Mahendra H Kampani vs IFB Agro Industries Limited

Rajasekhar V.K.: Member (Judicial)

This is an appeal under sections 46(2) and 59 of the Companies Act, 2013 read with rules 5, 6 & 7 of the Companies (Share Capital & Debentures) Rules, 2014 filed by the appellants inter alia seeking the following reliefs:

(a) An order be passed directing the Respondents to record the death of late Bina M. Kampani and transmit her 1400 shares in the name of the Petitioner no.1;

(b) An order be passed directing the Respondents to issue duplicate share certificates in favour of the Petitioners with respect to their respective shareholding;

(c) An order be passed directing the Respondents to issue duplicate share certificates in respect of 1400 shares of late Bina M Kampani in the name of the Petitioner no.1 after transmission;

(d) An order be passed directing the Respondents to dematerialise the shares of the Petitioners in compliance of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 read with SEBI Circular No.SEBI/HO/DOP1/ CIR/P/2018/73 dated April 20, 2018;

(e) An order be passed directing the Respondents to grant bonus shares, if any in favour of the Petitioners that have been issued by the Respondent no.1 from 1991 till date;

(f) An order be passed directing the Respondents to grant dividends in favour of the Petitioners for the shares held by them in the Respondent No.1.

The Respondent No.1 in the appeal has filed its reply affidavit in the matter whereas the Respondent No.2 has neither filed any reply nor has cared to attend the hearing despite notices to this effect being given by this court and also by the appellants. The affidavit of service has been furnished by the appellants in this regard. The appellants have also filed a supplementary affidavit and a rejoinder affidavit to the reply of the Respondent No.2.

The appellants have prayed for grant of the reliefs sought failing which they will suffer irreparable loss, injury and prejudice.

Submissions of the Counsel appearing for the appellant

The appellants are shareholders of the Respondent No.1 Company. The appellants' shareholding is reflected in the Company's records where they are the recorded owners of the shares owned by them, save and except for the 1400 shares which were held by the late Bina M. Kampani (since deceased), the wife of Petitioner No.1 and the mother of Petitioner No.2, whose 1400 shares are still standing in her name despite her having died on 07 January 2000 .Additionally, Petitioner No.1 has inherited the 1400 shares by P2, under her will dated 15 December 1999 wherein probate was granted by the Hon’ble High Court at Calcutta on 25 August 2000.

In August 1991, one Mr. Pankaj alias Nilesh Parekh, misrepresenting himself as a registered share broker of the Calcutta Stock Exchange Association Limited, fraudulently and dishonestly induced the Petitioners and late Bina M. Kampani into executing various contracts with him for sale of their shares in the Respondent No.1.

Based on the representations of the said Mr. Parekh, the Petitioners and late Bina M. Kampani made over the share scripts of the Respondent No.1 company along with the share scripts of other companies together with blank signed transfer deeds in respect thereof to the said Mr. Parekh who duly acknowledged receipt of the shares certificates and issued post-dated cheques towards the consideration in respect thereof.

When the Petitioners and late Bina M. Kampani presented the said cheques for encashment on the due date, the same were dishonoured. The Petitioners at once realised that Mr. Parekh had cheated them, having wrongfully induced the Petitioners to part with their share certificates.

Immediately after dishonour of the said post-dated cheques, the Petitioners confronted Mr. Parekh, who admitted his guilt and apologised to the Petitioners and admitted his liability towards the Petitioners and late Bina M. Kampani vide his letter dated 26 November 1991.

Being suspicious, the Petitioners contacted the Calcutta Stock Exchange Association Limited to enquire whether Mr. Parekh is at all a registered Share Broker or a member of the Calcutta Stock Exchange Association Limited.

The Petitioners have contended that they were shocked and surprised to find from a letter dated 27 November 1991, from the Calcutta Stock Exchange Association Limited that Mr. Parekh was neither a member of the Calcutta Stock Exchange Association Limited. He is also not a registered Share Broker.

By a letter dated 25 November 1991, the Petitioners requested one B.N.K. Financial Consultants Limited (now defunct/struck off), the erstwhile Registrar and Share Transfer Agent of the Respondent No.1 Company to stop transfer of the shares standing in the name of the Petitioners and late Bina M. Kampani if the same are lodged with the said erstwhile Registrar. In reply thereto, the said B. N. K. Financial Consultants Limited vide three separate letters all dated 27 November 1991, addressed to the respective Petitioners and late Bina M. Kampani, intimated that in the absence of an Order passed by a competent court of law, the erstwhile Registrar of the Respondent No.1 is unable to take steps to stop transfer of the shares lodged with it.

