BEFORE THE
COMPANY LAW BOARD, WESTERN REGION BENCH,
MUMBAI
(HEARD AT DELHI)
CP NO.35/111A/CLB/WR/99
Present: Justice A.K.
Banerji,Chairman
Shri S. Balasubramanian,Vice Chairman
In the matter of Section
111A of the Companies Act, 1956,
AND
In the matter of
V/s
Hindustan Lever Limited.
…Respondent
Present on behalf of the
parties
1. Shri N.
Hariharan, Advocate for the petitioner,
2. Shri Ajay Kumar,
Practicing Company Secretary for the respondents.
O R D E R
(Finally heard on 16.10.2001)
A.K. BANERJI
The
petitioner who is a shareholder of the respondent company has filed the above noted
petition under Section 111 of the Companies Act 1956 (the Act) alleging fraudulent
transfer of his 500 shares of the respondent
company on the basis of forged transfer deeds without proper procedure having been
followed and despite the communication for "stop transfer" sent to the respondent company. The petitioner has consequently prayed that the
respondent company be directed to restore the 500 shares to the petitioner or in the
alternative, to pay the aggregate value of the subject shares alongwith interest thereon
and also to pay the aggregate dividend on the said shares.
Compensation has also been demanded for the harassment caused to the petitioner.
2. Briefly
stated, the petitioners case as set out in the petition is that at the relevant time the
petitioner held 2196 shares of the respondent company and was surprised to receive a copy
of a communication dated 26.7.96 from the respondent company addressed to one Sunil K.Jain
C/o Vardhanan Port folio Pvt.Ltd verifying
the signature of the petitioner from its records, issued in response allegedly, of a
letter written by the petitioner . Since the
petitioner had not issued any communication to the respondent company for verification of
his signature, he contacted Shri Sunil K.Jain and was informed that some shares belonging
to the petitioner had been received for sale. The
petitioner vide letter dated 25.8.96 requested the respondent company not to transfer any
shares belonging to him till further advise and to furnish him the details of the shares
held by him to find out the exact number of shares missing from his possession. A letter was also sent to Sunil K. Jain requesting
him not to make payment towards the 300 shares received by him for transfer to anybody
except the petitioner. Vide letter dated
26.9.96 the respondent company furnished a print out of the petitioners shareholding with
them and from the details provided the petitioner was finally able to detect that 500
shares were missing from his possession The
petitioner thereafter wrote several letters to the respondent company to look into the
matter as the shares had been transferred to someone else.without obtaining clearance from
him. Ultimately vide letter dated 9.12.96 the
respondent company informed the petitioner that the said 500 shares had already been
transferred in favour of various transferees before the company received the communication
dated 25.8.96 from the petitioner stopping transfer, as the transfer deeds were valid in
all respects. Photocopy of the transfer deeds
were also enclosed. It was apparent from the
copies of transfer deeds that the same bore the forged signatures of the petitioner and
the attestation of his signatures on the said forms had been got fraudulently attested by
a bank in which the petitioner did not have
any account. As the respondent company took
no action with regard to the said shares despite several letters and legal notice the
petitioner had no option but to file the present petition for the relief mentioned above.
3. The
respondent company filed a reply to the petition and apart from raising certain
preliminary objections regarding the maintainability of the petition also stated that the
500 shares appearing in the schedule of the petition were transferred from the name of the
petitioner under valid and duly completed transfer deeds and the shares were already
dematerialised and are presently
standing in the names of various transferees in the electronic form. It was further stated that 200 shares out of the
total 500 shares were transferred between April to June 1996 prior to the communication
dated 28.8.96 stopping the transfer received from the petitioner and the balance 300 were
transferred in the month of September, 1996 as the signatures of the transferor tallied
with the records of the company and the said signatures were duly attested . The action on the part of the respondent is in
accordance with the circular dated 22.3.1993 issued by Ministry of Law,Justice and Company
Affairs, Deptt. of the Company Affairs . Consequently the petitioner was not entitled to
restoration of the said shares as claimed.
4. We have
heard the learned counsel for the parties and have perused the pleadings. On behalf of the respondent two preliminary
objections were raised at the outset namely, that
the petition filed under Section 111 of the Act was not maintainable as the said Section
did not apply in case of the respondent which was a public limited company . Secondly the petition was barred by limitation as
the cause of action arose in August/September, 1996 but the petition was filed after about
3 years. So far as the first objection is
concerned on the oral prayer made by the learned counsel for the petitioner we have
treated this petition as filed under section 111A of the Act. As regards the second objection since the
petitioner was alleging that his shares have been transferred fraudulently on the basis of
forged signature and fraudulent attestation of the same and
thus was void abinitio, in our view in such a case the period of limitation cannot
be strictly applied. We have therefore proceeded to hear this petition on merits.
