Raman Chadha vs Basti Sugar Mills Co. Ltd.

Manmohan, J.—The present appeal has been filed u/s 10F of the Companies Act, 1956 (for short "the Act") challenging the order of the Company Law Board dated September 9, 2011, by virtue of which the appellant''s petition u/s 111A of the Act for rectification of the share register has been dismissed. It is pertinent to mention that the appellant-petitioner claims that his father had transferred the shares to him in the year 2001. The Company Law Board while dismissing the appellant''s petition has observed as under:

Considering the facts of this case it is noted that no case has been made out u/s 112 of the Act, the petitioner''s claim is untenable, as the managing director, who is said to have colluded with the petitioner and his father (Shri H.K. Chadha who also was the statutory auditor of the respondent-company), cannot be said to be the person issuing certificated instrument and having been authorised to issue such so called instrument of transfer on the company''s behalf. The petitioner''s claim of deemed certification fails and the case of the respondents'' regarding the alleged collusion is prima facie made out, the documents seem to self-serving documents prepared with the motive to get over the debarring provisions of a statutory auditor, this finding is confirmed by the fact that the normal procedure for transfer has not been followed by the petitioner and his father, the statutory auditor of the company. There is no answer to the respondents contention that the reverse side of the share certificate does not have a valid transfer endorsement, there is no seal as well. There is no question of the respondent-company replying to the petition allowing or refusing of transfer when the proper documents have not been filed with the company, the receipt is by a company secretary, managing director is directly endorsing and returning it to the petitioner, this is certainly not the normal procedure followed in a company. The chronology of events and the manner and the timing of the claim all indicate towards this proxy litigation to get an entry in the company as a statutory auditor, get the disqualification removed retrospectively. Such a proxy litigation cannot be permitted. There is no dispute with the case law cited, but each case turns on its own facts. In the present case in law and on facts the petitioner''s case fails, the respondents'' contentions including the list of shareholders in the annual returns filed with the Registrar of Companies which is a prima facie evidence remains unrebutted, uncontroverted.

Mr. Naveen Chawla, learned counsel for the appellant submits that the impugned order is based on surmises and conjectures and has not dealt with the documents relied upon by the appellant, namely, share certificate executed by the then managing director of the respondent-company, the share transfer form duly signed by the company secretary at page 44 of the paper book and list of shareholders prepared by the account officer of the respondent-company at page 139 of the paper book.

Mr. Chawla, learned counsel for the appellant also points out that the original share transfer register had not been produced by the respondent-company during the proceedings before the Company Law Board.

Mr. Chawla lastly states that the respondent-company''s first response vide its letter dated January 10, 2007, to the appellant-petitioner''s request for notice was clearly evasive. According to him, if the appellant-petitioner was not a shareholder, the respondent-company would have taken a categorical stand in the first instance itself.

Mr. Alok Agarwal, learned counsel for the respondent-company, who appears on caveat, submits that the initial petition as well as the present appeal has been filed by the appellant-petitioner for collateral purpose at the instance of his own father who was the previous statutory auditor of the respondent-company. Mr. Agarwal points out that until the share register is rectified, the appellant''s father would not be qualified to be appointed as a statutory auditor of the company. Mr. Agarwal states that the appellant-petitioner''s father has initiated a number of litigations against the respondent-company. He also states that the documents referred to and relied upon by Mr. Navin Chawla, learned counsel for the appellant are self-serving documents which have been fabricated by appellant''s father in collusion with the previous management of the respondent-company. Learned counsel for the respondent points out that the management of the respondent-company had changed hands on October 30, 2005.

Mr. Agarwal further states that the respondent-company while shifting its registered office, had lost certain documents including its, share register and the appellant-petitioner having come to know of the said fact, had fabricated the above transfer documents.

Mr. Agarwal, points out that in the contemporaneous shareholders list filed with the Registrar of Companies, it is the appellant-petitioner''s father who has been shown as the shareholder.

During the course of arguments, Mr. Agarwal, pointed out number of discrepancies in the share transfer form as well as the share certificate referred to and relied upon by learned counsel for appellant. He submits that the collusion and conspiracy between the previous management of the respondent-company and the appellant''s father would be apparent from the fact that the share transfer form is in the possession of the appellant-petitioner and not the respondent-company.

Having heard the parties at length, this court is of the view that an appeal u/s 10F of the Act lies only on a question of law. Undoubtedly, a perverse finding also gives rise to a question of law, but in the present case, this court finds no perversity in the impugned order.

In fact, the share certificate as well as the share transfer form relied upon by Mr. Chawla, learned counsel for the appellant do not bear any transfer number, ledger folio number as well as stamp/seal of the company. Even with regard to the non-production of the original share transfer register, the respondent-company has given a legally valid explanation. Moreover, this court has also perused the annual returns filed contemporaneously in accordance with the statutory provisions by the previous management of the respondent-company with the Registrar of Companies for the years 2002, 2003, 2004 and 2005. The certified copies of the said records clearly show that it is the appellant-petitioner''s father who is the shareholder of the respondent-company and not the appellant-petitioner. Consequently, this court is of the opinion that the Company Law Board in paragraph 11 of the impugned order has rightly concluded that these public documents "completely demonstrate the falsity of the case filed by the petitioner". Accordingly, this court is of the view that the present appeal is devoid of merit and is accordingly dismissed, but with no order as to costs.