C.P. No. 17 of 2013 and C.A. No. 137 of 2014. Case: 3A Capital Services Limited Vs HMG Industries Limited and Ors.. Company Law Board

Case NumberC.P. No. 17 of 2013 and C.A. No. 137 of 2014
Party Name3A Capital Services Limited Vs HMG Industries Limited and Ors.
CounselFor Appellant: Rajeev Panday, Arun K. Shilwant, Advocates and Jigarkumar Gandhi, PCS and For Respondents: M.P. Rao, Sr. Counsel and Ramesh Mishra
JudgesAshok Kumar Tripathi, Member (J)
IssueCompanies Act, 1956 - Sections 111, 111(4), 111A, 111A(2), 17, 391, 394; Reserve Bank Of India Act, 1934 - Section 45IA
Judgement DateJanuary 07, 2015
CourtCompany Law Board


Ashok Kumar Tripathi, Member (J), (Mumbai Bench)

  1. The above captioned petition has been filed by the Petitioner Company (hereinafter referred to as "the Petitioner" in short) under Section 111A(2) of the Companies Act, 1956 (hereinafter referred to as "the Act" In short) seeking an order thereby directing the Respondent No. 1 Company (hereinafter referred to as "the Company" in short) to register 5,00,000 Preference Shares held by the Petitioner in the Company and rectify its Register of the Members in respect of the shares in question.

  2. At the outset, I would like to narrate the undisputed facts of the case in short herein as under:-

    2.1. The Company was incorporated on 28/09/1987 as a Public Company Limited by shares under the Companies Act, 1956.

    2.2. The Petitioner had purchased 5,00,000/- Preference Shares from the ICICI Bank, the Respondent No. 2 herein, for consideration and the said Preference Shares were transferred by the ICICI Bank in its favour, along with all attached rights thereto and thus the Petitioner has acquired all the rights, interest and title in the said shares.

    2.3. After acquisition of the shares-in-question as aforesaid, the Petitioner lodged the share certificates, along with share transfer forms duly executed by the Transferor and Transferee, in accordance with law, with the Company, along with the letter dated 4/6/2012, which was delivered to the Company on 11/6/2012. In response to the Petitioner's letter dated 4/6/2012, Mr. Edgar John Kamath, the Director of the Company, issued a fetter dated 20/6/2012, for and on behalf of the Company, to the Petitioner, inter alia seeking time for a personal meeting with the Manager of the Petitioner to discuss the issue with respect to transfer of the shares-in-question. However, the Company vide its subsequent letter dated 30/7/2012 raised certain objections regarding transfer of the said shares. Thereafter, the said Director of the Company personally visited the office of the Petitioner and after having discussions, he promised to transfer the shares-in-question. When the Petitioner did not receive any response, they wrote a letter dated 25/9/2012 to the Company reiterating the request for transfer of the said shares with Immediate effect. Instead of complying with the request of the Petitioner for transfer of the said shares, the Company vide its letter dated 3/10/2012 rejected the application of the Petitioner for transfer of the said shares and asked the Petitioner to approach the competent forum for redressal of its grievances, if so advised.

  3. It is the case of the Petitioner that the reasons for rejection of the request for transfer of the shares-in-question by the Company are mala fide, arbitrary and against the basic principles governing the law of natural justice, which defeat the fundamental right of the shareholder/Petitioner with respect to marketability of the shares held by it in the Company and which is also against the public policy. It is, therefore, submitted that refusal by the Company to register/transfer of 5,00,000 Preference shares is without sufficient cause, and hence, this petition for the following reliefs:-

    a) To pass a mandatory order thereby directing the Respondent No. 1 Company and the other Respondent Directors to transfer the 5,00,000 (Five Lacs Cumulative Redeemable Preference Shares) as mentioned in the Petition in favour of the Petitioner.

    b) To pass an order thereby directing the Respondents, pending the transfer of the said shares, to restrain from creating third party rights and interest and further to restrain from transferring the said shares to any other person,

    c) To pass an order thereby directing the Respondent Company to pay costs of the Petition and incidental expenses to the Petitioner,

  4. The Respondent Nos. 1 and 3 to 5 (hereinafter referred to as "the Answering Respondents) appeared and filed their reply justifying the reasons for rejection of transfer of shares-in-question in favour of the Petitioner, which are stated here as under:-

    4.1. Because, the shares in question were acquired by the Petitioner which were the subject matter of the scheme under Section 391/394 of the Act as approved by the Hon'ble High Court of Bombay in Company Petition No. 236 of 2005, and therefore, the transfer of the shares by the erstwhile owner i.e. the Respondent No. 2 Bank, in favour of the Petitioner, is unlawful.

    4.2. Because, the alleged transfer of the shares was in violation of the RBI Guidelines on the part of the seller i.e. the Respondent No. 2 Bank, while selling the non-performing financial assets i.e. the shares-in-question.

    4.3. Because, the erstwhile owner of the shares in question has no authority to sell the said shares, no proper resolution was passed by its Board of Directors, and similarly, the Petitioner has no authority to purchase the said shares, as required by law.

    4.4. Because, the seller had not given intimation to the Company before sale of the said shares, as required by Articles of Association of the Company.

  5. On the aforesaid grounds, which shall be elaborately dealt with hereinafter in the course of appreciation of the contentions advanced by the Ld. Counsels representing the parties, the Answering Respondents have prayed for dismissal of the petition. In addition to above, the Answering Respondents have sought dismissal of the petition inter alia on two preliminary grounds. Firstly, the petition is barred by limitation and secondly, serious question with respect to title of the shares is involved. It may be mentioned here that the Respondent No. 2 neither appeared nor filed any reply to the Petition.

  6. I have heard the Ld. Counsels appearing for the respective parties at length and perused the record.

  7. First, I proceed to deal with the preliminary objections. According to the Ld. Counsel for the Answering Respondents, the petition is time barred, and therefore, deserves to be dismissed at the threshold stage on the ground of limitation. The other preliminary objection raised by the Ld. Counsel for the Respondents is that, from the pleadings, serious question of dispute pertaining to the title of shares arises in the proceedings which cannot be decided in the summary proceedings and, therefore, a suit would be the proper remedy. The Ld. Counsel to support the said preliminary objection has relied upon the decision in the cases of [1] Dr. Mahesh Batra and Others vs. Gujarat Beverages (P) Ltd. and Others (2004) 5 Comp. LJ 550 (CLB) [2] Bharat K. Gajjar and another vs. Castrot India Limited and others, (2003) 115 Comp Cas 396, and [3] Sengupta vs. Hindustan Construction Company (2002) 112 Comp Cas 166.

  8. As regards limitation, from perusal of Section 111(4) of the Act, it is noted that the said provision, although does not specifically provide the period of limitation, however, in my view, the...

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