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Section 111A of the Companies Act, 1956, read with section 2

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Court :
COMPANY LAW BOARD, SOUTHERN REGION BENCH, CHENNAI

Brief :

Citation :
Vallur Mohammad Saheb v. Golden Agro-Tech Industries Ltd

COMPANY LAW BOARD, SOUTHERN REGION BENCH, CHENNAI Vallur Mohammad Saheb v. Golden Agro-Tech Industries Ltd. K.K. BALU, VICE CHAIRMAN C.P. NO.706/111A/SRB/2006 SEPTEMBER 28, 2007 Section 111A of the Companies Act, 1956, read with section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 - Transfer of shares - Rectification of register on - Third respondent originally acquired 2700 shares of respondent-company, which were sold in favour of petitioner - Petitioner and third respondent executed transfer deeds upon which petitioner lodged transfer deed along with original share certificates to second respondent who was then Registrar and Share Transfer Agent of 1st respondent for transfer in his favour - Since second and third respondents failed to deliver share certificates in favour of petitioner, third respondent entered into a series of correspondence with second respondent - Though second respondent assured in its communication that issue of duplicate share certificates and transfer in favour of petitioner would take some time due to certain formalities yet no tangible action was found to be taken -Petitioner, thus, filed instant petition to direct respondents No. 1 and 2 to pay certain amount with future interest from date of filing petition till date of realization; or to issue duplicate share certificates to petitioner -Respondent-company resisted petition on ground that it had become a sick unit and was registered with Board for Industrial and Financial Reconstruction (BIFR) thus instant petition was not maintainable in view of section 22 of SICA - Respondent-company further submitted that second respondent had been appointed as Registrar by Company and therefore second respondent alone was entitled to deal with issuance and transfer of shares by Company - Whether bar embodied in section 22 of SICA does not extend to any direction which may be issued by bench under section 111/111A for rectification of register of members of company -Held, yes - Whether in view of this legal position resistance of first respondent company for not registering transfer of shares constituting miniscule 2700 shares only in favour of petitioner was not tenable - Held, yes - Whether, even otherwise, first respondent being principal of second respondent could not shrink of its responsibility on account of inaction of second respondent who was its agent - Held, yes - Whether, therefore, first respondent was to be directed to rectify its register of members by placing name of petitioner in place of third respondent and consequently issue fresh share certificates to petitioner - Held, yes FACTS The third respondent originally acquired 2700 shares of the respondent-company, which were sold in favour of the petitioner. The petitioner and third respondent executed the transfer deeds 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 first respondent for transfer in his favour. Since the second and 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 that the issue of duplicate share certificates and transfer in favour of the petitioner would take some time due to certain formalities yet no tangible action was found to be taken. The petitioner was also unsuccessful before the Consumer Forum and the I.ok Adalat. The petitioner thus filed instant petition under section 111/111A to direct the respondents No. 1 and 2 to pay certain an amount with future interest from the date of filing the petition till the date of realization; or to issue duplicate share certificates to the petitioner. The respondent-company resisted the petition contending that the second respondent had been appointed as Registrar by the Company and therefore the second respondent alone was entitled to deal with issuance and transfer of shares by the company the company further submitted that it had become a sick unit and was registered with the Board for Industrial and Financial Reconstruction (BIFR) thus the instant petition was not maintainable in view of section 22 of 1985 Act (SICA). HELD The first respondent being the principal of the second respondent could not shrink of its responsibility on account of the inaction of the second respondent who was its agent. The company, though reportedly a sick company could not take protection under section 22 of S1CA. Section 22 of S1CA 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 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 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 2700 shares only, in favour of the petitioner was not tenable. Under sub-section (11) of section 111A and sub¬-section (7) of section 111, when a petition is made under section 111A/111, the CLB 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 indicated 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 established that the title to the impugned shares belonged 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. Therefore, the first respondent company was directed to rectify its register of members by placing the name of the petitioner in the place of third respondent and consequently issue fresh share certificates to the petitioner. [Para 4]
 

C.rajesh
on 09 April 2008
Published in Corporate Law
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