KANTHI NARAHARI,MEMBER (J) - (1.) THE present petition is filed under section 111A of the Companies Act, 1956, praying this Bench to direct respondent No. 1 company to rectify its register of members by inclusion of the petitioner's name as a shareholder to the extent of 5,600 equity shares and delete the name of the second respondent in respect of those shares and also consequentially direct the inclusion of the petitioner's name as a shareholder to the extent of 11,200 equity shares issued as bonus shares on March 20, 2010 and delete the name of the second respondent in respect of those bonus shares. Shri Cibi Vishnu, learned counsel appeared for the petitioner submitted that the petitioner was initially allotted 1,400 equity shares of Rs. 100 each and the same is evidenced by a share certificate annexed as annexure 5, to this petition, the petitioner was also further allotted shares on various dates and eventually came to hold 5,600 equity shares of Rs. 100 each in the first respondent and the same is evidenced by the list of allottees as on September 30, 2009, filed along with Form 20B made up to the annual general meeting held on September 30, 2009, filed by the first respondent (annexure 6). It would be pertinent to mention that the petitioner was issued with a share certificate with regard to 1,400 equity shares and that even this share certificate has not been issued in terms of the applicable provisions of law. The petitioner submits that he held 5,600 equity shares in the first respondent and his wife (Mrs. S. Sridevi) is also a shareholder of the first respondent and held 20,400 equity shares of Rs. 100 each and the same is evidenced by the list of allottees as on September 30, 2009, filed along with Form 20B made up to the annual general meeting held on September 30, 2009, filed by the first respondent (annexure 6) and this combined shareholding of the petitioner and his wife is 26,000 equity -shares of Rs. 100 each in the first respondent represents 26 per cent of the paid -up capital of the first respondent, and this significant shareholding of more than 25 per cent is of significance with relation to special resolutions. The petitioner submits that differences arose between the promoters of the first respondent in the year 2010, and after discussions it was agreed that the petitioner, his wife, and another promoter named Mr. Muthu Krishnan would sell their combined shareholding of 60,000 equity shares of Rs. 100 each (the petitioner and his wife 26,000 equity shares, and Mr. Muthu Krishnan and family 34,000 equity shares of Rs. 100 each) and the petitioner was to receive a consideration of Rs. 70,00,000 from the second respondent and this understanding, inter alia, was reduced to writing in the form of an "memorandum of understanding" and was executed on April 2, 2010 (annexure 7) and was executed by the petitioner, the respondent, and the aforementioned Mr. Muthu Krishnan. The petitioner submits that the second respondent failed to honour his commitments under the aforementioned "memorandum of understanding" dated April 2, 2010 and the petitioner nor his wife have till date received any consideration from the second respondent nor have they executed any share transfer deed in favour of the second respondent. The petitioner submits that in July 2012 he was shocked to learn that the entire shareholding of himself and his wife had been illegally transferred. The petitioner submits that from the documents/forms filed by the first respondent at the behest of the second respondent, the petitioner to his shock and surprise learnt that his entire shareholding of 5,600 equity shares has been illegally shown to have been transferred to the second respondent herein. Form 20B made up to the annual general meeting held on May 31, 2010 and uploaded on the MCA website on June 24, 2010 (annexure 12) reveals that the petitioner had purportedly transferred his entire shareholding of 5,600 equity shares of Rs. 100 each to the second respondent on February 25, 2010. It is pertinent to mention that the aforementioned "memorandum of understanding" (annexure 7) is dated and was executed on April 2, 2010, wherein the second respondent had agreed to buy the entire shareholding of the petitioner and his wife for a consideration of Rs. 70,00,000. It is further reiterated that the petitioner has not received any consideration from the second respondent or his nominee for the purported transfer of the petitioner's 5,600 equity shares of Rs. 100 each in the first respondent, nor has the petitioner executed any share transfer deed (Form 7B) with regard to the 5,600 equity shares held by the petitioner in the first respondent. Thus the petitioner's entire shareholding of 5,600 equity shares of Rs. 100 each in the first respondent has been illegally transferred to the second respondent, such illegal transfer ought to be set aside and consequentially the register of members of the first respondent ought to be rectified. The petitioner submits that he had lodged a complaint regarding the cheating, criminal breach of trust, forgery, and criminal conspiracy committed by the second respondent and his family members upon the petitioner and his wife with the police authorities (Economic Offences Wing) on July 26, 2012 and had also approached the hon'ble High Court of Madras under section 482 of the Code of Criminal Procedure, 1973 (annexures 15 and 16) and