M. Palanisamy and Others vs S.V.T. Spinning Mills (P.) Ltd. and Others

P. Jyothimani, J.—This company appeal filed u/s 10F of the Companies Act, 1956 (for brevity, ''the Act'') has been directed against the order, of the Company Law Board (''CLB'') passed in CP No. 37 of 2006 {now reported as M Palanisamy v. SVT Spinning Mills (P.) Ltd. [2010] 98 CLA 222 (CLB) by which the CLB has dismissed the petition filed by the Appellants against the Respondent-company under Sections 235, 237, 397 and 398 of the Act seeking a direction to the first Respondent-company to issue duplicate share certificates representing 3,888 shares of the company and for consequential reliefs.

The main grounds raised against the impugned order of the CLB are that the CLB has taken an inconsistent stand regarding the transfer of shares and, therefore, there is a factual error and that the reliance placed on by the CLB, the income and wealth tax returns of the 6th Respondent to decide that the shares of the company have not been transferred is an extraneous grounds and that order of the CLB in holding removal of the first Respondent as managing director of the first Respondent-company as per the procedure u/s 284 of the Act is not in order and that when the transfer of shares in favour of the Appellants was stated to be established in facts, the finding by the CLB that the Appellants have not proved their shareholding is contrary to the fact and that the CLB has exceeded its jurisdiction in arriving at a conclusion that the Appellants claims are not bona fide.

In the light of the earlier judgment passed by this Court in CA No. 10 of 2007, the short facts leading to the filing of the appeal are that the 6th Respondent was a promoter of the first Respondent-company and the land in which the factory of the first Respondent-company is located belonged to the 6th Respondent. The first Appellant and the Respondents 2 and 3 have jointly taken over the first Respondent-company with an understanding that all the three persons should equally invest and carry on the affairs jointly and an agreement was entered accordingly on 27th July, 1989 between the first Appellant and the Respondents 2 and 3 on one side and the 6th Respondent on the other side. It is the case for taking over the said company together with land, plant and machinery and other assets for a total consideration of Rs. 60 lakh. It is stated that the first Appellant has paid an amount of Rs. 1,00,000 towards advance from the personal amount on the date of agreement and the balance was agreed to be paid within one month. A joint current account was opened with Indian Bank, Variety Hall Road, Main Branch, Coimbatore by the Petitioner and the Respondents 2 to 5 for depositing the money to be paid to the 6th Respondent. It is stated that the Petitioner has deposited a sum of Rs. 19 lakh while the Respondents 2 and 3 deposited a sum of Rs. 37,50,000.

3.1 It has been the case of the Appellant that in respect of the contribution made by the first Appellant, the sixth Respondent had transferred 3,880 equity shares worth Rs. 100 each, having distinctive numbers 151 to 4030 for a total value of Rs. 3,78,000. It is stated that the vacant land to an extent of 64.65 cents was purchased by the first Appellant and Respondents 2 and 3 on 19th April, 1995 under two separate sale deeds and the lands were registered in the joint names of the first Appellant and Respondents 2, 3, 4 and 5. After taking over the company, the first Appellant was appointed as managing director while Respondents 4 and 5 were appointed as directors. It has been the case of the Appellants that the 2nd and 3rd Respondents with an ulterior motive of removing the first Appellant and his family members have entered the name of the third Respondent in the property tax records maintained by the Panchayat relating to the property pertaining to the company. Thereafter, on a complaint, the ownership was restored in the joint names of the first Appellant and Respondents 2, 3, 4 and 5. Since there was an interference in his function as managing director, the first Appellant has filed OS No. 3346 of 1996 against the Respondents praying for restraining the Respondents from interfering with the first Appellant''s right to manage the company''s affairs as its managing director. Since it was a stand taken by the Respondents in the suit that the first Appellant has been removed from the Board in the extraordinary general body meeting (''EGM'') held on 11th August, 1995, the suit was withdrawn with liberty to approach the proper forum.

3.2 The first Appellant has filed another suit in OS No. 49 of 1998 for a declaration that the resolution passed in EGM by which the Appellant was stated to be removed as null and void. It has been the case of the first Appellant that he has not been served with a notice of annual general body meeting (''AGM'') as required u/s 284 of the Act. It is stated that there has been some settlement between the first Appellant and the second Respondent by which the second Respondent has agreed to restore the first Appellant as managing director. However, in the meantime, the Respondents 2 to 5 have fabricated certain agreement to the effect that the first Appellant has agreed to transfer his l/5th share in the land of the company in favour of the Respondents 2 to 5 and that was also executed in the unregistered nonjudicial stamp paper dated 15th October, 1995. Based on the said unregistered non-judicial stamp paper agreement dated 15th October, 1995, the Respondents 2 to 5 have filed a suit in OS No. 1638 of 1995 for specific performance. It has been the case of the first Appellant that he has never signed such agreement and not received any advance much less Rs. 1,50,000. The first Respondent-company has issued share certificates in respect of 20 per cent of shares in the name of the Appellants and it is stated that the Appellants have lost the said share certificates on 25th May, 1996 in respect of which a complaint was given to the police. Thereafter, the first Appellant sent a letter to the first Respondent-company on 23rd December, 1996 requesting to issue duplicate share certificates.

