Case: Dr. C. Uma Vs Satyam Computer Services Ltd. and Ors.. Company Law Board
| Judges | K.K. Balu, Vice-Chairman |
| Issue | Company Law |
| Citation | [2010] 154 CompCas 114 (CLB) |
| Judgement Date | August 17, 2009 |
| Court | Company Law Board |
Order:
K.K. Balu, Vice-Chairman, (Chennai Bench)
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This company petition has been filed under Section 111A(2) read with Section 111(4) of the Companies Act, 1956 ("the Act") seeking directions against M/s. Satyam Computer Services Ltd. ("the company") (a) to rectify the register of members by registering the petitioner as owner of 12,000 equity shares; (b) to direct the respondents to pay a sum of Rs. 71 lakhs by way of damages, suffered by the petitioner on account of the wrongful actions of the respondents, in terms of C.A. No. 4 of 2009; and (c) to pay all dividends, rights shares, bonus shares declared from time to time and any other accruals with respect to 12,000 equity shares together with interest at the rate of 12 per cent. per annum from the date of payment of dividend, for the reasons set out therein.
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Shri R. Murari, learned Counsel, representing the petitioner, while initiating his arguments, submitted:
The petitioner purchased 1,000 equity shares of the company in February, 1994, from one Meenakshi Shah, Durgapur, West Bengal, paying the full consideration and took delivery of the share certificates along with the signed transfer deeds in April, 1994, from her sub-broker. The petitioner had thereafter sent on May 3, 1994, to the company by registered post the share certificates along with duly executed share transfer deeds for effecting registration in her name, which were received by the company. The petitioner never received any communication from the company for a long time and ultimately by an e-mail sent on March 8, 2000, reported that the fifth respondent, being the share transfer agent, had duly transferred the entire shares in her name. Nevertheless, the petitioner neither received the share certificates nor any particulars of the despatch from the respondents. In the meanwhile, the aforesaid 1,000 shares purchased by the petitioner became 1,200 shares by virtue of the issue of rights shares, which in turn became 2,400 shares, pursuant to bonus shares issued by the company, out of which 1,200 shares were given by the company and the present claim is in respect of the remaining 1,200 shares, being the subject-matter of the company petition. The respondents have, therefore, wrongfully and without sufficient cause failed to enter the name of the petitioner in the register of members. By reason of such failure and negligence, the respondents permitted further illegal dealings in the shares in the names of third parties, some of which occurred as early as on April 29, 1995, August 16, 1996 and September 9, 1997, even though no transfer deed was ever executed by the petitioner, as admitted by the company in its undated communication sent to the petitioner. Due to split of shares at the rate of 1: 5,1,200 shares of Rs. 10 each became 6,000 shares of Rs. 2 each and on issue of bonus shares at the rate of 1: 1, those 6,000 shares of Rs. 2 each became 12,000 shares of Rs. 2 each. The total shares due to the petitioner as on date account for 12,000 shares of Rs. 2 each. The withholding of 12,000 shares (1,200 = 6,000 = 12,000) by the respondents is unlawful and intended to cause wrongful loss to the petitioner. The petitioner came to know in the course of the discussion with the fourth respondent, the executive assistant of the company, on February 24, 2000, that the impugned shares had been wrongly transferred to certain other persons, which is clearly unauthorised and unlawful in the eyes of law. The third respondent, being a company secretary of the company realising the seriousness of such illegal transfer of shares, invited the petitioner for discussions on May 1, 2000 and forced her into accepting only 50 per cent. of the shares to which she was entitled, namely, only 1,200 shares out of the total of 2,400 shares. The petitioner was pursuing the issue for about six years and therefore, compelled and coerced to accept, the offer made by the third respondent, in terms of her communication dated May 3, 2000, thereby giving up her allegations of misappropriation committed by the respondents. The aggregate value of the then existing 2,400 shares had once appreciated to Rs. 1.5 crores, which was equivalent to Rs. 625 per share and by forcing the petitioner to accept only 1,200 shares, she was put into a loss of Rs. 75 lakhs, on account of the wrongful and unauthorised acts of the respondents. This caused the petitioner mental agony, inducing her to accept involuntarily 1,200 shares offered to her in May, 2000. The petitioner caused a legal notice dated January 23, 2006, calling upon the company to allot/return 12,000 shares, which came to be refused by way of a reply notice dated February 27, 2006, by the company. The Supreme Court held in National Insurance Co. v. Boghara Polyfab P. Ltd. Civil Appeal No. 5733 of 2008 that (a) a person may sometimes have to succumb to the pressure of the other party to the bargain who is in stronger position; (b) the public sector undertakings would have an upper hand; (c) mere execution of a full and final settlement receipt or a discharge voucher is a bar to arbitration, even when the validity thereof is challenged by the claimant on the ground of fraud, coercion or undue influence; (d) if in a given case, the consumer satisfies the consumer forum that the discharge voucher was obtained by fraud, misrepresentation, undue influence or the like, coercive bargaining compelled by circumstances, the authority before whom the complaint is made would be justified in granting appropriate relief; (e) the courts will strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between the parties who are not equal in bargaining power; and (f) if the discharge is under economic duress on account of coercion, the discharge cannot be considered to be voluntary or having resulted in discharge of the contract by accord and satisfaction. Being in financial difficulties, the discharge by the claimant in full and final settlement, cannot be voluntary but under duress, compulsion and coercion and not by free consent.
The petitioner anticipating that the share prices will improve, did not claim any damages on account of the wrongful actions of the respondents. However, by reason of the recent scam in the company, the price of its shares has since fallen to Rs. 34 as on January 12, 2009. Consequently, the value of the aforesaid 12,000 shares would only be Rs. 4 lakhs. This loss has been caused to the petitioner by reason of default of the company in providing the said 12,000 shares. The petitioner is entitled to damages in a sum of Rs. 71 lakhs representing the loss caused to her on account of the wrongful actions of the respondents. This Bench may direct the company to pay a sum of Rs. 71 lakhs towards damages, in exercise of the powers under Section 111(5)(b) of the Act, which is also made applicable to the proceedings under Section 111A, by virtue of Section 111A(7) of the Act, towards which the petitioner may be permitted to amend the main petition, as claimed in C.A. No. 4 of 2009.
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Shri L.V.V. Iyer, learned Counsel, opposed the company petition, on the following grounds:
The company is a public limited company, but the company petition has been filed under Section 111 of the Act, which is applicable in case of private companies. Section 111A(2) relates to refusal to register the transfer of shares, while the issue in the present case does not pertain to refusal to register the transfer of shares and hence the company petition is liable to be dismissed in limine. The Madras High Court held in NEPC Micon Ltd. v. Sashi Prakash Khemka [2007] 137 Comp Cas 917, that by virtue of insertion of Section 111A with effect from September 20, 1995, remedies relating to the public companies came to be governed only under Section 111A of the Act. Sub-section (7) of Section 111A provides that the provisions of Sub-sections (5), (7), (9), (10) and (12) of Section 111 shall, so far as may be, apply to the proceedings, before the Company Law Board under this section as they apply to the proceedings under that section. The Supreme Court in Dr. Pratap Singh v. Director of Enforcement AIR 1985 SC 989, while interpreting the words "so far as may be" held that "those...
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