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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
P.S. DINESH KUMAR, P. KRISHNA BHAT, JJ.
S.M. Kannappa Automobiles Pvt. Ltd. – Appellant
Versus
Sri. Bhupinder Rai S/o Late Lajpat Rai – Respondent
COMPA Nos. 8, 9, 10, 11 of 2014
Decided On : 04-03-2022
Constitution of India,1950 - Articles 6 and 7 - Limitation Act, 1963 - Article 137 - Seeking transfer of that ‘one’ share in his name - Sole Proprietary Firm - Company was originally started as a “Sole Proprietary Firm” Petitioners and sixth respondent decided to take over said business. Right from date of incorporation, two groups were holding 1000 shares each holding one share till his death - His heirs sold said ‘one’ share in favour of first petitioner - First petitioner lodged transfer forms and the original share certificate seeking transfer of that ‘one’ share in his name - Company informed that share cannot be transferred in his name, but, transferred said ‘one’ - Transfer in name of was illegal and directed the Company to enter the name of the first petitioner with respect to the said one share.
Finding of the Court: Allotment of 6000 shares within one week from the date of first petitioner lodging his application for transfer of S.M. Kannappa's ‘one’ share, lacks bona-fides and is manifestly illegal view taken by the CLB to direct the petitioners to sell their shares would amount to placing premium on the illegal act - It is settled that justice should not only be done, but also seen to be done - Transfer of 6000 shares in favour of respondent have carefully perused CLB’s order and concur with its view so far its conclusion that allotment of 6000 shares in favour of respondent no. 6 and 7 is illegal - Judgment is on the facts of that case - Facts and circumstances of this case, for reasons recorded hereinabove, CLB’s direction to sell the shares is not sustainable - Issuance of an illegal direction by CLB is a question of law and we accordingly answer question framed by us in the negative - Respondent no. 6 are uncalled for and illegal and sought for their expunction - Court have carefully perused said paragraphs - CLB has only recorded the facts contained in the additional reply filed by respondent respondent no. 6 cannot be allowed to take inconsistent pleas and the pleadings contained in reply shall not be read and no reliance shall be placed on them.
Result: Dismissed and disposed.
JUDGMENT :
P.S. DINESH KUMAR, J.
1. These four appeals are directed against order dated August 26, 2014 passed by the Company Law Board, Mumbai, in Company Petition No. 13/111/CLB/MB/2014.
2. For the sake of convenience, parties shall be referred as per their status in the Company Petition.
3. Company Appeal No. 8/2014 is by M/s. S.M. Kannappa Automobiles Pvt. Ltd. [‘the Company’ for short] and its two Directors. Company Appeal No. 9/2014 is by respondents No. 7 to 10 in the Company Petition. Company Appeal No. 10/2014 is by the petitioners in the Company petition. Company Appeal No. 11/2014 is by respondent No. 6 in the Company petition.
4. Heard Shri S.S. Naganand learned Senior Advocate for the petitioners (Shri Bhupendra Rai and Shri Vijay Kumar Narang), Shri Dhyan Chinnappa, learned Senior Advocate for the Company (M/s S.M. Kannappa Automobile Pvt. Ltd.) respondents No. 2 and 4 (Shri C.K. Narotham and Shri Mohandas Pai respectively), Shri Aditya Sondhi, learned Senior Advocate for respondent No. 6 (Shri Sudarshan Kumar Manchanda) and Shri Srinivas Raghavan, learned Senior Advocate for respondents No. 7, 8, 9 and 10 (Shri Bharat Bhushan Narang, Chitra Narang, Vaibhav Narang and Sheetal Narang).
Brief facts of the case:
5. M/s. Kannappa Automobile Pvt. Ltd. was incorporated on May 7, 1975 with an authorized capital of Rs. 10 Lakhs consisting of 10,000 equity shares of Rs. 100/- each. The issued and paid-up capital of the Company was Rs. 2,00,100/- consisting of 2001 equity shares of Rs. 100/- each.
6. The Company was originally started as a “Sole Proprietary Firm” by Shri S.M. Kannappa. Petitioners and sixth respondent decided to take over the said business. Right from the date of incorporation, two groups were holding 1000 shares each. Shri S.M. Kannappa, was holding one share till his death on June 3, 1986. His heirs sold the said ‘one’ share in favour of first petitioner. The first petitioner lodged transfer forms and the original share certificate seeking transfer of that ‘one’ share in his name. The Company informed that the share cannot be transferred in his name, but, transferred the said ‘one’ share in the name of S.M. Kannappa's Son Rajashekhar. Petitioner challenged the same in this Court in Company Petition No. 98/1990 and it was allowed vide common order and judgment dated August 16, 2006 holding that the transfer in the name of Rajashekar was illegal and directed the Company to enter the name of the first petitioner with respect to the said one share. The appeal filed by the Company against the order passed by the Hon'ble Company Judge stood dismissed by the Division Bench [O.S.A. No. 51/2006 and O.S.A. No. 45, 46/2006 decided on 22.03.2012]. The Special Leave Petition [SLP Nos. 18370-18372/2012 decided on 09.07.2012] filed against the order passed by the Division Bench also stood dismissed.
7. Petitioners learnt from the pleadings in Company Petition No. 98/1990, that the paid-up capital of the Company had been increased to Rs. 8,00,100/- and divided into 8001 shares of Rs. 100/- each. On verification, they learnt that 3000 shares each had been allotted to sixth and seventh respondents in the Board Meeting held on September 24, 1990. Petitioners moved the CLB [Company Law Board, Madras] invoking Section 111 of Companies Act, 1956 and their petition was dismissed vide order dated October 24, 1994. On appeal, this Court vide order dated February 29, 2012, based on the minutes of order filed by the parties, remitted the matter to the CLB for fresh consideration.
8. After remand, petitioners sought to amend the petition by adding certain grounds and prayers. Their prayer was rejected by the CLB [vide order dated October 17, 2012]. Petitioners challenged the same in this Court in Comp Appeal No. 25/2010 and this Court vide order dated January 28, 2014, set-aside the CLB's order and allowed the amendment. Respondents chal
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