3.3 It is the case of the Appellants that taking advantage of the said position, the Respondents have proceeded to alter the register of members of the first Respondent-company to show that the shares of the first Appellant have been transferred to Respondents 2 to 5. It was in those circumstances, the Appellants have filed another suit in OS No. 201 of 1999 for declaration that they are the shareholders in respect of 3,880 shares. It is stated that 6th Respondent who has transferred the shares, has confirmed the said transfer of shares in favour of the Appellants in the written statement. Therefore, it has been the case of the Appellants that the first Appellant has been ousted from the company''s affairs by playing fraud in order to prevent the first Appellant to participate the management and administration of the company''s affairs and the first Appellant had to approach the court only to enforce his genuine rights. But the Appellants have withdrawn the civil suit with liberty to approach the CLB.

3.4 It is the case of the first Appellant that as per the agreement dated 27th March, 1995, stated above, the first Appellant and Respondents are bound to run the company jointly. Originally, the paid-up capital of the company was Rs. 68,03,000 and after the first Appellant was ousted, the Respondents have increased the share capital of the company, which is liable to be set aside. Alleging that all these conducts are amounting to acts of mismanagement, which requires interference of the CLB on the ground that the statutory records are not properly maintained and despite several requests for inspection of records of the first Respondent-company, the first Appellant was unable to obtain any copies from the Registrar of Companies (''RoC''), after withdrawing the said suit, the Appellants have filed the above-said petition before the CLB for a direction against the first Respondent-company to issue duplicate share certificates representing 3,780 shares in the share capital of the first Respondent-company and the consequent rectification in the register of members of the company ; for a declaration that the removal of the first Appellant as a managing director of the first Respondent-company at the proposed meeting held on 11th August, 1995 as illegal, null and void ; for a declaration that the increase of the authorised share capital and the paid-up capital of the 1st Respondent in the year 1995 and thereafter to the exclusion of the first Appellant as null and void and for a direction to allot proportionate shares to the first Appellant in the first Respondent-company based on the agreement dated 27th March, 1995 ; to supersede the Board of directors appointing independent persons in order to administer and manage the affairs of the first Respondent-company; to restore the first Appellant as managing director of the first Respondent or alternatively for a direction to the Respondents to purchase the shares of the first Appellant at a fair value and to surcharge the Respondents 2 to 5 for their misfeasance, fraud and cheating committed and for a direction to investigate the affairs of the 1st Respondent-company u/s 235 of the Act.

The said petition was resisted by the Respondents 1 to 5 on the ground that the first Appellant was an employee of Lakshmi Machine Works, Periyanayakanpalyam, Coimbatore and when the Respondents purchased the first Respondent-Mill, the first Respondent was originally named as GSS Spinners (P.) Ltd., and for the said purchase the first Appellant has negotiated. It is the case of the Respondents 1 to 5 that the Respondents 2 to 5 were ready to purchase the land to an extent of 64.65 cents in Survey No. 404/1A2 and 402/2 of Goundenpalayam Village, Coimbatore Taluk and Respondents 2 to 5 have purchased the shares of GSS Spinners (P.) Ltd. while the first Appellant has not purchased any share from the company. Since the first Appellant has negotiated the purchase of the company, he was nominally taken as one of the directors of the company and the first Appellant has never contributed any money as his share capital. It is stated that the first Appellant was removed on 11th August, 1995, after discussion in the Board of directors meeting on 20th July, 1995, since he has not subscribed to his qualification shares. It is the case of the Respondents that the first Appellant has never acted as managing director of the company and it is their case that the first Appellant has misappropriated the amount of Rs. 5,00,000 withdrawn by him from the company''s account on 28th April, 1995. It is stated that the Respondents 2 to 5 have purchased the entire shares of the company from the 6th Respondent.

4.1 The first Appellant has filed OS No. 1056 of 1995 before the District Munsif Court, Coimbatore seeking an order of injunction from his acting as managing director in which the Respondents have taken a specific stand that the first Appellant has never functioned as managing director and he was removed from the directorship on 11th August, 1995 and thereafter, OS No. 49 of 1998 was filed by the 1st Appellant for a declaration that the EGM held on 11th August, 1995 as invalid. The Respondents have stated that the meeting was held in accordance with law and thereafter the first Appellant filed a suit in OS No. 201 of 1999 for a declaration that the Appellants are the shareholders in respect of 3,880 equity shares with distinctive numbers from 151 to 4030. A detailed written statement was filed in the said suit by the Respondents stating that the Respondents have originally purchased 80 per cent shares from 6th Respondent and they have subsequently purchased the remaining 20 per cent on 19th December, 1997. When the suits were taken up for trial, the first Appellant has withdrawn the said suits with liberty to approach the proper forum. It was objected by the Respondents. The court has permitted the first Appellant to withdraw the suit without reserving any right to move any proper forum and in spite of it, the first Appellant has wrongly stated as if the Appellants were given permission to move the CLB and, therefore, the filing of the petition is a clear abuse of process of law.

4.2 It is stated that during the pendency of the civil suit, on 15th October, 1995, the first Appellant has executed an agreement in favour of the Respondents 2 to 5 agreeing to release l/5th share in the property purchased vide sale deed dated 19th April, 1995 and a criminal complaint filed by the first Appellant in the Judicial Magistrate, Coimbatore was dismissed, after oral evidence, in the judgments dated 27th May, 2002 and 30th March, 2005 and it was thereafter the Respondents have filed OS No. 1638 of 1995 before the Sub-Court, Coimbatore for specific performance of the agreement dated 15th October, 1995. Therefore, according to the Respondents, there is no question of further issue of shares and moving the CLB is only to harass the Respondents. It is also denied that there has been a loss of share certificates. Since the first Appellant has not purchased the qualification share, the question of loss of share does not arise and there is nothing mentioned by the first Appellant about the loss of share certificates in the suit filed by him in OS No. 1638 of 1995 and the company petition itself has been filed 10 years after the alleged transfer of shares and, therefore, the petition is liable to be dismissed for the long delay and laches.