the complaint is being currently investigated by the police authorities. It is further submitted that upon subsequent legal advice from his advocate the petitioner realised that this hon'ble Board is the appropriate forum for the petitioner to seek the civil law remedy of rectification of register of members by seeking to transfer the 5,600 equity shares of Rs. 100 from the second respondent to the petitioner. The petitioner reiterated that he has not received any consideration from the second respondent or his nominee for the purported transfer of the petitioner's 5,600 equity shares of Rs. 100 each in the first respondent, nor has the petitioner executed any share transfer deed (Form 7B) with regard to the 5,600 equity shares held by the petitioner in the first respondent. In view of the reasons the petitioner requested the Bench to allow the petition as prayed for. The second respondent filed counter statement to the petition. The respondent submits that the petitioner was a shareholder holding 5,600 shares in the company. It is true that the share certificate is not in the possession of the petitioner as his entire shareholding got transferred already to the second respondent and his family members. The entire 5,600 shares got transferred with effect from February 25, 2010. The shares were transferred to the second respondent as per the provisions of law only. The present petition has been dated as May 18, 2013. The transfer was took place on February 25, 2010, even the memorandum of understanding was dated on April 2, 2010. The petitioner's claim is mainly that the second respondent has not paid the consideration. Even the electronic mail dated August 4, 2010, states the same. Whereas the petition is dated as May 18, 2013, as on the date of petition even assuming the respondent is liable to pay towards anything for the consideration for the transfer of shares in terms of the memorandum of understanding dated April 2, 2010, as on the date of petition, the petitioner claim is barred by limitation. Therefore, the question of deciding whether the consideration passed on from the respondent to the petitioner cannot be legally adjudicated in the present petition since any claim on the basis of transfer deed dated February 25, 2010 and memorandum of understanding dated April 2, 2010. Therefore, the present petition is liable to be dismissed since, that claim of the petitioner is barred by the limitation. It is incorrect to state that there was no share certificate issued for 4,200 shares of the petitioner. The share certificate was issued and the same was replaced after the transfer was effected. It is totally false that the petitioner wife's shares have been transferred illegally. These shares were transferred legally as per the request of the petitioner and his wife. Therefore, if at all there is any action on the part of the petitioner against the respondent it can be by way of illegal means and abusing the process of law. It is true that there was a difference among promoters and thereafter it was decided by them to transfer the shares of the petitioner and his wife and another promoter Mr. Muthu Krishnan and his family to transfer the 60,000 shares out of the 1,00,000 paid -up share capital to the respondent and his family members. Accordingly, all the abovementioned promoters transferred the 60,000 shares to and in favour of the respondent and his family members. All the transfers are made on February 25, 2010. The consideration was fixed Rs. 70,00,000 for the 26,000 equity shares of the petitioner and his wife. However the petitioner was not satisfied subsequent to the transfer of shares with regards to the consideration. Therefore, at his insistence memorandum of understanding was entered on April 2, 2010. The respondent submits that the consideration of Rs. 70,00,000 to the petitioner and his wife, in terms of the memorandum of understanding and as agreed mutually at the time of transfer of shares will be after adjusting all the payables from the petitioner and his wife. Accordingly, the entire payment was adjusted and even after adjustment the petitioner is still liable to pay to the company as stated in the balance -sheet. Finally, the transfers were approved by the board of directors at the board meeting held on April 20, 2010. The bonus shares issued by the first respondent -company to its shareholders, i.e., to the transferors pending registration were kept in abeyance in terms of section 206A, and after the approval of transfers the same was issued to the all the transferees. Therefore, the contention of the petitioner that memorandum of understanding was entered prior to the transfer of shares does not have any merit. It is incorrect to state that the second respondent has failed to honour the commitment given by the petitioner and his wife. It is not correct to state that the share transfers were effected without any share transfer deed. Even prior to the transfer of shares the entire consideration was adjusted against the dues of petitioner and his wife to the company. Against the adjustment of consideration there was a dispute among the promoters to resolve that as stated earlier memorandum of understanding dated April 2, 2010, was entered. It is incorrect to state that the petitioners came to know that the above transfer of shares only during July, 2012. The petitioner was well aware and very conscious about his