The Petitioners had executed blank transfer deeds at the time of handing over of share scripts to Mr. Parekh. Since Mr. Parekh was not a member of the Calcutta Stock Exchange Association Limited, the sale transaction or contract notes entered into by and between the Petitioners and late Bina M. Kampani and Mr. Parekh in respect of the shares of the company are null and void ab initio. As a precautionary measure, the Petitioners and late Bina M. Kampani had filed a suit being Title Suit No.1945/1991 before the Learned VII City Civil Court at Calcutta, inter alia, praying for declaration and injunction in respect of the said shares. The Petitioner No.1 also filed a complaint with the Karaya Police Station against Mr. Parekh.

In the said suit, the Petitioners and late Bina M. Kampani had also moved an application under Order 39 Rules 1 and 2 read with Section 151 of the Code of Civil Procedure, 1908 and the Learned Trial Court was pleased to pass an Order of injunction dated 20 December 1991 directing the company and the erstwhile Registrar thereof not to transfer the said shares of the Petitioners and late Bina M. Kampani in the name of any other person.

The said suit was dismissed for default by an order dated 10 August 2001 due to bona fide mistake on the part of the advocate's clerk. On coming to know of such dismissal, the Petitioners had taken steps for restoration of the said suit by filing an application being Misc. Case No.4226/2001 before the Learned Trial Court. Subsequently, the said suit was restored but eventually the matter got delisted due to long pendency and lack of hearing. Later, when the petitioners caused searches in the City Civil Court at Calcutta it was found out that the records pertaining to the said suit are not traceable.

Meanwhile, the Petitioners again enquired from the company and its Registrar about the status of their shareholding in the company. The Petitioners were informed that the Petitioners and late Bina M. Kampani were still shown as the registered shareholders and owners of the said 4200 shares.

Thereafter, the Petitioners received letters dated 18 July 2018 and 17 September 2018 from the Respondent no.2 thereby intimating the Petitioners for updating of shareholders details in the records of the company and for dematerialisation of the shares as per the Securities and Exchange Board of India (SEBI) Notification No.SEBI/LAD NRO/GN/2018/24 dated 08 June 2018 followed by BSE Notification dated 05 July 2018 which has mandated that the securities of listed companies such as the Respondent No.1 is transferred (except in case of transmission transportation of securities) only in dematerialised form. As the Petitioners still hold shares in physical form in the company, the Petitioners were asked to dematerialise their shares. Along with the said letter, a form furnishing bank mandate, PAN and email registration updation was also enclosed. Similar letter was also issued to Bina M. Kampani (since deceased). The Petitioners had duly submitted the updation form furnishing details of shareholding to the Respondent No.2.

By a letter dated 30 October 2018 the Petitioner no.1 had duly informed the Respondent no.2 about the death of his wife late Bina M. Kampani and that by virtue of her probated will the Petitioner no.1 had become the owner of her 1400 shares in the company. Along with the said letter, the Petitioner no.1 had also enclosed a copy of the probate of the last will and testament of his deceased wife with a request to the Respondent no.2 to transmit his wife's shares in his name. However, the Respondents have not acted upon such request.

The Petitioner no.1 sent two letters both dated 01 December 2018 to update records and for issue of duplicate share certificates. Despite receipt of all requisite documents, the Respondents had not taken any steps to issue duplicate share certificates in favour of the Petitioners.

It is in such circumstances that the Petitioners were constrained to prefer an application being CP No.1213/KB/2019 under section 46(2) of the Companies Act, 2013 before this Tribunal, inter alia praying for directions upon the Respondents to issue duplicate share certificates in favour of the Petitioners. The said Company petition was dismissed vide order dated 18 October 2019 on the ground that the original Share Certificates were under the custody of third party, i.e., the said Mr. Parekh and hence, the original share certificates were neither lost or destroyed.

After the said order was passed, it was necessary for the Petitioners to locate the said Mr. Parekh, whose whereabouts had not been known to anybody as per the Petitioners’ knowledge. Even the service of the earlier Company Petition where Mr. Parekh was arrayed as respondent no.3 could not be effected upon Mr. Parekh and was instead returned with the remark “not found” when service was attempted at his last known address, i.e., Premises No.58, Debendra Ghosh Road, Bhowanipur, Kolkata 700 025.

The Petitioners have stated that they made all attempts to search for the said Mr. Parekh. However, despite diligent and vigorous attempts to locate Mr. Parekh, the Petitioners were unable to learn about his whereabouts.

Being left with no other option, the Petitioner No.1 was constrained to inquire about the whereabouts of the said Mr. Parekh from Karaya Police Station vide his letter dated 22 April 2021. In response, the concerned Investigating Officer, Karaya Police Station, Mr. Raj Kumar Mishra replied to the Petitioner's query vide his reply letter dated 14 July 2021 whereby the Petitioner No.1 was informed that the said Mr. Parekh had been absconding for more than eighteen years, and that his whereabouts have not been known to any person including the police.

