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Akhil Pandey v/s Karvy Consultants Ltd.


Company & Directors' Information:- KARVY CONSULTANTS LIMITED [Active] CIN = U74140TG1981PLC003122

Company & Directors' Information:- AKHIL INDIA PRIVATE LIMITED [Active] CIN = U51109JK2000PTC002046

Company & Directors' Information:- AKHIL CORPORATION PRIVATE LIMITED [Under Process of Striking Off] CIN = U74900TG2015PTC098902

    C.P. NOS. 226/113(3)/SRB of 2000 AND 19/111A/SRB of2001

    Decided On, 12 April 2007

    At, Company Law Board Southern Region Bench Chennai

    By, K.K. BALU
    By, VICE CHAIRMAN

    D.B. Saxena for the Petitioner. S. Ravi for the Respondent.



Judgment Text

1. This Bench by a common order dated 6-9-2002 made in C.P. No. 226 of 2000 filed under section 113(3) of the Companies Act, 1956 (?the Act?) for delivery of the original share certificates comprising of 200 equity shares of Rs. 10 each (Rs. 2 with effect from 25-8-2000) of M/s. Satyam Computer Services Limited (?the Company?) together with 200 bonus shares (?the impugned shares?) thereof and C.P. No. 19 of 2001 filed under section 111A of the Act for rectification of the register of members of the Company in respect of the impugned shares, directed the Company to pay the price of the impugned shares to the petitioner at the highest rate prevalant in Mumbai Stock Exchange between the period of lodgement of the share certificates by the petitioner on 6-5-1996 and the date of effecting registration of the transfer, namely, 31-8-1996 together with simple interest at 10 per cent till the date of payment and cost of Rs. 10,000. The petitioner, aggrieved by the reliefs granted in the company petitions, preferred an appeal in C.A. No. 12 of 2003 before the High Court of Judicature, Andhra Pradesh at Hyderabad, upon which, the order dated 6-9-2002 of the Bench came to be set aside on 28-2-2006 thereby remitting the matter to the Bench for fresh consideration, in the light of the following observations, made in the judgment of the High Court :?


?Having recorded a specific finding that the first respondent company was negligent in not effecting transfer and having relied upon the judgment in the Bahia and San Francisco Railway Company Limited?s case which laid down that the company was liable for damages on account of acting on the basis of a forged instrument of transfer of shares, the learned Board failed to assess the damages and award the same. It may be realized that directing the first respondent-company to pay the price of the impugned shares with the simple interest at the rate of 10 per cent by no stretch of the imagination tantamount to assessment of damages and eventually awarding the same in favour of the appellant. Indeed there has been no attempt to assess the damages. Awarding costs of Rs. 10,000 equally cannot be considered as damages. It is trite that costs shall follow the event. The amount of damages assessed duly shall have to be paid with interest from the appropriate date till realization. In any view of the matter, the learned Company Law Board did not assess any damages having reached the conclusion that the first respondent-company was negligent. Since it is a matter where the damages have to be assessed on some reasonable criteria; making an endeavour to do the same in this appeal, in my considered view, is not appropriate since original Court viz., the Company Law Board here has virtually made no effort in that regard, assessment of damages shall have to be made on some factual foundation. Therefore, there is no other go except to remit the matter for fresh consideration by the Company Law Board, Southern Region Bench, Chennai.?


2. Shri D.B. Saxena, learned Counsel appearing for the petitioner pointed out that in view of the judgment of the High Court, the petitioner is entitled to damages at the highest share price prevailing from 1996 till the date of filing the petition under section 113(3) of the Act, namely, 22-6-2000, which stood at Rs. 7,225 per share as at 7-3-2000 in terms of the chart depicting the share value, produced before the Bench. In addition, the petitioner is entitled to bonus shares or its equivalent at market value, unpaid dividend on 400 shares amounting to Rs. 15,000 together with interest for the period from 7-3-2000 at 12 per cent, costs aggregating Rs. 25,000 and punitive damages of Rs. 5 lakhs, for causing mental agony and harassment to the petitioner for 7 long years of litigation, and for deliberate negligence of the Company which perpetuated forgery and fraud aggregating Rs. 56,55,400 as tabulated here below :


S.No. Particulars of claim Rate Amount


(in Rs.)


1. 200 shares purchased on 15-4-1996

@ Rs. 7,225 per share being the highest share price prevalent at BSE on 7-3-200014,45,000


2. 200 bonus shares issued by the respondent in the ratio 1:1

- do -

14,45,000


3. Dividend on unpaid 400 shares to the applicant

Rs. 15,000

15,000


4. Interest on the aggregate value of 400 shares (1&2 above) at BSE

@12% p.a. from 8-3-2000 till date of application

22,19,520


5. Interest on unpaid dividend of Rs. 15,000

@ 12%

11,700


6. Costs of the Company appeal

Rs. 25,000

25,000


7. Costs of the initial petitions under sections 111A and 113 of the Act filed by the petitioner before the board including counsel fee

Rs. 25,000

25,000


8. Punitive damages

Rs. 5,00,000

5,00,000


Total 56,86,200




S.No.