transfer of shares to the respondent and his relatives on February 25, 2010. The petitioner's 5,600 shares were transferred legally to the second respondent. In the previous paragraph, the applicant has clearly stated that under what circumstances memorandum of understanding dated April 2, 2010, was entered subsequent to the transfer of shares on February 25, 2010. Therefore, the averments that how the memorandum of understanding could be entered subsequent to the transfer of shares will not anyway support the petitioner's false claim. The respondent already stated that the method of receipt of consideration as agreed between the parties mutually and as per the terms of the memorandum of understanding. The petitioner is not entitled to the bonus shares issued on March 20, 2010. Since, the petitioner had transferred his shares on February 25, 2010 and also the petitioner has lodged the document before the company well before the issue of bonus shares. As the petitioner is not entitled to the bonus shares and the same was kept in abeyance until the approval of the board of directors. Therefore, the petitioner is not entitled for any bonus shares as claimed in the petition. Upon the enquiry the respondent came to know that the petitioner, his wife colluded along with the staff thus cheated and misappropriated the first respondent a sum of Rs. 2,89,66,670. The first respondent -company had lodged a complaint with the Commissioner of Police, Chennai and thus forwarded the complaint to the Central Crime Branch, Egmore, Chennai and a FIR No. 36 of 2014 has been registered by the Central Crime Branch, Chennai. At present the investigation is going on. The respondent also intends to file appropriate petition before this hon'ble Bench to surcharge the funds to the company by the petitioner and to the extent of the misappropriation of funds in the company. The terms and conditions of the memorandum of understanding was fully honoured and transferred the 5,600 shares to the respondent is strictly in accordance with the Indian Contract Act, 1872, with sufficient cause. Therefore, the petitioner is not entitled to get any relief as alleged in the petition and the petition is liable to dismiss with cost.
(2.) HEARD learned counsel appeared for the respective parties. After analysing the pleadings the only issue felt for consideration is whether the nature of reliefs sought by the petitioner in the petition is capable of being granted by this Bench. From the perusal of memorandum and articles of association of the company it is evident that the petitioner is one of the subscribers to the shares to the extent of 1,000 equity shares. The petitioner enclosed a photocopy of the share certificate wherein it shows that the petitioner held 1,400 equity shares, however the list of allotment made as on September 30, 2009, it shows that the petitioner held 5,600 equity shares as on that day and the respondents also admit the said holding of shares. The grievance of the petitioner is that differences were arose between the promoters of the company in the year 2010 and after discussions it was agreed that the petitioner, his wife and another promoter, viz., Mr. Muthu Krishnan would sell their combined shareholding of 60,000 equity shares of Rs. 100 each and the petitioner was to receive a consideration of Rs. 70 lakhs from the second respondent and the said understanding was reduced to writing in the form of memorandum of understanding dated April 2, 2010. The petitioner contends that the second respondent failed to honour his commitment under the aforementioned memorandum of understanding dated April 2, 2010, the petitioner nor his wife have till date received any consideration from the second respondent. On the other hand the respondents contended that the promoters have transferred 60,000 shares in favour of the second respondent and his family members on February 25, 2010 and the consideration was fixed Rs. 70 lakhs for the 26,000 equity shares of the petitioner and his wife. Further the respondents contend that the petitioner having not satisfied subsequent to transfer of shares on February 25, 2010, with respect to the consideration, entered into an memorandum of understanding on April 2, 2010. The crucial issue for adjudicating of the matter is the memorandum of understanding dated April 2, 2010. Before considering the issue it is important to note from the perusal of Form 20B filing of annual returns for the financial year ended March 31, 2009, it shows that the authorised share capital of the company is Rs. 3 crores divided into 30,00,000 equity shares and the paid -up capital was shown as Rs. 1 crore divided into 10,00,000 equity shares. The petitioner is one of the signatory to the annual returns filed with the concerned Registrar of Companies. The petitioner is also a director of the company and his date of appointment was October 21, 2004. As stated supra according to the list of allotment of shares the petitioner's shareholding shown as 5,600 equity shares. Now I deal with the memorandum of understanding. The memorandum of understanding dated April 2, 2010, was entered by the founding directors of respondent No. 1 company and Mr. Lalith Surana.