In view of such further developments pertaining to the whereabouts of the said Mr. Parekh, the petitioners have stated that the said Mr. Parekh had disappeared and has been absconding for more eighteen years, whose whereabouts are not known to the police or any other person to the best knowledge of the police, it should be presumed that Mr. Parekh is apparently non-existent. Consequently, the only inference which can be drawn in respect of the original share certificates which had been fraudulently obtained by Mr. Parekh nearly 30 years ago is that the said share certificates are lost, duplicates in respect whereof ought to be issued to the Petitioners.

With the legal presumption that Mr. Parekh has not been known to have existed for over eighteen years, the petitioners have contended that the Petitioners’ share certificates which were in possession of the said Mr Parekh are deemed to have been lost, the recovery whereof is impossible. The petitioners have further stated that given such further developments, the case of the Petitioners for issue of duplicate share certificates is now squarely covered within the scope of section 46 of the Companies Act, 2013.

As a result of the inability to obtain duplicate share certificates, the Petitioners have stated that they are unable to dematerialise their shares in required form so as to enjoy complete rights in respect of their shareholding. Hence, the petitioners have filed the present appeal.

Submissions by Respondent No.1

The respondent No.1 has contended that when the Respondent No.1 was informed about the order of injunction passed by the Learned VII City Civil Court at Calcutta, it had immediately been able to stop the transfer of 4,100 shares out of 4,200 shares held by the Petitioners in the name of the Late Bina M. Kampani.

It has been stated that the dispute pertaining to the ownership or title of the said shares is sub judice and is pending adjudication before a court of competent jurisdiction. As the subject matter of the Title Suit filed by the petitioners pertains to the transfer of shares by the Petitioners and the title thereof, such issue having not been conclusively adjudicated upon, the Petitioners do not have the locus standi to seek reliefs for issue of duplicate share certificates. Therefore, the Respondent no.1 has stated that it is not in a position to accede to the requests of the Petitioners unless the Petitioners are able to produce appropriate order or judgment of a court of competent jurisdiction declaring the title of the Petitioners over the said shares.

The Respondent No.1 has stated that the Petitioners has also sought to make out a case for transmission of shares without any conclusive title over the same and the said issue is pending adjudication before a civil court. The transmission of shares can only be permitted in favour of the Petitioners subject to the said Late Bina M. Kampani having successfully proved her title over the said 1400 number of equity shares and moreover, her will does not refer to any shares allegedly held by her in the company.

Thirdly, the respondent No.1 has contended that the said application is barred by the principles of res judicata as the first application filed by the petitioners on the self-same cause of action being CP No.1213/KB/2019 had been dismissed by this Tribunal by way of an order dated 18 October 2019 whereby the said application had been held to be not maintainable.

The Respondent No.1 has contended that the Petitioners have also failed to make out a clear and unimpeachable title over the said shares with the pending proceedings in relation thereto before a civil court. As such, the Respondent No.1 has prayed for dismissal of the present petition.

Submissions of the Petitioners in rejoinder and supplementary affidavit:

The petitioners have contended that they are the owners of the shares in respect whereof duplicate share certificates are to be issued and this is not disputed by the Respondents. In this respect, the petitioners have disclosed in their Supplementary Affidavit the certificates issued by the Respondent No.2 (i.e., the Registrar and Share Transfer Agent of the Respondent no.1 Company) dated 04 February 2022 certifying that as per records, the Petitioners (along with the Petitioner No.1's late wife) are the recorded owners of those shares held by them in the Respondent No.1 Company, in respect whereof the duplicate share certificates have been requested for by the Petitioners.

In their rejoinder, the petitioners have stated that they have been consistently shown as the recorded owners of the said shares. The Petitioners have constantly received notices for all general meetings of the Respondent No.1 Company in their capacity as shareholders and also various notices to comply with the SEBI norms and other formalities, which have been duly complied with and submitted before the Respondent No.2 by the Petitioners.

The petitioners have stated that the Respondent No.1 having acknowledged the Petitioners (including the Petitioner No.1’s late wife) is now estopped from contending otherwise.

Analysis and findings:

We have considered the submissions made by the learned counsel on both sides and perused the records.

Since the police report on the whereabouts of Mr. Parekh is a subsequent event which conclusively proves that the petitioners’ shares are lost, were not before this Tribunal while considering CP No.1213/KB/2019, the present application cannot be held as barred by the principles of res judicata. The police report gives fresh cause of action and hence, the present application is maintainable.

On the basis of a prima facie finding, injunction order dated 20 December 1991 was passed by the Learned Trial Court in the Title Suit filed by the petitioners, thereby directing the company and its share registrar not to transfer shares to any third party. In view of the said order the company could not have transferred any shares to any person. The company has contended that subsequent purchasers of the said shares have lodged the original share certificates for transfer which could not be done due to injunction order. Moreover, the fact remains that for the last thirty years or so, no one has come forward to claim the subject shares except for the petitioners.