Particulars of claim Rate

Amount

(in Rs.)


Less: Rs. 30,800 paid by the Company in terms of order dated 6-9-2002

(-) 30,800


Amount payable:

56,55,400


The aforesaid sum of Rs. 56,55,400 is the minimum damages along with interest and cost payable by the Company and therefore, sought for appropriate directions against the Company, in the light of sub-section (7) of section 111A read with section 111(5)(b) of the Act. This sub-section empowers the Company Law Board to order rectification of the register and also direct the Company to pay damages sustained by any party aggrieved. Any rectification operates retrospectively and hence the petitioner is entitled to bonus shares and dividends. Where a party sustains a loss by reason of breach, he is so far as money can do it to be placed in the same situation as if the contract has been performed. The price of shares of the Company touched the highest in March, 2000 at Rs. 7,225 per share of Rs. 10 each and the petitioner would have sold the impugned shares at this rate, which was lost on account of unlawful conduct of the Company, entitling the petitioner for large damages, as observed by Gibbs Chief Justice in Merest v. Harvey [1813] 5 Tauntan 443. The damages of Rs. 5 lakhs claimed by the petitioner is reasonable in the light of the following observations of the High Court :?


?That relief granted by the Company Law Board in favour of the appellant is commensurate with the damage done to him while resorting to forgery of the transfer forms, or not is the mute question.?


The Company had adopted a callous attitude and chose not to reply to the complaint of the petitioner. The Company further made a false statement to Securities and Exchange Board of India stating that the matter has been resolved, forcing the petitioner to approach the CLB for appropriate reliefs.


3. Shri S. Ravi, learned Counsel, representing the Company, opposed the claim of the petitioner, on the following among other grounds :


The CLB directed not merely the purchase price of the shares but on the contrary the price of the shares which was the highest in the Mumbai Stock Exchange during the period 6-5-1996 to 31-8-1996 together with interest at 10 per cent with effect from 31-8-1996 till the date of payment and cost of Rs. 10,000. The Company has complied with the order of the CLB and made payment to the petitioner, which accounted for Rs. 30,800. The petitioner is not entitled for damages at the highest share price prevailing from 1996 till the date of filing of the petition under section 113(3) of the Act. No such inference can either be drawn from the judgment of the High Court. Furthermore, the petitioner ought to have sought the remedy under section 113, as on the date of cause of action, namely, in 1996. The petitioner, cannot, therefore, take advantage of his own delay in seeking the remedy. Neither the High Court nor the CLB granted any relief with regard to the claim of the petitioner towards the bonus shares declared in the year 1999. The claim for damages in respect of the bonus shares does not lie. Similarly, there is no direction to make payment of any dividend, as claimed by the petitioner. The claim towards interest on the unpaid dividend, market value of the shares, costs and punitive damages sought by the petitioner is rather imaginary. The petitioner has taken the highest price prevailed on a particular day and for a particular moment as the basis for calculation of damages, which cannot be countenanced. The petitioner having purchased 200 shares for Rs. 11,410 is claiming damages at Rs. 56.55 lakhs, which cannot be countenanced. The entire claim of the petitioner is far beyond the scope of remand made by the High Court. The CLB in its order dated 6-9-2002 has correctly arrived at the quantum of damages payable to the petitioner. Where no rectification can be ordered, no question of damages would arise, as held in Praga Tools Corpn. Ltd. v. M.R. Patny AIR 1968 AP 320. This proposition has neither been urged in the appeal nor considered by the High Court. Hence, this plea can be raised at this stage. The cause of action arose on 31-8-1996. The first petition (C.P. No. 226 of 2000) was filed on 22-6-2000 and the second petition (C.P. No. 19 of 2001) was filed on 18-9-2001, whereas the damages have been claimed as on 7-3-2000, which is impermissible under law. Furthermore, remoteness of damages cannot be considered and therefore, the claim of the petitioner is liable to be rejected.


4. I have considered the pleadings and arguments of the learned Counsel for the parties. It is on record that by a common order dated 6-9-2002 made in C.P. No. 226 of 2000 for delivery of the original share certificates comprising of 200 equity shares of Rs. 10 each of the Company together with 200 bonus shares thereof and in C.P. No. 19 of 2001 for rectification of the register of members of the Company in respect of the impugned shares directed that the Company shall pay the price of the impugned shares to the petitioner at the highest rate prevalent in Mumbai Stock Exchange between the period of lodgment of the share certificates by the petitioner on 6-5-1996 and the date of effecting registration of the transfer, namely 31-8-1996 till date of payment together with simple interest at 10 per cent and cost of Rs. 10,000. However, in the appeal preferred by the petitioner, the High Court of Judicature, Andhra Pradesh at Hyderabad concluded that the CLB having recorded a specific finding that the Company was negligent in not effecting the transfer, failed to assess the damages and further held that merely directing the Company to pay the price of the impugned shares with the simple interest by no stretch of imagination tantamount to assessment of damages and therefore remitted the matter for fresh consideration by the Bench. Against this background the petitioner is now seeking an amount of Rs. 56,55,400 by way of minimum damages along with future interest and cost of the present application. It is on record that the petitioner had purchased 200 shares of

