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2005 Supreme(Cal) 167
High Court Of Calcutta
Indira Banerjee
REKHA MITRA - Appellant
Versus
SHYAML KUMAR MITRA - Respondent
C. P. 56 Of 1998
Decided On : 03/10/2005
The transfer of shares without a proper instrument of transfer duly stamped and executed is void and of no effect, and the shares in question were not marketable securities due to the restriction on their transferability imposed by a consent decree.
Headnote:
COMPANIES ACT, 1956 - SECTIONS 397, 398, 403, 409 - TRANSFER OF SHARES - VALIDITY - STAMP ACT, 1899 - SECTION 12 - REGISTRATION - LOCUS STANDI - COMPANY PETITION - MAINTAINABILITY - JURISDICTION - CITY CIVIL COURT - CODE OF CIVIL PROCEDURE, 1908 - SECTION 10 - SECURITIES CONTRACT REGULATION ACT, 1956 - SECTION 16 - MARKETABLE SECURITIES - FAMILY CONCERN - CONSENT DECREE - VARIATION - COMPANY LAW BOARD - POWERS - WIDE DISCRETION - CONSENT ORDER - CONCLUSIVENESS - APPEALABILITY.
Fact of the Case:
The respondent, a shareholder in the appellant company, filed a company petition under sections 397, 398, 403, and 409 of the Companies Act, 1956, alleging various acts of mismanagement and oppression by the appellants, including transfer of company property, failure to submit balance sheets, and siphoning of assets.
Finding of the Court:
The court held that the respondent had locus standi to prosecute the proceedings under sections 397 and 398 of the Companies Act, 1956, as he was the registered owner of the shares in question and the transfer of shares had not been duly stamped and executed.
Issues: 1. Whether the respondent had locus standi to prosecute the proceedings under sections 397 and 398 of the Companies Act, 1956, despite having transferred his shares? 2. Whether the company petition was barred by the principle of res judicata, as the respondent had filed a suit in the City Civil Court involving similar matters? 3. Whether the transfer of shares was valid, considering that the stamps affixed to the transfer deed had not been cancelled? 4. Whether the shares in question were marketable securities and, therefore, subject to the provisions of section 16 of the Securities Contract Regulation Act, 1956?
Ratio Decidendi: 1. The validity of a petition under the Companies Act must be judged on the facts as they existed at the time of presentation, and a petition that was valid when presented cannot cease to be maintainable due to subsequent events, unless there is a provision to that effect in the statute. 2. The principles of section 10 of the Code of Civil Procedure do not apply to proceedings under sections 397 and 398 of the Companies Act, 1956. 3. A transfer of shares is void and of no effect if it is not evidenced by a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and transferee. 4. The shares in question were not marketable securities, as their transferability was restricted by a consent decree, and therefore, section 16 of the Securities Contract Regulation Act, 1956 was not applicable.
Final Decision: The court dismissed the appeal, holding that the impugned order of the Company Law Board was based on consent of the parties and did not call for interference.
( 1 ) THIS appeal under section 10 (f) of Companies Act, 1956 is against an order dated 25th August, 2002 passed by the learned company Law Board in Company Petition No. 56 of 1998 filed by the respondent against tile Appellants under sections 397, 398, 403 and 409 of the Companies Act, 1956.
( 2 ) IN the said company petition, the Respondent complained of various alleged acts of mismanagement and oppression on the part of the appellants including transfer of property of the Appellant No. 7 (hereinafter referred to as the company) at Gharsuguda, in the name of the Appellant Nos. 3 and 4, failure to submit balance sheets of the company with the Registrar of Companies, failure to deposit Employees state Insurance and Provident Fund contributions of the workers, siphoning of assets of the company, fraudulent transfer of the immovable properties of the company to one D. N. Mehta in flagrant disregard of the terms of settlement submitted in this Court in Suit no. 261 of 1974 and Company Petition No. 263 of 1973 and also entering negotiations for transfer of shares to the said D. N. Mehta in contravention of the said Terms of Settlement.
( 3 ) THE appellants appear to have filed an Affidavit-in-Opposition denying the allegations of mismanagement and oppression. The appellants contended that the company petition filed by the respondent was liable to be dismissed since the respondent had also filed a suit before the learned City Civil Court at Calcutta being TS no. 2278 of 1996 against the same parties involving matters which are directly and substantially in issue in the company petition.
( 4 ) THE appellants further contended that no order was passed on the application of the petitioner for interim injunction filed in the said suit and an appeal in this Court against refusal of interim injunction had been dismissed. The company petition was for the same reliefs.
( 5 ) ACCORDING to the appellants the Gharsuguda property transferred to the Appellant Nos. 3 and 4 never belonged to the company. Negotiations for transfer of shares in contravention of the Terms of settlement filed in this Court, is virtually admitted. It is, however, alleged that the respondent consented to the same.
( 6 ) THE appellants alleged that the respondent resigned from the company and removed various important books, papers and documents of the company with the ill motive of putting the company into trouble. Delay in filing of accounts was alleged to be by reason of wrongful acts of the respondent in removing books, papers and documents.
( 7 ) IN course of hearing of the said Company Petition, the learned company Law Board suggested that the parties settle their disputes. On 13th March, 2001 the learned Company Law Board passed the following Order:"pursuant to last order 14. 1. 2000 the counsel for Respondent has made a statement that his client desires to dispose of his client's shares @rs. 510. 00. The petitioner agreed to purchase the share at the same rate. However, counsel for petitioner has submitted that there are some arrears of payment due for payment since 11. 8. 1999 which the Respondent should pay as they were in management, counsel for petitioner prays for filing an affidavit quantifying the heads of the amount by 22. 3. 2000 and the respondent is directed to file reply thereto by 29. 3. 2000. Counsel for petitioner prays for maintaining status quo with regard to assets of the factory as on 11. 8. 99 to which the counsel for Respondent has got no objection ordered accordingly Fresh notice to be issued. "
( 8 ) AS rightly pointed out on behalf of the appellants, the learned company Law Board had, by its order dated 21st July, 2001 recorded that compromise efforts had failed, and directed that the petition be heard oil merits.
( 9 ) SUBSEQUENTLY, however, a consent order was passed on 14th september, 2001, which is extracted herein below :"it has been agreed by the counsel for the parties that the petitioner will purchase the sh
