MARUTI UDYOG LTD Vs. PENTAMEDIA GRAPHICS LTD

JUDGEMENT

(1.) THIS is a petition filed under Section 111A of the Companies Act, 1956 ('the Act') seeking directions against Pentamedia Graphics Ltd. ('the company') to register 50,000 shares comprised in share certificate No. 67126 in the name of the petitioner and enter the name of the petitioner in the register of members of the company.

(2.) The facts in brief as stated in the petition are that the petitioner is the manufacturer of various models of cars by the name and under the brand of 'Maruti'. The second respondent is a supplier of certain car components. In the course of business dealings between the petitioner and the second respondent, the petitioner had advanced amounts aggregating Rs. 5 crores against, inter alia, the pledge of 50,000 shares of the company. The third respondent, being Chairman of Pentafour Group by a letter dated 20-4-1998 (Annexure-B) had deposited the Share Certificate No. 67126 relating to the impugned shares together with a signed blank transfer deed with the Director (Finance) of the petitioner enabling the petitioner to sell the impugned shares or transfer them in favour of the petitioner in case of default by the second respondent. In spite of repeated demands, the respondents 2 and 3 being the principal borrower and guarantor had failed to repay the amounts advanced by the petitioner, resulting in a civil suit filed by the petitioner before the Delhi High Court for recovery of the outstanding amount due from the respondents 2 and 3. Consequently, the petitioner was constrained to enforce the security by seeking transfer of the impugned shares of the company deposited by the third respondent. Accordingly, the petitioner by its letter dated 16-4-2001 forwarding the original share certificate together with duly executed and stamped transfer deed, requested the company to transfer the impugned shares in its favour. However, the company refused to transfer the impugned shares in favour of the petitioner on account of stop transfer instructions received from the third respondent, which, according to the petitioner is contrary to the provisions of Section 111A(2). Hence, the petition.

(3.) ACCORDING to the third respondent the impugned shares were neither pledged nor sold in favour of the petitioner. However, the third respondent had given the impugned shares to Mr. A.R. Halasyam, in his individual capacity as comfort level security to be kept confidentially under his custody, who had without any authority delivered the share certificate to the petitioner. The third respondent had never advised Mr. A.R. Halasyam either to sell or transfer the shares in his own name. Consequently, the third respondent had to advise the company by his letters dated 29-6-1999 and 9-5-2001 (Annexure 'G' and 'H') that he has not mandated the shares for sale and requested to stop any registration of the shares. Moreover, there is no valid transfer of shares in accordance with Section 108 of the Act between the third respondent and the petitioner. The petitioner has no right to seek registration of transfer in its favour. The request of the third respondent to stop registration of the transfer in favour of the petitioner is sufficient cause on the part of the company to return the instrument of transfer together with share certificates. The transfer of shares in favour of the petitioner is not pursuant to sale of shares in favour of the petitioner. The shares pledged cannot be sold without notice and in the instant case, there is no notice before the sale in favour of the petitioner. In these circumstances, the transfer of shares in favour of the petitioner is not valid in law.