5. Learned
counsel for the petitioner has submitted that the stand of the respondent company that the
500 shares were transferred prior to receipt of petitioners communication dated 25.8.96
was totally incorrect as the said 500 shares were found mentioned in the print out of the
shareholdings of the petitioner which had been sent by respondent alongwith the
communication dated 26.9.96. This clearly
means that as on 26.9.96 the shares stood in the name of the petitioner. That apart in the dividend warrant dated 1.7.96
the total shares of the petitioner were shown to be 2196 and in the interim dividend
warrant dated 4.11.96 it was shown as 1896 . The
respondent company has acted negligently in transferring the shares in question after the
petitioner had requested them to stop transfer. Besides
the transfer were made without properly verifying the signature of the transferor on the
transfer deed with the recorded signatures which clearly shows that the same were not
tallying . Attention was also drawn to the
communication dated 12.8.97 from the Manager Bank of India Shahdara Branch, which Bank was
supposed to have attested the signature of the transferor on the transfer deeds, that the
attestation was not done by any officer of the said branch.
The instruments of transfer received by the respondent company, therefore, was an apparent forgery and the same should not
have been acted upon. As there was willful
neglect and default on the part of the respondent and the possibility of the involvement
of some representative of the respondent company could not be ruled out, the refusal on
the part of the said respondent in not restoring the shares is motivated by illegal
consideration and for defeating the rightful claim of the petitioner. Consequently the reliefs sought in the petition
deserves to be granted.
6. On behalf
of the respondent it was contended as follows:-
i)
The shares of the
respondent company are listed on various Stock Exchanges. Consequently it is bound by the
Listing Agreement executed with the Stock Exchanges . Clause 12A of the said agreement
lays down that if the signature of the transferor is attested by a person authorised by
the Deptt. of Company Affairs under 108(1A) of the Act, the company shall not refuse to
transfer the share on the ground of signature difference.
In the present case the original share certificates alongwith the transfer deeds
executed and the signatures of transferor duly attested by a banker were presented to the respondent company . Therefore, in accordance with the Listing
Agreement as well as the Circular dated 22.3.1993 issued by the Ministry of Law, Justice
and Company Affairs, Deptt. of Company Affairs, New Delhi,
the respondent company had transferred the shares in question in the name of the
transferees.
ii)
Out of the 500 concerned
shares, 200 shares were lodged for transfer between January to May 1996. As there was a slight variation in the signature
of the petitioner, although the same was duly attested, the company had by way of abundant caution, sent warning notices in respect
of 200 shares to the petitioner . However, no
communication/objection was received,
consequently the shares were transferred much before the communication dated 25.8.96 of 'stop' transfer
was received by the respondent.
iii)
As regards the balance 300
shares the same were transferred on the strength of valid transfer deed as the signature
tallied with the signatures on record. Therefore,
no warning notice was given to the petitioner in respect of the said transfers and the
same were valid and in accordance with law and the procedure laid down.
iv)
The respondent company had
received an undated letter from the petitioner alongwith 7 copies of transfer deeds for
signature verification with a request to
intimate the fact to Sunil Kumar Jain at the address given in the said letter. As the signature tallied the respondent company
sent a reply dated 26.7.96 to Sunil Kumar Jain confirming the said fact. A copy of the said letter was sent to the
petitioner for information. The petitioner is
now feigning ignorance regarding the transfer transaction with ulterior motive.
v)
The petitioner has not
approached this Board with clean hands. It
has not been explained how the shares were missing from his house and how it reached S.K.Jain. Despite
knowledge no complaint was lodged with the police regarding the missing shares and on the
contrary admittedly the petitioner after discussing with
S.K. Jain who was in possession of the missing shares, addressed a letter dated 29.8.96 to
Jain to make payment of the said shares to him
only and not to anybody else. This shows that
the shares were sold to Sunil Kumar Jain and the transfer deeds in question was executed
by the petitioner himself.
