CITI BANK NA Vs. POWER GRID CORPORATION OF INDIA LTD
COMPANY LAW BOARD
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(1.) CITY Bank NA, the petitioner herein, has filed a petition on September 30, 1993, under Section 111 of the Companies Act, 1956 (hereinafter referred to as "the Act"), seeking rectification of the register of debenture holders in Power Grid Corporation of India Ltd. (hereinafter referred to as "Power Grid") by deleting the name of Can Bank Financial Services Ltd. (hereinafter referred to as "Can Fina") and inserting the name of the petitioners (hereinafter referred to as "the CITY Bank") for the reasons stated in the petition.
(2.) According to the petitioner in March, 1992, Power Grid sold bonds of the face value of Rs. 80 crores by way of private placement in favour of Can Fina and issued allotment letters. On or about May 5, 1992, Can Fina sold to the petitioner, bonds of the face value of Rs. 30 crores and delivered three allotment letters of the face value of Rs. 10 crores each. On or about July 6, 1992, the petitioner lodged the allotment letters along with the transfer forms with Power Grid for registering the transfer of bonds in favour of the petitioners. But till the date of filing the petition, Power Grid had not registered the transfer. Power Grid had also not paid the interest due on the bonds that fell due to the petitioners. Power Grid was duty bound to register the transfer and send either the allotment letters or the bond certificates as required by Section 113 of the Act. Since City Bank had not received any communication from Power Grid in this regard, many meetings were held with the Power Grid authorities but no response was forthcoming from Power Grid. Even though as per the terms of issue of bonds, interest was to be paid on January 1, and July 1, every year, no interest had been paid by Power Grid. Even to the letters dated June 23, 1993, written to the chairman of Power Grid or to the letter of the petitioner's attorney dated August 24, 1993, Power Grid did not send any positive reply. In view of the inaction on the part of Power Grid, either to transfer the bonds or to refuse the same, the petitioner has a cause of action under Section 111(4) and 111(5) of the Act. Accordingly, the petitioner has sought for rectification of the register of bondholders as prayed for in the petition.
The second respondent, namely, Can Fina, filed a reply to the petition stating therein that Can Fina sold to the petitioner the impugned bonds on May 5, 1992, and also received the sale consideration. They have also delivered to the petitioner allotment letters in respect of these bonds. It is further stated in the reply by Can Fina that they have also written to Power Grid stating that Can Fina has no objection to Power Grid paying the interest due on September 10, 1992, March 10, 1993, and September 10, 1993, to the petitioner. It has further been stated in the reply that Can Fina has no objection to the transfer of the bonds and to payment of interest as prayed for by the petitioner.
(3.) POWER Grid, in its reply, has raised certain preliminary objections, inter alia, the following :
(i) Section 111 is applicable only in the case of refusal of transfer of shares and debentures of a company. The impugned letters of allotment are neither shares nor debentures and as such the same does not fall within the purview of Section 111.
(ii) The petition is time-barred in terms of Section 111(3) as appeal against refusal has to be made within a period of four months from the date of lodgment. The instant application has been filed after a period of one year from the date of lodgment and as such it is belated and cannot also be condoned.
(iii) The petition has become infructuous inasmuch as the letters of allotment in question have been forfeited in accordance with the articles of association of the respondent-company.
(iv) The petitioner has not given/furnished many details like contract note, the name of the broker through whom the contract was completed, no consideration has been shown in the transfer deed, etc.;
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