4.3 It is stated that the first Appellant has already vacated his office due to disqualification and the first Appellant has never be a director and he was only a mediator in the purchase of the property and the agreement dated 25th March, 1995 relates to purchase of land, building and machinery and not in respect of the shares of the company. Originally, the company, namely, GSS Spinners (P.) Ltd., did not own any land and building. It is stated that in respect of surrendering l/5th right of the first Appellant in the land and building, he was paid a sum of Rs. 1,92,000. It is stated that the issues raised in the petition before the CLB are similar to that issues raised in OS No. 1638 of 1995. It is stated that the sixth Respondent, who was the owner of the disputed shares till 19th December, 1997, has transferred the said shares in favour of the Respondents 2 and 3 for a consideration of Rs. 3,88,000 and the same has been disclosed through wealth tax return and income tax returns for the year 1996-97 and 1997-98. It is the case of the Respondents that they are maintaining the entire statutory records of the first Respondent-company.

4.4 After considering the entire contentions raised on both sides, the CLB, while rejecting the petition, has found that the Appellants have not even given particulars regarding the exact date when the disputed shares were transferred to them. The CLB has also found that when it has been the case of the first Appellant that he along with Respondents 2 to 3 have decided to take ever the first Respondent-company with equal rights jointly, the first Appellant has chosen to claim l/5th share in the immovable property as per the two sale deeds and he has also chosen to claim l/5th share in the shares also. The CLB has also found that there are no evidence to show that the first Appellant has deposited a sum of Rs. 19 lakh from his personal account except the amount of Rs. 1 lakh remitted from his personal account. There is an evidence to show that the first Appellant has remitted an amount of Rs. 4,00,000. As per the Respondents, the said amounts were withdrawn by the first Appellant thereafter. The CLB has further found that the first Appellant has chosen to completely rely upon the pleadings of the 6th Respondent in the suit to prove that the sixth Respondent has transferred the shares in favour of the first Appellant. While so, the sixth Respondent has remained ex parte before the CLB.

4.5 For the specific pleadings of the first Appellant that on 15th May, 1995, the sixth Respondent has transferred 3,880 shares in favour of the Appellants'' group, with face value of Rs. 100 each having distinctive Nos. 151 to 4030, for a total value of Rs. 3,78,000, there was no evidence on record except the photo copy of share transfer deeds. When the originals are not forthcoming, it was also found that there was no evidence to show that there has been a transfer of share in favour of Appellants'' group. The CLB has also found that in the first suit the first Appellant has not chosen to state about the loss of the share certificates and that was pleaded only for the first time in the third suit filed by the first Appellant on 8th September, 1997. The alleged loss of 3,880 shares on 25th May, 1996 has never been affirmed by the first Appellant in the written statement filed by him in OS No. 1638 of 1995 which was filed in July 1996 and that suit was filed by the Respondents 2 to 5 with the specific pleadings that the first Appellant has not contributed any amount towards the share capital.

4.6 The CLB has also found that even though the first Appellant has specifically stated that he lost the share certificate, a police complaint was made only 23rd December, 1996. There is no explanation for such a long delay. The CLB has found that the first Appellant was inducted as director only on 5th May, 1995 and he was appointed as managing director on 18th May, 1995 but he has never got any share transferred in his name and he has also signed the minutes of the meeting along with Respondents 2 and 3 and there is no evidence for manipulating the minutes by the Respondents 2 and 3. Therefore, the CLB has concluded that the first Appellant has not made any consistent plea. The endorsement of the sixth Respondent which has been relied upon by the first Appellant was also found to have no date and in the said endorsement, which relates to the payment of a loan amount, the sixth Respondent has stated to have received some amount and the CLB has found that there is no correlation to the alleged transfer of shares. Therefore, the CLB has found that it was the case of the Respondents that the first Appellant along with Respondents 2 and 3 have purchased the movable property following the sale agreement dated 27th March, 1995 and, therefore, the first Appellant was made as one of the directors on 5th May, 1995, acknowledging his co-operation for the purchase of the Mill. The first Appellant has never contributed money as share capital. As per the requirement of articles of association, the first Appellant should have held a share value of Rs. 5,000 as qualification share to be a director and u/s 270(1) of the Act, it is the duty of every director to obtain the qualification share within two months after the appointment and the first Appellant has never subscribed the amount even after the appointment.

4.7 The CLB has also gone into the original minutes of GSS Spinners (P.) Ltd. and found that the name of the first Appellant does not figure anywhere as the transferee of shares. As per the resolution dated 5th May, 1995 and subsequent of the Board meeting held on 18th May, 1995, the second Respondent was appointed as new chairman. It is true that the CLB having found that the name of the first Appellant was not available anywhere as the transferee of any share, it has been stated that on the resignation of the 6th Respondent as chairman, and appointment of second Respondent, as a new chairman on 18th May, 1995, there was a resolution to appoint the first Appellant as managing director and the third Respondent as executive director and in the said resolution, the first Appellant has been made as a signatory. However, the said finding given by the CLB has been given to arrive at a conclusion that when the first Appellant was a signatory to the resolution dated 18th May, 1995, there is no reason to suspect that the minutes of the meeting have been manipulated by the Respondents.