Though the aspect of fraud is subject matter of adjudication before the Learned Trial Court, it is noted that even as per police report the perpetrator Mr. Parekh is absconding for more than eighteen years. Section 107 107. Burden of proving death of person known to have been alive within thirty years.— When the question is whether a man is alive or dead, and it is shown that he was alive within thirty years, the burden of proving that he is dead is on the person who affirms it. of the Indian Evidence Act, 1872, deals with presumption of continuation of life, while section 108 108. Burden of proving that person is alive who has not been heard of for seven years.— Provided that when the question is whether a man is alive or dead, and it is proved that he has not been heard of for seven years by those who would naturally have heard of him if he had been alive, the burden of proving that he is alive is shifted to the person who affirms it. of the Indian Evidence Act, 1872 is about presumption of death. Read together, Since, original share certificates were given to Mr. Parekh, and Mr Parekh is now untraceable and unheard of for the last eighteen years, the said share certificates can be presumed to be lost, unless the contrary can be proved.

The petitioners have been, time and again, shown as the shareholders of the company which will be evident from the following documents:

(a) Copies of notices of Annual General Meeting for the year ending 31st March, 2019 of the Respondent No.1 Company given by the company to the petitioners including Late Bina M. Kampani in their capacity as shareholders;

(b) Two letters dated 18 July 2018 and 17 September 2018 issued by the Respondent no.2 thereby asking the Petitioners for updation of shareholders details in the records of the company and for dematerialisation of the shares as per the Notification No.SEBI/LAD NRO/GN/2018/24 dated June 8, 2018 issued by the Securities and Exchange Board of India;

(c) Certificates issued by the Respondent No.2 dated 04 February 2022 certifying that as per company records, the Petitioners (along with the Petitioner No.1's late wife) are the recorded owners of 4100 nos. of shares in the Respondent No.1 Company.

Mr. Parekh was not even a registered share broker and hence, no transaction could have been executed by him. The post-dated cheques issued by him were also dishonoured. Such fraud is admitted by Mr. Parekh in his letter dated 26 November 1991. It would appear that the company was all along aware of the fraud perpetrated by Mr Parekh.

All these documents which form part of the records of the present proceedings are either issued by the company itself or its Registrar and Share Transfer Agent. Since the company itself acknowledges the petitioners as the registered and recorded owners of at least 4100 shares out of the 4200 shares as claimed by the petitioners, there can be no impediment in the Respondent No.1 company issuing duplicate share certificates in respect of the said 4100 shares to the petitioners. This is a Möbius Strip argument, to say the least. Compliance with SEBI norms and other formalities cannot be done without having the share certificates. And the company cannot issue duplicate share certificates without SEBI compliance.

On its part, the company has a genuine fear that it might have to face litigations in case it issues the duplicate share certificates. It might also get into adverse notice of the regulatory authorities.

We have the onerous responsibility of balancing the apprehensions of both sides and doing justice between the parties. To resolve this contentious issue, we have to start somewhere. The best point is to start at the point of issue of duplicate shares in respect of the 4100 shares held by the late Ms Bina M. Kampani and the Petitioners, that are beyond the pale of any controversy. To this end, we issue the following directions: -

(a) The petitioners in question shall apply afresh to the company for issue of duplicate share certificates in respect of the 4100 shares standing in the name of Ms Bina M. Kampani, Mahencdra H. Kampani and Neha M.. Kampani in the records of the company. The application shall be accompanied by an indemnity bond in the form prescribed, and duly notarised.

(b) Upon receipt of the notarised indemnity bond, the company shall promptly publish public advertisements in two newspapers – Business Standard (English) and Anandabazar Patrika (Bengali), giving ten clear days for objections, if any.

(c) In case no objections are received by the company within the said period of ten days, the company shall proceed to issue the duplicate share certificate in respect of the shares standing in the name of the late Bina M. Kampani, Mahencdra H. Kampani and Neha M.. Kampani, immediately thereafter, and in any case, within a period of fifteen days therefrom.

(d) The parties shall take all necessary steps for dematerialisation of the 4100 shares so issued.

(e) Upon transmission of the 4100 shares in their names, the petitioners shall not alienate the shares in favour of any third parties without leave of the learned VII City Civil Court, where the issue of title of the shares is being adjudicated upon.

(f) The petitioners shall be entitled to all the benefits attached to the shares in the intervening years since the death of Ms Bina M. Kampani, including dividends and bonus shares, if any issued by the company from 25 November 1991 onwards.

With these directions Appeal No.49/KB/2021 shall stand disposed of.

Liberty to apply in case of any difficulty.

Registry is directed to email a copy of this order to the counsel on record for the parties.

Certified copies of this order may be issued, if applied for, subject to usual formalities.