(3.) IN the memorandum of understanding it was stated that they have valued the company at INR 3.5 crores including all liabilities, statutory and otherwise. Mr. Baskaranarayanan, managing director of the company has decided to buy the 60 per cent shares of the other two directors at a face value of INR 350 per share. Clause 3 of the memorandum of understanding states that Mr. Muthu Krishnan and Mr. Subitha Kumar (husband of petitioner) hold 6,00,000 shares together. Clause 4 states that Mr. Baskara -narayanan has each. Clause 5 states that Mr. Baskaranarayanan will pay a sum of Rs. 150 lakhs to both the other directors, in lieu of their shareholding in the company by themselves and through their respective family members after adjusting all payables from the two directors to the company. Clause 6 states that out of Rs. 150 lakhs, Rs. 80 lakhs will be paid to Mr. Muthu Krishnan and Rs. 70 lakhs to Mr. B. Subitha Kumar. Clause 8 states that Mr. Baskaranarayanan will divide into four equal portions all collections every month and share the sum of three portions in respective proportions between Mr. Muthu Krishnan and Mr. Subitha Kumar and Mr. Lalith Surana. Clause 10 states that Mr. Muthu Krishnan and Mr. Subitha Kumar shall not be liable for any financial commitments of the company, statutory and otherwise from the date of signature to this memorandum of understanding including existing liabilities, statutory or otherwise. Clause 14 states that Mr. Muthu Krishnan will oversee the operations of the company until settlement of dues to the abovementioned parties. The memorandum of understanding dated April 2, 2010, was signed by the petitioner, Muthu Krishnan, Mr. Baskaranarayanan and another signatory whose name has not been affixed under the signature. There is no dispute and denial with regard to the said memorandum of understanding. The petitioner has resigned from the post of directorship vide his letter dated April 2, 2010, which was addressed to the board of directors. The petitioner vide his electronic mail dated August 4, 2010, addressed to Mr. Baskaranarayanan wherein it was stated at first paragraph that "I draw your attention to the memorandum of understanding signed on April 2, 2010, by the then board of directors of El -Shaddai and Mr. Lalith Surana, chartered accountant to the company and also in his personal capacity, which is a full -fledged understanding, entered into with an intention to act upon accordingly". At paragraph 3 of the memorandum of understanding it is stated that the memorandum of understanding cannot be disowned by anyone as myself, yourself, Mr. R. Muthu Krishnan and Mr. Lalith Surana are signatories to the same. I resigned from the directorship of the company on the same day of the memorandum of understanding to facilitate induction of your family members as the new directors and the same has been filed before the Registrar of Companies and now I do not represent the company in the capacity of a director, but as a shareholder I have say in the administration of the company. Further at paragraph 4 it was stated that "the memorandum of understating clearly states that the settlement due to me is Rs. 70 lakhs and the same will be paid out of 75 per cent of the collections due to the company in equal proportions to the signatories of the memorandum of understanding on a month on month basis until full settlement is reached. But you have failed to pay my dues as per the memorandum of understanding in spite of the company realising close to Rs. 2 crores from the market from outstanding receivables as on date of the memorandum of understanding and also from the sales effected after the memorandum of understanding date. This clearly shows that your only motive was to take control of the company's assets on the promise of buying my shares and take control and thereby you have committed criminal breach of trust. I am afraid you have no intention to pay my dues and have nefarious intend and motives with regard to the same. I call upon you to settle my dues within 15 days from the date of receipt of this notice by e -mail and also by regular mail. I will be forced to seek legal recourse on your failure to comply with my demand. You forced my resignation from the board on the promises made out in the memorandum of understanding and have now very clearly breached the trust vested in you by me and also you are accountable for the money collected by the company from the perspective of the memorandum of understanding". Further the company filed annual returns for the year 2010 wherein the petitioner's name has not been shown in the list of directors. Moreover in the list of share transfers made up to May 31, 2010, the petitioner's shares shown as transferred to B. Baskaranarayanan. After the share transfers the name of the petitioner was not shown in the list of shareholders made as on May 31, 2010. The subsequent annual returns filed by the company the name of the petitioner was not been shown. The petitioner vide his letter dated July 26, 2012, addressed to the Additional Director General of Police, Economic Offences Wing, Chennai wherein it is specifically alleged that Mr. Baskaranarayanan had forged his signature and had transferred his shares on February 25, 2010, much before the memorandum of understanding. Further it was alleged that the act of Mr. Baskaranarayanan is a guilty of conspiracy and breach of trust and to cheat the petitioner and his wife. It is also alleged that Mr. Baskaranarayanan has criminally conspired with members of the petitioner's family and forged their signatures on various documents