4.8 The CLB has also found the inconsistency of the first Appellant, who has not proved that the disputed shares have been transferred to the Appellants on 14th May, 1995 or 18th May, 1995 or thereafter. It is true that in para 9 of the plaint filed by the Appellants in OS No. 201 of 1999 on the file of the Additional Sub-Judge, Coimbatore in which the 6th Defendant, who is the 6th Respondent herein, in paragraph 9, the Appellants have averred as follows:

As specified in Item No. 1, above, the transferors transferred 3,880 equity shares of Rs. 100 each aggregated to a face value of Rs. 3,88,000 to and in favour of the Plaintiffs and the relevant share certificates with distinctive Nos. 151 to 4030 (both inclusive) were handed over to the Plaintiff No. 1 after due compliance with the formalities with regard to transfer of shares provided under the Companies Act, 1956.

4.9 The said averments made in paragraph 9 has been admitted by the sixth Respondent/transferor in the written statement filed by him.

4.10 The CLB, while considering the said admission of the sixth Respondent in the suit, which was subsequently withdrawn, as admitted by the Appellants, with liberty to file company petition before the CLB, has come to a conclusion that even though there is an evidence to show that the sixth Respondent has submitted transfer form to the Appellants'' group, in the resolution of the Board meeting on 18th May, 1995, in which the first Appellant has subscribed his signature, the names of the Appellants are never shown as transferees of the disputed shares and relying on the statement filed by the 6th Respondent in a different suit, no conclusive evidence can be drawn that the transfer of shares have been effected in the names of the Appellant, and finding on records that there is no transfer effected in favour of the Appellants'' group, and that statement made by the 6th Respondent in the public documents, namely, income and wealth tax returns in the year 1996-97 ; 1998-99, there is nothing to indicate about the prayer. The CLB has taken note of the fact if the case of the first Appellant that the share certificates were lost on 25th May, 1996 is accepted, the transfer from the sixth Respondent should have taken place between 18th May, 1995 to 25th May, 1996 and accordingly disbelieved the case of the Appellants. As per the income tax returns, which only relate to the year 1996-97 ; 1998-99, it has been presumed that the sixth Respondent was holding the shares during the relevant point of time and in 1998-99, the sixth Respondent was not holding the same since it was the specific case of the second Respondent that the shares were transferred to his name by the sixth Respondent in the year 1997 and it was those circumstances, the CLB has held that the 1st Appellant has not proved this case.

4.11 The CLB, while dealing with the next document relied upon by the Appellants, which is a letter of the chartered accountant, by name, K Narayana Swami, dated 16th March, 1997, who is stated to have introduced the first Appellant to the 6th Respondent for the purchase of Mill and the immovable property, has found that the said letter, which is relied upon by the first Appellant, was relied upon after the disputes have arisen and, therefore, the same cannot be taken into consideration. In fact the CLB has also compared the handwriting in the letter with the handwriting in the original minutes and found there was no similarity in respect of two handwritings. The CLB has also found that the civil suits filed by the first Appellant were withdrawn for no reason especially when the cause of action-for the civil suits as well as the petition filed before the CLB are one and the same.

4.12 On the other hand, the CLB has taken note of the admitted fact that the suit filed by the Respondents 2 to 5 for specific performance against the first Appellant based on the agreement dated 15th October, 1995 is pending. However, on the finding that there is no evidence to show that after 18th May, 1995, the first Appellant has either attended the office of the first Respondent-company or participated the Board of directors meeting and having come to the conclusion that there is no evidence to show that the first Appellant has acquired the required share qualification to continue to be the director and managing director of the company, the CLB has held that due to lack of qualification share, the first Appellant cannot maintain the application u/s 398 of the Act.

4.13 Further, the CLB has found that the criminal complaint filed against the second Respondent alleging cheating, forgery and manipulation of documents came to be dismissed and there was no other evidence to show that the second Respondent has committed any fraud or cheating. The CLB has further given a finding that inasmuch as the Appellants have not been able to give any consistent case regarding the exact date on which the disputed shares were transferred and for the fact that the transfer was made on 14th May, 1995 based on the photo copy of the transfer forms, there is no evidence that the GSS Spinners (P.) Ltd., has passed a resolution and in the absence of the originals, the Appellants'' case was held to be not believable and the loss of the original certificates alleged by the first Appellant has not been proved at the earliest point of time and even in the sale agreement dated 27th March, 1995 there is no mention about the agreement to transfer of 3,880 shares to the Appellants. Despite the fact that in the suit filed by the Respondents in OS No. 1638 of 1995, the Respondents have specifically averred that the shares were transferred in their favour, no steps have been taken on behalf of the first Appellant for rectification of registers u/s 111 of the Act and irresistible conclusion came to be arrived at in dismissing the application for oppression, mismanagement, or investigation by the Central Government in the affairs of the company. It is clear that the CLB has decided the entire issues against the Appellants on the factual assertions on the basis of which there are no question of law involved in the case as it is seen on record.

The main contention raised by the learned Counsel for the Appellants that the CLB has relied upon the income tax returns and wealth tax returns of the 6th Respondent to come to a conclusion that the disputed shares have not been transferred in the name of the Appellants stating that it is not admissible, especially when the 6th Respondent in his written statement has specifically admitted the transfer of shares in the names of the Appellants. The fact remains that the said suit filed by the Appellants, in which the admission is stated to have been made by the 6th Defendant in transferring the shares, came to be dismissed as withdrawn and, therefore, it is clear that even if such admission has been made by the 6th Respondent in his written statement, the same cannot be taken as a proof for the factum of transfer of shares especially under the circumstances that the 6th Respondent has remained absent in the proceedings before the CLB.

