K.K.Balu, - (1.) THIS is a petition filed under Section 111/111A of the Companies Act, 1956 ("the Act"), to direct respondents Nos. 1 and 2: (a) to pay an amount of Rs. 1,38,560 with future interest from the date of filing the petition till the date of realisation; or (b) to issue duplicate share certificates to the petitioner; and (c) award costs of the petition.
(2.) Shri A. Mohamed Asghar Ali, learned Counsel while reiterating, the averments made in the petition submitted that the petitioner, who was a school teacher by profession purchased during December, 1996, 2,700 equity shares of Rs. 10 each comprised in Certificate Nos. 13951 to 13960, 13029 to 13037 and 13961 to 13968 from the third respondent. The transfer deeds executed on December 19, 1996, were sent to the second respondent, the then registrar and share transfer agent through M/s. Front Line Couriers P. Ltd., on December 28, 1996, by the petitioner for transfer of 2,700 shares in his favour. Respondents Nos. 1 and 2 did not effect the transfer in favour of the petitioner. When the petitioner approached the third respondent, the transferor, the latter made correspondence with respondents Nos. 1 and 2. Respondents Nos. 1 and 2 in their reply reported that they received the share certificates and requested the third respondent to wait some time as it would take time for effecting the transfer of shares in the name of the petitioner. Thereafter, in spite of repeated demands made by the third respondent, respondents Nos. 1 and 2 delayed the transfer of shares in favour of the petitioner. When the third respondent approached the first respondent personally for the issue of share certificates in favour of the petitioner in the month of May, 2000, the first respondent assured that it would transfer the shares in favour of the petitioner. In spite of a series of letters, respondents Nos. 1 and 2 failed to transfer the shares in favour of the petitioner, which compelled the petitioner to file a consumer dispute petition in C.D. No. 319 of 2001 before the Consumer Forum, Cuddapah, Andhra Pradesh, which was dismissed in March, 2002, on the ground that Consumer Forum had no jurisdiction to entertain the complaint. Thereafter, the petitioner approached the Lok Adalat, Cuddapah, Andhra Pradesh, against respondents Nos. 1 and 2 and the Lok Adalat dismissed the complaint on November 11, 2003, as none of respondents Nos. 1 and 2 appeared before it. In these circumstances, the petitioner is seeking directions against respondents Nos. 1 and 2 to pay an amount of Rs. 1,38,560 with future interest till the date of realisation or to issue duplicate share certificates in favour of the petitioner and award costs of this application. The second and third respondents neither appeared nor filed their reply 3 in spite of notices of hearing sent to them. However, the company filed counter pleading that the third respondent had purchased 2,700 shares of Rs. 10 each and the purchase was not directly made from the company but from the second respondent. The company is not aware of the transaction that had taken place between the third respondent and the petitioner. The petition is purposefully made against the company knowing fully well that it was the second respondent who is in charge of dealing with the transfer of share certificates. The second respondent has been appointed as registrar by the company and therefore the second respondent alone is entitled to deal with issuance and transfer of shares by the company. The company never transacted directly either with the third respondent or with the petitioner and therefore the allegations in the petition regarding the assurance by the company is incorrect. If the petitioner purchased shares of the company, he ought to have dealt with the second respondent for effecting the transfer of shares in his name. If at all the originals are lost, the second respondent alone should issue the duplicate share certificates if it is satisfied as to the loss of original share certificates. The relevant records would be available only with the second respondent and the second respondent has not handed over any records relating to the share certificates purchased by the petitioner to the company. The company became a sick unit and is registered with the Board for Industrial and Financial Reconstruction (BIFR), New Delhi, under Reference No 57 of 2002. The petition is not maintainable in view of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 ("the SICA") and therefore, the petitioner may be directed to approach the BIFR and the petition may be dismissed with costs.
(3.) I have considered the pleadings and arguments of learned Counsel for 4 the petitioner. The facts not in dispute are that the third respondent originally acquired 2,700 shares of Rs. 10 each of the company, which were sold in favour of the petitioner. The petitioner and third respondent executed the transfer deeds on December 19, 1996, upon which the petitioner lodged the transfer deed along with the original share certificates to the second respondent who was the then registrar and share transfer agent of the first respondent for transfer in his favour on December 28, 1996, through M/s. Front Line Couriers P. Ltd. Since the second and the third respondents failed to deliver share certificates in favour of the petitioner, the third respondent entered into a series of correspondence and submitted indemnity bond, fresh transfer deed for obtaining duplicate share certificates and transferring the shares in favour of the petitioner. Though the second respondent assured in its communication dated November 5, 1997, addressed to the third respondent, that the issue of duplicate share certificates and transfer in favour of the petitioner would take some more time due to certain formalities yet no tangible action was found to be taken. The petitioner was also unsuccessful before the Consumer Forum and Lok Adalat, thereby the legal rights of the petitioner over the impugned shares got unduly delayed over a decade. The first respondent being the principal of the second respondent cannot shrink of its responsibility on account of the inaction of the second respondent who was its agent. The company, though reportedly a sick company cannot take protection under Section 22 of the SICA. Section 22 of the SICA, contemplates that where in respect of an industrial company, an enquiry under Section 16 is pending, or any scheme referred to under Section 17 is under preparation or consideration by the BIFR or any appeal under Section 25 is pending, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advances granted to the industrial company shall lie or be proceeded with further, save with the consent of the BIFR or, the appellate authority. Thus, the bar embodied in Section 22 of the SICA does not extend to any direction which may be issued by the Bench under Section 111/111A for rectification of the register of members of the company. In view of this legal position, the resistance of the first respondent-company for not registering the transfer of shares constituting miniscule 2,700 shares only, in favour of the petitioner is not tenable. Under Sub-section (11) of Section 111 and Sub-section (7) of Section 111 of the Act, when a petition is made under Section 111A/111 of the Act, the Company Law Board may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted therefrom the register. The third respondent did not enter appearance in spite of notices of hearing. The documents enclosed with the petition clearly indicate that the third respondent sold the shares to the petitioner and even corresponded with the second respondent to transfer the shares in favour of the petitioner after issue of duplicate share certificates. The events establish that the title to the impugned shares belong to the petitioner. No purpose would be served by directing the first respondent to issue the duplicate share certificates in favour of the third respondent and transfer the same in the name of the petitioner especially when the third respondent did not enter appearance and in view of the contention of the first respondent that the second respondent did not hand over any records in relation to the impugned shares.;