MADANLAL PATODIA Vs. LUXMINARAYAN COTTON MILLS LTD

JUDGEMENT

(1.) This is an application under Section 155 of the Companies Act, 1956, inter alia, for rectification of the register of shares of the respondent No. 1 in the names of the respective transferees mentioned in Schedule " A " to the petition and return the share scrips after such rectification and for various other directions.

(2.) The facts of the case shortly are that the petitioners allege that they are the holders of the equity shares in the respondent No. 1 company being Luxminarayan Cotton Mills Ltd. of the face value of Rs. 10 each fully paid up for valuable consideration and the particulars of the said shares are set out in annexure " A " to the petition. The petitioners allege to have acquired the said shares from the respective transferors as mentioned in Schedule " A " to the petition who are also made respondents in this application. The petitioners after paying the consideration in respect of the said shares as mentioned in Schedule " A" to the respective registered holders thereof, being the transferors of the said shares, received the relative share scrips together with the relative transfer deeds executed by the respective transferors in favour of the respective petitioners. Thereafter, on or about 16th of June, 1969, all the petitioners excepting petitioner No. 5 who on the 23rd of June, 1969, lodged their respective shares together with the relative transfer deeds duly stamped and signed by the respective transferors and transferees with the respondent No. 1 Luxminarayan Cotton Mills Limited, hereinafter referred to as the respondent-company, along with the relevant amounts of transfer fees for which the respondent-company duly granted the receipts to the respective petitioners which are annexed to the petition and marked with letter "B". The respondent-company failed to intimate either the transfer or the refusal to do so within two months from the date of lodgment of the said shares for registration of the transfer and the said time expired on the 16th of August, 1969, in respect of all the petitioners except the petitioner No. 5 whose time expired on the 23rd of August, 1969. Thereafter, the petitioners addressed letters dated 13th October, 1970, requesting the respondent-company to transfer the said shares and specimen copies of such letters are annexed to the petition and marked with letter " C ". No replies were received by the petitioners- from the respondent-company to the said letters and, consequently, the petitioners preferred an appeal under Section 111 of the Companies Act, 1956, to the Company Law Board, Central Government, New Delhi, in February, 1972, and the particulars of the said appeal are also set out in Schedule " A " to the petition and a specimen copy of the petition of appeal is annexed to this petition and marked with letter " D ". Thereafter, notices were issued by the Company Law Board to the petitioners to show cause as to why the said appeals were not filed within time as prescribed under the Companies Act, that is, within two months from the lodgment of the shares for registration with the respondent-company. Thereafter, the petitioners made an application under Section 637(b) of the Companies Act, 1956, for condonation of delay in filing the said appeal. Ultimately, the Company Law Board being satisfied with the ground shown by the petitioners for delay in making the appeal before the Company Law Board beyond the statutory periods, the delay was condoned by an order of the Company Law Board in Calcutta being dated 2nd/3rd of November, 1973, The petitioners have set out the facts showing the reasons which prevented them from making the application earlier, in paragraph 9 of the petition. It appears that since 1968 various proceedings were taken against the company including winding-up petition and ultimately an application was made by the State of West Bengal being the mortgagee of the assets and the properties of the respondent-company in a suit and a receiver was appointed of the mortgaged properties of the said company and thereafter by an order dated the 9th of October, 1972, the Central Government issued an order under Section 18A of the Industries (Development and Regulation) Act, 1951, for taking over the management of the undertaking of the respondent-company and appointed an authorised body of persons mentioned therein for the said purpose. The said authorised body immediately thereafter took possession of the undertaking and is still in possession of the same. On the 12th of December, 1972, the State of West Bengal by a notification declared the said undertaking as a "State Industrial Undertaking" and also declared the undertaking to be a relief undertaking for one year. Thereafter, on the 1st of December, 1973, by further notification the period was extended till 11th of December, 1974. It appears that no objection was filed by the respondent-company before the Company Law Board in the appeals filed by the petitioners under Section 111 of the Companies Act, 1956, disputing the merits of the said appeals. The respondent-company subsequently took objection for rectification of the share register by registering the names of the petitioners, inter alia, on the ground that the Company Law Board had no jurisdiction to condone the delay in filing the appeal under Section 111 of the Companies Act, stamps affixed on the transfer deeds were not duly cancelled and consequently the said transfer deeds could not be acted upon and lastly, the particulars in some of the applications for transfer were incomplete and as such it could not be effected. By an order and decision of the Company Law Board dated the 22nd of November, 1973, the Company Law Board after holding that the condonation of delay was duly granted in favour of the petitioners dismissed the applications on the ground that the transfer deeds lodged by the petitioners were not duly stamped in view of the decision of S.P. Mitra J. (as he then was) in In re Coronation Tea Co. Ltd. [1962] 32 Comp Cas 568 (Cal). The petitioners in these circumstances contend that it is not possible to obtain fresh transfer deeds from the respective transferors of the said shares by the petitioners and there are bona fide omissions in filling up the particulars in certain transfer deeds. Therefore, the petitioners should be given an opportunity to rectify the discrepancies or omissions, if any, in the transfer deeds as otherwise they would be seriously prejudiced. The relative share scrips and the transfer deeds are still lying with the respondent-company which is being controlled by an authorised body as hereinbefore stated. In these circumstances, as common questions of law and fact arise in these applications all the petitioners have been joined and the respective transferors have also been made party respondents along with the company and the members of the authorised body who are now managing the affairs of the company are also made respondents and the present application was made on the 11th of April, 1974, and after affidavits were filed, the matter was heard at length.

(3.) Mr. S.B. Mukherjee with Mrs. Padma Khastgir appearing for the petitioners after drawing my attention to the facts of this case as stated in the petition and the affidavit-in-opposition submitted that the petitioners have the right to apply under Section 155(2)(b) of the Companies Act, 1956, and as such the court has wide power and should liberally exercise the same to do justice in a particular case. Mr. Mukherjee dealing with the question of the application being barred by limitation submitted, firstly, that there is no question of the petitioners' remedy being barred. He referred to a recent Supreme Court decision in Vasudev Ramchandra Shelat v. Pranlal Jayanand Thakar [1975] 45 Comp Cas 43, where in a case of gift of shares the deed of gift was registered by the donor and the share certificates delivered to the donee together with the blank transfer form duly signed by the donor but such transfer was not registered with the companies after complying with the formalities prescribed by the Companies Act, for transfer of shares. Dealing with the question of the validity of the transfer of the said shares by gift in the absence of registration after the death of the donor, it was observed by the Supreme Court in the said decision in paragraph 13 at page 1734 of AIR 1974 SC, as follows :