It was in those circumstances, the CLB by placing reliance on the income tax and wealth tax returns of the sixth Respondent came to a conclusion that there was no indication as per the said records that the 6th Respondent has transferred the shares in favour of the Appellants and it is only an additional factor since on fact, it is clear that the Appellants have not proved with any authentic evidence that the 6th Respondent has in fact transferred the shares in favour of the first Appellant and such transfer has been effected in the manner known to law.

An analysis of the order of the CLB, as elicited above, makes it clear that it is the Appellants, who have been taking inconsistent stand, and in the absence of any proof to show that the disputed shares have been transferred in their favour, certainly, the finding of the CLB against the Appellants cannot be either treated as perverse or illegal even though there may be some contradictions in the finding of the CLB.

On the other hand, the contention of the learned Counsel for the Appellant Mr. Venkatavaradan that the CLB has not understood the facts in a proper manner and that there has been an inconsistent finding in the impugned order of the CLB, in my considered view, is not based on the legal principles. The relief asked for by the Appellants before the CLB was only a direction against the first Respondent to issue duplicate share certificates in respect of 3,880 shares on the specific plea that the Appellants have lost the original certificates. In the absence of any proof to show that first of all, the first Appellant has been transferred with any shares by the 6th Respondent especially when the Appellants have taken a stand that they have lost their share certificates, certainly, in my considered view the relief claimed for issuance of duplicate certificates cannot be given to the Appellants at all. Further, the CLB has found which it is unimpeachable that at the earliest point of time, the first Appellant has never taken a stand with regard to the loss of share certificates and if the loss of certificates is pleaded by the Appellants for the purpose of obtaining the duplicate copy of the share certificates, there shall be a tangible evidence for the Board to decide in favour of the Appellants. In the absence of such tangible evidence, it is not possible for the CLB to come to the rescue of the Appellants. When the first and basic relief of factum of transfer of shares has not been substantiated by the Appellants, the subsequent relief becomes redundant. Unless the required shares stand in the name of the first Appellant, he loses his right under the Act to continue to be the managing director since acquisition of qualification share within two months from the date of appointment of the managing director is a mandatory requirement, failing which, he automatically loses the post of the managing director.

While so, the Respondents 2 to 5, who are the remaining directors are certainly entitled for enhancing the authorised share capital and that can never be treated as oppression or mismanagement at all. While Section 397 of the Act specifically enables only the members of the company, who are entitled to make a complaint about oppression, Section 398 of the Act enable the members of the company to make a complaint about mismanagement and for exercising such a right either u/s 397 or 398, it is contemplated u/s 399 of the Act as follows:

Right to apply under Sections 397 and 398. - (1) The following members of a company shall have the right to apply u/s 397 or 398.-

(a) in the case of a company having a share capital, not less than one hundred members of the company or not less than one-tenth of the total number of its members, whichever is less, or any member or members holding not less than one-tenth of the issued share capital of the company, provided that the applicant or applicants have paid all calls and other sums due on their shares ;

(b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members.

(2) For the purpose of Sub-section (1), where any share or shares are held by two or more persons jointly, they shall be counted only as one member.

(3) Where any members of a company are entitled to make an application in virtue of Sub-section (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them.

(4) The Central Government may, if in its opinion circumstances exist which make it just and equitable so to do, authorise any member or members of the company to apply to the Tribunal u/s 397 or 398, notwithstanding that the requirements of Clause (a) or Clause (b), as the case may be, of Sub-section (1) are not fulfilled.

(5) The Central Government may, before authorising any member or members as aforesaid, require such member or members to give security for such amount as the Central Government may deem reasonable, for the payment of any costs which the Tribunal dealing with the application may order such member or members to pay to any other person or persons who are parties to the application.

It contemplates the required number of members to have qualification to apply for oppression or mismanagement.

Even though the learned Counsel for the Appellant has chosen to raise the point that the admission made by one of the parties in one proceeding can be used in an another proceeding, the law is well settled that such admission itself cannot be a conclusive proof. The learned Counsel for the Appellant relied on the judgment of the hon''ble Supreme Court in Basant Singh Vs. Janki Singh and Others, , wherein the hon''ble Apex Court while referring to Section 17 of the Indian Evidence Act, 1872 has held as follows:

The High Court also observed that an admission in a pleading can be used only for the purpose of the suit in which the pleading was filed. The observations of Beaumont, CJ In Ramabai Shriniwas v. Bombay Government AIR 1941 Bom. 141 lend some countenance to this view. But those observations were commented upon and explained by the Bombay High Court in Dattatraya Shripati Mohite Vs. Shankar Ishwara Mohite and Another, . An admission by a party in a plaint signed and verified by him in a prior suit is an admission within the meaning of Section 17 of the Indian Evidence Act, 1872, and may be proved against him in other litigations.

The High Court also relied on the English law of evidence. In Phipson on Evidence, 10th edn., article 741, the English law is, thus, summarised:

Pleadings, although admissible in other actions, to show the institution of the suit and the nature of the case put forward, are regarded merely as the suggestion of counsel, and are not receivable against a party as admissions, unless sworn, signed, or otherwise-adopted by the party himself.

Thus, even under the English law, a statement in a pleading sworn, signed or otherwise adopted by a party is admissible against him in other actions. In Marianski v. Cairns [1852] 1 Macq 212 the House of Lords decided that an admission in a pleading signed by a party was evidence against him in another suit not only with regard to a different subject-matter but also against a different opponent. Moreover, we are not concerned with the technicalities of the English law. Section 17 of the Indian Evidence Act, 1872 makes no distinction between an admission made by a party in a pleading and other admissions. Under the Indian law, an admission made by a party in a plaint signed and verified by him may be used as evidence against him in other suits. In other suits, this admission cannot be regarded as conclusive, and it is open to the party to show that it is not true.