the Company on 15-4-1996 for Rs. 11,400 upon which the share certificates along with the transfer forms were reportedly forwarded on 6-5-1996 to the second respondent (C.P. No. 19 of 2001) being Registrar and Transfer Agents for the Company for effecting the transfer in favour of the petitioner. Nevertheless, the petitioner had filed C.P. No. 226 of 2000 on 22-6-2000 seeking delivery of the share certificates and C.P. No. 19 of 2001 on 18-9-2001 for rectification of the register of members of the Company. The impugned shares purportedly came to be transferred in favour of the petitioner and his spouse as early as on 15-5-1996 and despatched the share certificates to the petitioner on 24-6-1996 by registered post in terms of the postal receipt produced at the time of hearing of the company petitions. According to the Company, the impugned share certificates were lodged by the transferees namely, fourth respondent upon which the transfer was registered on 31-8-1996 in favour of the transferees. This Bench on a careful consideration of the share transfer forms unequivocally came to the conclusion that the signature of the petitioner?s wife in the transfer forms was obviously forged and found that the transfer effected by the company on the basis of a forged share transfer forms is a nullity. Nevertheless, the impugned shares were found to be transferred from time to time in favour of the third parties, who are bona fide purchasers. In these circumstances, the company is wholly at fault in effecting registration of the transfer in favour of the transferees and hence directed the company to pay the price of the impugned shares in favour of the petitioner at the highest price which was prevalent in Mumbai Stock Exchange between the period of lodgment of the share certificates by the petitioner on 6-5-1996 and the date of effecting registration of the transfer, i.e., 31-8-1996 with simple interest at the rate of 10 per cent with effect from 31-8-1996 till the date of payment and awarded the cost of Rs. 10,000 to the petitioner to be paid by the company. This Bench declined the reliefs in respect of bonus shares which were issued in August 1999 and the dividend amount declared for the years 1996-1999 especially when the company effected registration of the transfer as early as on 31-8-1996. The High Court while remitting the matter for fresh consideration by the CLB pointed out that ?directing the first respondent company to pay the price of impugned shares with simple interest at the rate of 10 per cent by no stretch of the imagination tantamount to assessment of damages? and accordingly directed the CLB to assess duly the amount of damages to be paid to the petitioner with interest from the appropriate date till realisation. In this connection, learned Counsel appearing for the Company pointed out that any loss has to be ascertained as at the date of breach but not the subsequent time. It is not under dispute that the cause of action arose as early as on 31-8-1996, when the impugned shares were transferred by the Company in favour of the fourth respondent, whereas C.P. No. 226 of 2000 was filed on 22-6-2000 and C.P. No. 19 of 2001 came to be filed on 18-9-2001. At the same time, the petitioners are claiming damages as on 7-3-2000 on the basis of the price of shares of the Company at the highest rate of Rs. 7,225 per share of Rs. 10 each. The claim for damages as on 7-3-2000 remains unexplained. It is not made out by the petitioner as to his entitlement to claim damages as on 7-3-2000. The only reason appears to be that the price of shares of the company touched the highest in March 2000 at Rs. 7,225 per share of Rs. 10 each. This cannot be the yardstick for claiming any damages. There is no other material to substantiate the damages reportedly suffered by the petitioner. In the observations of the High Court in C.A. No. 12 of 2003, payment of the price of the impugned shares does not tantamount to assessment of damages. Furthermore, the petitioners? claim of Rs. 56,55,400 shall include value of impugned shares, bonus shares (at Rs. 7,225 per share), unpaid dividend amount etc. of which the claim towards bonus shares and unpaid dividend amount were originally declined by the CLB, with which the High Court did not interfere in C.A. No. 12 of 200

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3. The petitioner has claimed an amount of Rs. 5 lakhs towards punitive damages against the Company for causing mental agony and harassment to the petitioner which however, remains to be a mere pleading. It is well-settled principles of law that if the pleadings and/or the evidence adduced in a proceeding remains unsatisfactory to arrive at a definite conclusion of the charges levelled in a petition the same must necessarily be rejected. The measure of damages will be the actual loss sustained by the petitioner together with such other special damage which was within the contemplation of the parties. There is no material whatsoever to prove the actual loss reportedly suffered by the petitioner. The plea of the petitioner that he would have sold the impugned shares at Rs. 7,225 per share of Rs. 10 each in March 2000, of which he was, however, deprived on account of unlawful conduct of the company does not merit any consideration especially when the claim for damages cannot be remote but must be direct. However, keeping in view the directions of the High Court, I am of the considered view that in the facts and circumstances of the present case, the company shall pay an amount of Rs. 25,000 by way of damages within 30 days from the date of this order. This shall be apart from the amount of Rs. 30,800 already settled by the Company in terms of the order dated 6-9-2002. The proposition that where no rectification can be ordered, no question of damages would arise not having been raised by the Company in the appeal before the High Court cannot be belatedly raised at this stage. With these directions, the company petitions stand disposed of afresh in terms of the order dated 28-2-2006 of the High Court. No order as to costs.
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