CHARANJIT SINGH GHUMMAN Vs. REDDYS LABORATORIES LTD

JUDGEMENT

(1.) THIS is a petition originally filed under Section 111(4) of the Companies Act, 1956 (hereinafter referred to as "the Act"), and subsequently considered under Section 111A on submissions of the petitioner against Dr. Reddy's Laboratories Limited (hereinafter referred to as "the company") for-

(2.) According to the petitioner and as reiterated at the time of arguments, the petitioner was holding 100 equity shares since July, 1988, bearing distinctive Nos. 3561265 to 3561364 with share certificates Nos. 58768 and 58769. These shares were said to be lodged by the second respondent with the company for effecting the transfer in favour of the former. The company claims that the original share certificates were taken from its office by some one before effecting the transfer in favour of the second respondent. Consequently, the company issued duplicate share certificates in lieu of the purported lost original certificates and forwarded them to the second respondent. However, the petitioner has not sold the shares or parted with possession for any consideration. They have been pilfered from the custody of the petitioner. The company issued duplicate share certificates suo motu and forwarded them to the second respondent. There was no request either from the petitioner or the second respondent for issue of duplicate share certificates. The company has not obtained any proof of purchase of shares or indemnity from the second respondent before issuing duplicate share certificates. The issue of duplicate share certificates was approved post facto by the transfer committee and not by the board of directors. New scrips shall not be issued in the place of old ones without any order of the company court or the Company Law Board unless the latter are proved to have been lost or are defaced or surrendered, for which the company and its officers are liable for fine and imprisonment under Section 84(3) of the Act. Section 84 provides that a member has to surrender the torn or defaced or mutilated share certificate for issuing the duplicate. A member shall apply for the issue of duplicate certificate and prove that original certificate is lost or destroyed. The company may issue duplicate certificate on being convinced that the original is lost. He further submitted, placing reliance on Pradip Kumar Sarkar v. Luxmi Tea Co. Ltd. [1990] 67 Comp Cas 491 (Cal) that the company can issue share certificate or even duplicate share certificate only to a registered holder provided the duplicate share certificate has been lawfully and properly issued. No advertisement has been issued under orders of the court or the Company Law Board as has been held in Katyal v. Bhagwan Das and Co. Pvt. Ltd. [1994] CLA 379 (CLB) and stated in the Reserve Bank of India Circular No. CMD. IB. 943/03-18-026/95-96. The duplicate share certificates issued by the company are spurious as the originals are neither conclusively proved to have been lost nor cancelled. This shows mala fides and fraudulent intention of the company pressurising the petitioner to give transfer forms afresh, for which the company or its officers are criminally liable. He further drew our attention to the mode of completing the transfer instruments by questionable way of signing on the reverse of the certificates adopted by officers of the company, which are illegible. The applicant was constrained to move the City Civil Court at Bombay and obtained an order of injunction restraining the company from transferring the impugned shares in favour of the second respondent. The petitioner was in urgent need of funds for the education of his children, compelling him to withdraw the civil suit under financial duress. Accordingly, the petitioner delivered the transfer forms together with letters of consent for effecting transfer and obtained the pay order for a sum of Rs. 1.30 lakhs. The transfer forms so procured under coercion were signed by the second respondent and another as joint transferee and attested by the banker. They were sent to the company without the date of execution or consideration and not properly filled in. They were either stamped inadequately or not stamped at all. The company registered the transfer summarily without raising any objection about its validity. The transfer is in violation of the provisions of Section 108(1) of the Act and not valid, which empowers the court to rectify the register of members as held in Jagdish Mills Ltd., In re [1954] 24 Comp Cas 241 ; [1954] 56 Bom LR 525. The second respondent has not paid any consideration for the impugned shares and, therefore, transfer without consideration is void in law as propounded in John Tinson and Co. (Pvt.) Ltd. v. Mrs. Surjeet Malhan [1997] 88 Comp Cas 750 (SC) ; [1997] 2 Scale 99 by the Supreme Court.

(3.) S.V. Raju, advocate appearing for the company, reiterated the averments made in the counter-affidavit and raised a preliminary objection that the reliefs sought by the petitioner do not fall within the scope and ambit of Section 111(4) of the Act. The petition can neither be entertained under Section 111A in view of the fact that the petitioner failed to approach the Company Law Board within two months of the transfer of the impugned shares. The petition is, therefore, liable to be dismissed in limine. The petition is bad for non-joinder of necessary parties, especially when the petitioner has made several allegations against selling and delivering brokers. Moreover, the petition has been filed after a lapse of three years from the date of transfer of impugned shares and the petition suffers from laches.