As per the above said judgment, such admission cannot be regarded as conclusive and it is always open to the parties to prove that such admission is not true. Unfortunately, to the facts of the present case, the reasoning given by the hon''ble Supreme Court cannot be made applicable. Here it is not a case as if the 6th Respondent having made admission in an earlier proceedings about transferring his shares, has stated otherwise so as to put his admission against him in the company petition. That apart, the sixth Respondent, who has filed the written statement, as elicited above, has not chosen to appear before the company court when he was made as a party and under such circumstances, the written statement made by the 6th Respondent in a suit filed by the Appellants cannot be put against the Respondents 2 to 5 especially when it is on record that the said Respondents have purchased the concerned shares during the relevant point of time. Moreover, the Act provides a method for the purpose of transfer of shares and there is absolutely no material anywhere on the pleadings to show that the said proceeding for transfer of shares had been effected. Even though the contention of the learned Counsel for the Appellant that the transfer of shares have already been effected by registration by the company and it was because the share certificates were lost, the Appellants were not able to substantiate and, therefore, it is the duty on the part of the first Respondent to produce the record before this Court, the said stand is not available to the Appellants for the simple reason that even in the typed set of papers produced by the Appellants regarding the register of members as well as registration of share transfer during the particular time shows that the 6th Respondent has not transferred any of the shares in the name of the Appellants. On the other hand, the records evidently show that the transfers were effected in the names of the Respondents 2 to 5.

The hon''ble Supreme Court while dealing with the rectification of the register u/s 155 of the Act in M/S. Ammonia Supplies Corporation (P) Ltd. Vs. M/S. Modern Plastic Containers Pvt. Ltd. and Others, has held that a party who pleads that any transfer of shares has been effected, it has to be proved as to whether the procedure contemplated under the Act has been followed for the purpose of effecting such transfer. While comparing the provision of 1913 Act and the present Act, the hon''ble Apex Court has held as follows:

Both under the 1913 Act and 1960 Act a procedure is prescribed for admitting a person as member by purchase or transfer of shares of that company. With reference to 1913 Act u/s 29, a certificate of shares or stock shall be prima facie evidence of the title of the number of the shares or stock therein. Section 30 defines "member" to be one who agrees to become a member of a company and whose name is entered in its register. Section 31 is to keep register of its members. Section 34 deals with transfer of shares and application for the registration of the transfer of shares is to be made either by the transferor or the transferee. Where such application is made by the transferor for registration of his shares a registered notice is to be sent to the transferee. Section 34(3) restricts to register a transfer share until the instrument of transfer duly stamped and executed by the transferor and transferee has been delivered to the company. Thus, before the name of any transferee is registered these procedure has to be shown to have been followed, which is an obligation of any such applicant under the Act. This shows an application is to be made either by the transferor or transferee for registering the name of the transferee as members or shareholders of the company by placing before the company duly stamped and signed document both by the transferor and transferee. Similarly is the position u/s 155 of Indian Companies Act, 1960 before power is exercised for rectification essential ingredients are to exist. Section 108 gives mandate to a company not to register transfer of shares, unless proper instrument of transfer duly stamped and executed by or on behalf of the transferee has been delivered to the company along with certificates relating to the shares.

The question raised by the learned Counsel for the Appellants that for maintaining the petition for oppression and mismanagement under Sections 397 and 398 of the Act, the required number of strength of the members as per Section 399 cannot be insisted in all cases is no doubt true. Those are cases where a person holding sufficient number of shares in a company are deprived of continuing to hold such shares by the oppressive conduct. In these cases, when the question of oppression or mismanagement is raised, certainly, we have to see whether the issue involved itself is as to whether the removal of shareholding of a member is valid or not. Only on the court or Board having satisfied prima facie the original holding of the member, which confirms to the requirements of proceeding under Sections 397 and 398 of the Act and that has been arbitrarily deprived of, the court can entertain application even though the qualification shares are not available, so as to decide it on merit. I am afraid that such a situation does not exist on the facts of the present case as stated above.

The case of the Appellants themselves is for issuance of duplicate certificates and that has been resisted by the 1st Respondent-company on the ground that the Appellants have never purchased the shares and the amounts contributed by the first Appellant was in support of the purchase of the property which cannot be construed to be a purchase of shares and in such a situation, it would have been highly improper for the Board if such application under Sections 397 and 398 was entertained.

In fact, in M/s. World Wide Agencies Pvt. Ltd. and another Vs. Mrs. Margarat T. Desor and others, which was at length explained by me in the earlier appeal filed by the Appellants, the hon''ble Supreme Court while holding that the right given u/s 397 is to a member of the company and, therefore, unless the person is a member, he cannot maintain the said application. But there are circumstances, wherein the solution may have to be arrived in cases of oppression where the member is dead and his legal representatives are yet to be transmitted and in such cases, on equitable ground, the application can be entertained. The relevant passage of the hon''ble Supreme Court in that case is as follows:

... We are clearly of the opinion that having regard to the scheme and the purpose of Sections 397 and 398 of the Act, the reasoning on a pari materia provision of the English Act would be a valuable guide. The said construction, appears to us, to further the purpose intended to be fulfilled by petitions under Sections 397 and 398 of the Act. It facilitates solution of problems in case of oppression of the minorities when the member is dead and his heirs or legal representatives are yet to be substituted. This is an equitable and just construction. This construction, as suggested by Pennycuick, J, does not militate against either equity or justice of the such situation. We would, therefore, adhere to that construction. In this connection, it may be mentioned that in the 1972 Edition of Gore-Browne on Companies, it has been stated as follows:

It has recently been settled that the personal representatives of a deceased member, even though they are not registered as members, are entitled to present a petition u/s 210. Jermyn Street Turkish Baths Ltd., In re. Pennycuick, J held that on its true construction Section 210 required that the word "member" should include the personal representatives of a deceased member, on whom title of his shares devolved by operation of law.