causing immense financial loss and mental agony. The petitioner in the petition at paragraph 6.7 specifically made the above averment with regard to the complaint made to the police against Mr. Baskaranarayanan and also stated that the complaint is being currently investigated by the police authority. Having discussed elaborately the facts leading to filing of this case, I am of the view that the petitioner has not made out any case for seeking the reliefs as prayed in the petition on the ground that the entire allegations and averments made in the petition is with regard to the non -implementation/breach of promises made in the memorandum of understanding dated April 2, 2010. As detailed out in the letter dated August 4, 2010, addressed by the petitioner that the memorandum of understanding cannot be disowned by anyone and he has resigned from the post of director. Further it is mentioned that pursuant to the memorandum of understanding Mr. Baskaranarayanan is due to pay a sum of Rs. 70 lakhs and Mr. Baskaranarayanan failed to pay the dues in accordance with the terms of the memorandum of understanding despite the company realising a sum of Rs. 2 crores from the outstanding receivables. From the clauses of the memorandum of understanding dated April 2, 2010 and from careful reading of the letter dated August 4, 2010, it is an admitted fact that the petitioner on his behalf and on behalf of his wife and Mr. Muthu Krishnan have entered into a memorandum of understanding with Mr. Baskaranarayanan to sell their shares for an amount of Rs. 70 lakhs to be paid to the petitioner and his wife and Rs. 80 lakhs to Mr. Muthu Krishnan. The only issue is with regard to non -payment of Rs. 70 lakhs by Mr. Baskaranarayanan to the petitioner and his wife thereby breach of promises and non -implementation of the memorandum of understanding. Therefore it is only an issue of non -payment of consideration and this Bench cannot go into the disputed facts and complex issues as emerged from the facts, with regard to either full or part implementation of the memorandum of understanding. A beneficial reference is drawn from the decision of the Calcutta High Court reported in : [2012] 175 Comp Cas 165 (Cal) in the matter of (ABA Builders Ltd. v. Smt. Anjula Nagpal). The hon'ble High Court of Calcutta has held that (catchword): "Inadequacy of consideration received to be pursued before appropriate forum - -Company Law Board has no jurisdiction to look into adequacy of consideration in respect of such transfer". Further the petitioner has alleged with regard to the forgery, conspiracy and breach of trust against which a complaint has been lodged with the Additional Director General of Police, Economic Offences Wing, Chennai and the petitioner has clearly stated that the complaint is being currently investigated by the police authorities. With regard to the said allegations this Bench does not have jurisdiction to look into those aspects and the matter has been seized of by some other investigating authority. It is important to mention that the petitioner had categorically stated that Mr. Baskaranarayanan had forged his signatures and the signatures of his wife and also specifically mentioned that the shares have been transferred. When there is a specific allegation with regard to forgery of signatures and transfer of shares and the said allegations are being under investigation, this Bench does not have the power to deal with those aspects. As stated supra this Bench does not have the jurisdiction to look into the allegations of forgery of the signatures as alleged by the petitioner. Therefore, I am of the view that it is completely disputed questions of facts and this Bench cannot deal with those disputed questions of fact in summary proceedings before this Bench in this regard a beneficial reference is drawn from the decision of the hon'ble High Court of Bombay in the matter of Advansys (India) P. Ltd. v. Ponds Investment Ltd. reported in : [2015] 188 Comp Cas 122 (Bom). It is held that (catchword): "Jurisdiction under section 111 summary in nature - -Board cannot go into complex questions of fact and decide title to disputed shares". Further counsel for the respondent relied upon a decision of the Bombay High Court reported in : [1999] 98 Comp Cas 378 (Bom) in the matter of (National Insurance Co. Ltd. v. Glaxo India Ltd.) wherein the hon'ble High Court held that (page 384): "In other words there is a dispute as to the very transaction itself which is not merely a matter for rectification. Secondly, there are disputes whether the persons who are holding the shares are holding the shares on account of forged documents. In other words it is not merely the case of the appellant being the owner of the shares and the company for wrong reasons refusing to rectify the register without cause. When there are disputes as to whether the appellants are the owners of the shares that would not be a case exclusively pertaining to rectification which could be decided by the Company Law Board". The above decisions are squarely applicable to the facts of the present case. In view of the aforesaid reasons, this Bench in a summary proceeding cannot decide the complex issues, as arises in this case. The citations relied upon by learned counsel for the petitioner is not applicable to the facts of this case. Accordingly, the company petition is dismissed. No order as to costs.;