7. We have
carefully considered the respective submissions made on behalf of the parties . Since strong reliance has been placed by the
respondent upon clause 12A of the Listing Agreement it will be worthwhile to notice the
said provision which provides as follows:-
"12A (1) The Company agrees that when proper
documents are lodged
for
transfer and there are no material defects in the documents except
minor difference in signature of the transferor(s).
i)
then the company will
promptly send to the first transferor an intimation of the aforesaid defect in the
documents and inform the transferor that objection, if any, of the transferor supported by
valid proof, is not lodged with the company within fifteen days of receipt of the
company's letter, then the securities will be transferred.
ii)
if the objection from the
transferor with supporting documents is not received within the stipulated period, the
company shall transfer the securities provided the company does not suspect fraud or
forgery in the matter.
(2) The
company agrees that when the signature of transferor(s) is attested by
a person authorised by the
Department of Company Affairs, u/s 108(1A)
of the Companies Act, 1956, then it shall not refuse to transfer the securities
on the ground of signature difference unless it has reason to believe that a
forgery or fraud is involved."
8. In the facts of the present case, the respondent's
letters to the petitioner filed as annexures A1 to A4 discloses that as there was some
minor difference in the signature of the transferor on the transfer deeds pertaining to
200 shares a warning was issued, as required
under Clause 12A (1) (i) of the Listing Agreement however, the transferor did not respond
to the said notice and therefore the respondent company cannot be legally blamed for transferring the said shares in the name of the
transferees. That apart the said transfer for 200 shares were effected between April to
June 1996 as per the details in paragraph 6 of the respondents reply, much before the
petitioner's communication dated 25.8.96 was received.
So far as the 300 shares were concerned, according to the respondents they did not find any difference in signature and as the shares certificates were accompanied by
valid transfer deeds duly stamped and executed on behalf of the transferor as per the
provisions of Section 108 of the Act and the signature of transferor were attested by the
proper authority the respondent company transferred the same without any further
intimation to the petitioner. Therefore no exception can be taken to the action of the petitioner which was also in accordance with the Circular No.3/93
(No.3/4/92 CLC .V) dated 22.3.1993 issued by the Ministry of Law, Justice and Company
Affairs, Deptt of Com. Affairs , New Delhi which laid down that in case the signatures of
the transferors did not tally with that on record, the same could be accepted if attested
by the authorities mentioned in the circular including the transferors bank . In the present case all the signature of the
transferor on the 500 shares in question were attested by the bankers. Consequently the respondent company was legally
obliged to transfer the said shares in favour of the transferees as it was not required to
verify at that stage whether attestation was genuine.
We therefore find substance in the submission made on behalf of the respondent, and are unable to accept the
submission of the petitioner that the transfer of the 500 shares were improperly and
illegally done.
9. That apart
we find force in the submissions made on behalf of the respondent that the petitioner has
not explained how the shares were missing from his house and why no complaint was lodged
to the police after having come to know that the shares in question were missing and were
in possession of the broker for the purpose of sale. In the letter dated 29.8.96 addressed
to said Jain the petitioner was wanting that payment for the said shares be made to him
only. If these shares had actually been
lost, Shri Jain could have been in possession of these shares and the petitioner would not
have asked Shri Jain to make payment only to him. This conduct does create some doubts
regarding the bonafide of the petitioners case.
10. There is another
aspect of the matter . In paragraph 6 of the
reply filed by the respondents they have mentioned the dates of the lodgement of the
shares as well as the date of transfer and the name of the transferees. It also discloses that all the disputed 500 shares
had been dematerialised. That apart the
respondent company has also furnished names and addresses of the concerned transferees
including NSDL to the petitioner vide their letter dated 2.4.2001 but despite the same the
petitioner has not initiated any steps to implead them as parties to the present
proceedings. After dematerialisation of
shares, the company has no control over, the
movement of dematerialised shares which may have changed hands several times over and the
identity of the shares has been lost. In the
absence of the aforesaid parties as well as the brokers (especially Shri Sunil Kumar Jain)
through whom the transaction had taken place it will not be possible to prove that there
was fraud and forgery in the transfer of the said 500 shares. This Board had in the case of Subhash Chandra Vs. Vardhman Spinning Mills (1994) 13 CLA 385 held that all persons to whom shares were
transferred subsequent to the registration should be impleaded as parties before
rectification of the register of members or to restore statusquo ante could be ordered. As the petitioners have not impleaded the
transferees as well as the brokers through whom the transaction had taken place, the
petition suffers from a serious defect of non joinder of necessary parties. Besides no effective order can be passed in their absence.
11. For the reasons stated
above, the petition deserves to be dismissed and is hereby dismissed. No order as to cost.
(S. BALASUBRAMANIAN)
(A.K. BANERJI)
New Delhi,
Dated the January, 2002.