Again I am unable to accept the contention of the learned Counsel for the Appellants that the ratio laid down by the hon''ble Supreme Court has to be applied to the facts of the present case. In any event, the CLB on the facts of the present case and on merit of the matter found that the Appellant has not made out a case for the purpose of entertaining application u/s 398 and also for investigation by the company u/s 235 of the Act. The elaborate contention made by the learned Counsel relating to appreciation of evidence, etc., are in my considered view not necessary for the facts of the present case for the simple reason that the entire decision given by the CLB is on the basis of appreciation of evidence and there are no question of law involved. Thus, the reliance placed by the learned Counsel for the Appellant on the judgment of the Supreme Court in Thimmappa Rai Vs. Ramanna Rai and Others, to explain about the fact of admission made by the party in the earlier proceedings as per Section 58 of the Indian Evidence Act cannot be pressed into service on the facts of the case. In fact, that was a case where, in a proceeding before the land tribunal, one of the parties has made an admission by way of declaration that the possession of the lands held by him was on behalf of the members of the family and when such a person filed a suit for partition, it was held that the earlier declaration is admissible against such person in the suit for partition. Paragraph 25 of the said judgment of the hon''ble Supreme Court is self-explanatory in this regard and the same reads as follows:

An admission made by a party to the suit in an earlier proceedings is admissible as against him. Such an admission being a relevant fact, the courts below in our opinion were entitled to take notice thereof for arriving at a decision relying on or on the basis thereof together with other materials brought on records by the parties. Once a party to the suit makes an admission, the same can be taken in aid, for determination of the issue having regard to the provisions of Section 58 of the Indian Evidence Act.

Even on the facts of the case, it cannot be concluded that on the alleged date of oppression, which according to the Appellants is relating to the further increase of the share capital of the company in order to oust the Appellants from the companies affairs, the requirement of Sections 397 and 398 of the Act has been confirmed by the Appellants, since, as found by the CLB, that the shares stood transferred from the 6th Respondent to Respondents 2 to 3.

That apart the reliance placed on the judgment of the Supreme Court in Needle Industries (India) Ltd. and Others Vs. Needle Industries Newey (India) Holding Ltd. and Others, is not relevant to the facts of the present case. That was the case where the hon''ble Supreme Court has construed the term ''just and equitable'' for deciding the charge of oppression u/s 397 of the Act.

The Division Bench judgment of this Court in AMP Arunachalam v. A.R. Krishnamurthy [1979] 49 Comp Cas 662 on which the learned Counsel has also placed reliance relates to sale of the share certificates duly signed by the transferor, which was subsequently sold to a party with a request to disharge the debts due to Defendants 1 and 2 and on the Defendants 1 and 2 having received the amount due to them directed to hand over the share certificates duly signed by the transferor to the Plaintiff, who has instituted a suit for a declaration regarding the title over the shares as stood in his name while the Defendants 1 and 2 have also filed a suit for enforcement of the right of pledge. It was in those circumstances, the hon''ble Supreme Court has held that when once the transaction is clear without any ambiguity, then the method to be followed is not much importance and it would amount only to technicality. While deciding the validity of the transfer effected between the parries, the Division Bench has observed as follows:

...In R. Subba Naidu Vs. Commissioner of Gift Tax, . the question arose whether there was a completed gift of the shares by the father to the daughter which operated with full force between the Assessee and his daughter, notwithstanding that vis-a-vis the company, he continued to be the holder of the shares in the absence of registration of the transfer in the company''s book. One of us, who was a party to the above Division Bench decision, whilst attempting to harmonise the provisions of the Transfer of Property Act and the Companies Act, observed that the transfer of the interest in the shares from the transferor to the transferee is independent of the requirement of its registration for the purposes of the Companies Act, as, without an anterior transfer, there can be no question of applying for registration of it. In all such matters, the guiding principle is whether the transferor, as donor or as seller, has done everything in his power to divest himself of title to his shares. So long as the substance of the transaction is demonstrative and clear and is not susceptible to any ambiguity, then the form or method (unless otherwise provided by any statute) by which the gift or transfer was made ought not to loom very large, insofar as common law is concerned, for a court to conclude about the validity of the transfer of the title or property in the shares to the donee or the purchaser, if the divestiture of title is complete. The only fact that certain formalities have to be gone into under the provisions of the Companies Act so as to vest a further marketable title in such shares in the purchaser would not be a bar (sic) to conclude that there has not been a valid transfer of title under the normal law of the State by the holder of the shares to the purchaser of such shares.

That was no doubt a decision by the Division Bench while deciding the validity of the factum of transfer having been effected between the parties when there was a dispute. But unfortunately, in the present case, the factum of transfer of shares itself was found to have not been proved by the Appellants and there is no record to show that the 6th Respondent has infact transferred the shares in favour of the first Appellant and, therefore, the reliance placed on the said judgment of the Division Bench is certainly of no use to the case of the Appellants.

