petitioner is not a shareholder of the company from 28th October, 2007 and they had already communicated the same in their letter dated 11th November, 2008. The petitioner has not received the aforesaid letter dated 11th November, 2008. He further submitted that it is observed from the list of shareholders attached to the return that the petitioner is not a shareholder of the company on 28th July, 2008 the date of AGM. However, it is also noted from the website of MCA that the company has filed a revised Return for the year ended 31st March, 2008 for which the AGM was already held on 28th July, 2008. The share transfers attached to the return show that the petitioner’s shares have been transferred in favour of Volition Trading (P.) Ltd. on 21st October, 2007. The petitioner has not transferred their shares in favour of Volition Trading (P.) Ltd. and they have not signed any transfer forms. All the original share certificates are still in the custody of the petitioner. They have also not received any consideration and as such the above transfers are fraudulent and invalid. This manipulation has been resorted to by the respondent No.2 in order to usurp total control of the company. The respondent-company has transferred the shares held by them unilaterally without their submission of share certificates along with duly signed transfer forms and without evidence of payment of any consideration. Such transfer of shares is in violation of the provisions of section 108 of the Act Thus, the respondent No. 1 company has violated the provisions of section 111 read with section 108 of the Act. In the circumstances he prayed this Bench to grant the reliefs.
3. Shri Ashok Mehta, learned PCS, appeared on behalf of the respondents filed reply to the petition. It is submitted that the petitioner is not a shareholder in the R1-company and, therefore, they have got no right or authority to file this petition before this Bench. The whole claim of the petitioner is based on the shareholding pattern of R1-company on 5th August, 2005 which is about 3 years and 6 months old. The petitioner has not given any genuine and correct reason as to why they have taken such an old date for their claim in the R1-company. The petitioner has very conveniently ignored the most vital facts and developments which have taken place during this period of more than three years, i.e., between June 2005 and January 2008. The petitioner has claimed themselves to be part of Pankaj group of companies. A family settlement has taken place amongst all the entities belonging to Pankaj group and arbitration awards have been passed on 2nd July, 2005 and 25th January, 2008. In terms of these awards, petitioner is no more shareholder or any kind of stakeholder in the R1-company. The ownership of the R1-company is with the respondents as per the aforesaid settlement and award. The hon’ble High Court of Gujarat vide its order dated 22nd July, 2008 given in the case of Pankaj Aluminium Industries (P.) Ltd. v. Pankaj Extrusions Ltd.  90 SCL 196 have recognised the existence of these arbitration proceeding and arbitration award. This order of the High Court has not been challenged by the petitioner. Had their rights been adversely affected the petitioner would have definitely taken effective steps against the order of the hon’ble High Court of Gujarat. But the fact remains that no such steps have been taken by the petitioner. Therefore, in other words the order is accepted by the petitioner and, hence, the same is binding on the petitioners.
4. It is further submitted that from the above facts it is clear that the petitioner has not come to this Bench with clean hands and has concealed and suppressed vital facts from the hon’ble Bench. The intention of the petitioner is hidden and oblique which is not only prejudicial to the interest of all the stakeholders of the R1-company but also is prejudicial to the justice and equity The annual returns have been filed by the R1-company absolutely in compliance with the provisions of section 159 of the Act and rules made thereunder Due to typographical error the date of financial year end is appearing as 31st March, 2006 which is in fact should have been 31st March, 2007. It is farther submitted that the name of the petitioner is not appearing in the register of members for very obvious and sufficient cause. A family settlement has taken place amongst all the entities belonging to Pankaj group and arbitration awards have been passed on 2nd July, 2005 and 25th January, 2008. In terms of these awards, the petitioner is no more shareholder or any-kind of stakeholder in the R1-company. The ownership of the R1-company is with the respondents as per the aforesaid settlement and award, As per the said settlement and award the last date for surrender of share certificates was 29th February, 2008 failing which it would be deemed that share certificates are surrendered and it is deemed that they are transferred. It is a fact that the petitioner has already acquired firms and companies which came to their fold in terms of the aforesaid family settlement and award. Due to their own gross mismanagement, their firms and companies have gone into financial and operational difficulties. The respondents due to their good corporate governance and ethical business practices have established a name and brand in the aluminium industrial world. He submitted that the petition is mala fide and made in gross prejudice to the law, justice and fair play in the business activities. The petition is a consequence of illegal greed and, therefore, the same may be dismissed with cost.
5. Heard, the learned counsel and PCS appeared for the respective parties The only issue in the present petition is whether the shares of the petitioner have been transferred in compliance with the provisions of law or not. The grievance of the petitioner that the shares have been transferred in favour of R3 on 21st October, 2007 and contended that they have not transferred the shares, have not signed any transfer forms nor received any consideration for the purported transfer. On the other hand the case of the respondents is that the shares have been transferred pursuant to family settlement and the last date was 29th February, 2008 for such transfers. They further contended there is no fraud played for such transfers. This Bench on earlier occasions-disposed of batch of petitions filed by the family members of Shah group in the matter of Pankaj Aluminium Industries (P.) Ltd. by an order dated 22nd June, 2009 and decided the matter in respect of transfer of shares. The present petition also arises out of same family settlement and the earlier decision of this Bench is followed in this petition also to avoid conflict of decision. The crux of the issue in all these matters are common, i.e., share transfers pursuant to family settlement between the family members. The petitioners filed the present petition under section 111(4)(a)(ii) seeking direction to R1-company to restore the name of the petitioner by cancelling the name of R3 for 7,81,500 shares and sought rectification of register of members. The relevant provision of section l11(4)(a)(ii) reads, thus :
“[I]f, the name of any person — after having been entered in the register, is, without sufficient cause, omitted therefrom.”
The case of the petitioner is that the respondents have removed their name without sufficient cause and without due compliance of the provisions of law and entered the name of respondent No. 3. From the pleadings it is unequivocal that there is a family settlement and the transfers have taken place pursuant to the said family settlement. However, the same could not fructify and the differences and disputes arose between them which lead to filing of these petitions. However, upon considering the factual position it is apparent that the respondents have not complied with the provisions of law in respect of transfer of shares most probably on the basis of family settlement. Whatever may be the reason, the share transfers must be done in accordance with law and with mutual consent and accepted procedure. The hon’ble Apex Court held in various matters that the shares have to be transferred only when applied as envisaged under section 108 of the Act. Further this Bench in these matters is also of the view that the respondents have not followed the procedure prescribed by arbitrators at clauses 10 and 11 of arbitration award dated 2nd July, 2005. Any transfer of shares without compliance of section 108 is void and illegal the same should be set aside Therefore, it is hereby directed the R1-company to rectify the register of members by incorporating the name of the petitioner in respect of 7,81,500 shares by deleting the name of the R3. With the above directions the CP is disposed of. No orders as to cost.