Again the contention of the learned Counsel for the Appellants by placing reliance of the Division Bench of Patna High Court in Rameshwar Prasad Sahu Vs. Parmeshwar Prasad Sahu and Others, about the proprietary of relying on the income tax returns and admissibility of such documents in the light of Section 54 of the income tax Act has absolutely no relevance. The Division Bench in that case has no doubt held that in such cases, where documents produced before the income tax Department is sought to be relied on in a parallel proceedings, it is only the Assessee, who can be directed to produce the document. Since they are strictly confidential, such documents cannot be used by any person other than the Assessee. On the facts of the present case, reliance was placed on the income tax returns of the 6th Respondent, which does not any way affect the rights of the 6th Respondent but it was only to find out as to whether the alleged share transaction forms part of the said assessment. Nevertheless, the income tax returns based on which the assessment order passed by the income tax officer should be treated as a public document of which even a certified copy can be obtained and, therefore, it cannot be said that the reliance placed on the income tax return is either improper or illegal.

In any event, all these are the factual circumstances in which no question of law as required u/s 10(f) of the Act arise out of the order of the CLB. The jurisdiction of this Court in entertaining an appeal u/s 10(f) of the Act is certainly limited to the extent of deciding on a question of law arising out of the order of the CLB. The CLB is certainly a final authority on facts and, therefore, while exercising the powers u/s 10(f) of the Act, this Court cannot re-appreciate the evidence analysed by the CLB. Hence, interference by this Court under the said provision in appeal can be only in cases where there is either a perverse finding or finding given on no evidence or the finding is arbitrary. In my considered view, not one of such instance has arisen on a reference to the impugned order of the CLB for the court to interfere.

In Shri V.S. Krishnan and Others Vs. Westfort Hi-tech Hospital Ltd. and Others, while referring to the scope of Section 10(f) of the Act, the hon''ble Supreme Court has restricted the power of High Court u/s 10(f) only in cases where the order of the CLB is against the law, decided on irrelevant material and decided by omitting to construe the relevant materials. The relevant portion of the judgment is as follows:

It is clear that Section 10F permits an appeal to the High Court from an order of the CLB only on a question of law, i.e., the CLB is the final authority on facts unless such findings are perverse based on no evidence or are otherwise arbitrary. Therefore, the jurisdiction of the appellate court u/s 10F is restricted to the question as to whether on the facts as noticed by the CLB and as placed before it, an inference could reasonably be arrived at that such conduct was against probity and good conduct or was mala fide or for a collateral purpose or was burdensome, harsh or wrongful. The only other basis on which the appellate court would interfere u/s 10F was if such conclusion was (a) against law, or (b) arose from consideration of irrelevant material, or (c) omission to construe relevant materials.

The Andhra Pradesh High Court while referring to the earlier judgments on the issue by the hon''ble Supreme Court in Deity Pattabhiramaswamy v. S. Hanymayya AIR 1959 SC 57; Mattulal Vs. Radhe Lal, and Meenakshi Mills, Madurai Vs. The Commissioner of Income Tax, Madras, has also given elaborate scope of this Court u/s 10(f) of the Act in D. Ramkishore v. Vijayawada Share Brokers Ltd. [2008] 86 CLA 285 (AP) : [2008] 144 Comp Cas 326. The relevant portion reads as follows:

u/s 10F of the Companies Act, 1956, any person aggrieved by any decision or order of the CLB may file an appeal to the High Court on any question of law arising out of such order. It is only on a question of law, and not of fact, that an appeal would lie against the order of the CLB to the High Court. There is no jurisdiction to entertain an appeal on grounds of erroneous findings of fact, however, gross the error may seem to be, for if the question to be decided is one of fact it does not involve an issue of law - Deity Pattabhiramaswamy v. S. Hanymayya AIR 1959 SC 57. It is only an error of law which can be corrected by the High Court in exercise of its jurisdiction u/s 10F of the Companies Act. If the finding recorded by the CLB is one of law or of mixed law and fact, the High Court can certainly examine its correctness, but if it is purely one of fact, the jurisdiction of the High Court would be barred. Mattulal Vs. Radhe Lal, . A finding on a question of fact is open to attack as erroneous in law only if it is not supported by any evidence, or if it is unreasonable and perverse, but where there is evidence to consider, the decision of the CLB is final even though the High Court might not, on the materials, have come to the same conclusion if it had the power to substitute its own judgment - Meenakshi Mills, Madurai Vs. The Commissioner of Income Tax, Madras, . In between the domains occupied respectively by questions of fact and of law, there is a large area in which both these questions run into each other, forming enclaves within each other. The questions that arise for determination in that area are known as mixed questions of law and fact. These questions involve first the ascertainment of facts on the evidence adduced and then a determination of the rights of the parties on an application of the appropriate principles of law to the facts ascertained. The ultimate finding on the issue must, therefore, be an inference to be drawn from the facts found, on the application of the proper principles of law, and in such cases an inference from facts is a question of law. In this respect, mixed questions of law and fact differ from pure questions of fact in which the final determination, equally with the finding or ascertainment of basic facts, does not involve the application of any principle of law. The proposition that an inference from facts is one of law will be correct in its application to mixed questions of law and fact but not to pure questions of fact. When the finding is one of fact, the fact that it is itself in inference from other basic facts will not alter its character as one of fact - Sree Meenakshi Mills Ltd. (supra).

In view of the said limited scope of this Court in exercising its jurisdiction as an appellate authority and on the analyses of the entire fact, as stated above, I have no hesitation to hold that there is absolutely no question of law involved on the issue covered by the CLB and, therefore, looking into any angle, there is no scope for interfering with the impugned order of the CLB.

Accordingly, the appeal fails and the same is dismissed. No costs.