At, Company Law Board Southern Region Bench Chennai
By, THE HONOURABLE MR. KANTHI NARAHARI
By, JUDICIAL MEMBER
For the Petitioner: R. Rajesh, Counsel. For the Respondent: V. Venkadasalam, Counsel.
1. The present company petition was filed under sections 111,397,398,402 & 403 of the Companies Act 1956 alleging, certain acts of oppression and mismanagement in the affairs of the company and sought reliefs inter alia seeking directions to the respondents to transmit the shares in the name of the petitioners thereby rectify the register of members of R1 company and appoint first petitioner or her nominee as a permanent director of the company.
2. The facts of the case are that the first petitioner's husband was chairman and director of the Rl Company holding 37,5,15 shares of Rs.100/- each in the R1 Company. Late E. Sathish Kumar husband of the First petitioner died in an accident on 25.06.2004. The second petitioner is the son of the first petitioner and late E. Sathish Kumar. It is submitted that the petitioners are legally entitled to the shares of late E. Sathish Kumar. It is stated that the first petitioner wrote a letter dated 09.07.2005 to the R1 Company requesting for transmission of shares held by her husband in her name and in the name of her minor son. The petitioner did not get any reply to that letter, wrote another letter dated 12.08.2005 to the R1s Company. the petitioner received a reply dated 18.08.2005 from the second respondent who is the managing director of the company wherein it is stated that the Board at its meeting held on 12.08.2005 discussed the issue of transmission of shares. however decided not to permit the transmission of shares in the name of the petitioners and the same is kept in abeyance until the loss incurred by the company are made good since the company incurred such loss due to late E. Sathish Kumar who was the chairman of the company.
3. The stand of the respondents is that late E. Sathish Kumar had borrowed monies by issuing company's cheques from various persons and also there was a raid from the Central Excise Department and they have taken all the books and records of the company. It is admitted that the late E. Sathish Kumar died in an accident. It is stated that the request for the transmission of shares is improper and the petitioners have no right to claim the shares of the deceased as the deceased left a "will" bequeathing all his properties to the second respondent. Even otherwise the second respondent is also entitled to l/3d shares of the deceased. Further it is stated that the first petitioner is aware of the will and that is the reason they had entered into a Memorandum of Understanding dated 10.06.2005 and the second respondent gave her personal property for the residence of the petitioners and also agreed to pay Rs.30,000/-per month. The second respondent had stopped the payment on the reason that the first petitioner had started using the said money for initiating the cases against the second respondent. As per the understanding the first petitioner should not interfere in the affairs of the company for a period of two years but in violation of the understanding she filed the present petition.
4. This Bench after adjudicating the matter disposed of the main company petition on 18.05.2010 declining the granting of reliefs under sections 397 & 398. The Bench directed the company to hold the EGM and Board meeting on regular basis and file the require documents and returns including the backlogs with the Roc. In respect of transmission of shares, the Bench has recorded its finding at page 12 of para 12 of the order dated 18.05.2010, which is reproduced as under:
"Anyway, not adverting to this issue since the matter is pending before the civil court. As held by me in this order above, the transmission of shares and the consequential rectification of register is deferred till the suite for partition filed by the petitioners is finally disposed of. After partition and separate entitlement of shares the petitioners are given liberty to apply transmission of the specific number of shares. Point is accordingly found."
5. Aggrieved by the said order the petitioners preferred an appeal under section 10F of the Companies Act, 1956 before the Hon'ble High Court of Madras. The Hon'ble High Court by its order dated 13.03.2013 remitted back the matter to this Bench and directed to decide the case with regard to rectification of register of shareholders and objection of respondent No.l to hold AGM as required under section 220. As per the directions of the Hon'ble High Court, the matter was heard on point of the remand.
6. It is an admitted fact that the husband of the first petitioner was a director and shareholder of the company holding 37,5 15 shares of Rs.100/- each. The husband of the first petitioner died on 25.06.2004. The petitioner filed a photocopy of the death certificate as a proof. The petitioners also obtained legal heir certificate from the Thasildar, Avanashi dated 26.08.2004 in which the petitioners 1 & 2 and the second respondent were shown as legal heirs of the late E. Sathish Kumar. The first petitioner vide letter dated 09.07.2005 addressed to the R1 company requesting transmission of shares held by her husband in her name and in the name of her son. Further another letter dated 12.08.2005 was sent to the company by the first petitioner requesting transmission of shares in her name and in the name of her son. The company in its reply dated 18.08.2005 addressed to the first petitioner stated as under: "Please take note that late E. Sathish Kumar was the chairman of the company. He was looking after the entire administration of the company' during the tenure of his office the company had to incur heavy losses due to the negligent and careless management of the company. The Board of directors discussed the various losses incurred by the company due to the mismanagement by the then chairman. The Board in the interest of the company decided not to permit the share transmission till the losses are made up by the person responsible' Further, your claim for transmission was not supported by any documentary evidence to entertain your request which please note. Under the above circumstances, your claim for the transfer of shares at this moment is kept in abeyance and conclusions in this regard will be arrived at after making good the losses committed by the deceased chairman, till that time the Board is not able to consider your claim."
7. Further the petitioner vide letter dated 05.09.2005 addressed to the company requested for transmission of shares. During pendency of the instant petition the respondents claimed that the deceased executed a will in favour of the second respondent and as per the will the second respondent is alone entitled to receive and enjoy all the properties including the shares of the company. As per the request of the petitioners, the will as in original form was sent to Forensic Science Department, Chennai, Tamil Nadu. The Forensic Science Department has concluded that the signatures on the will purported to be executed by late E. Sathish Kumar did not match with the signatures of late E. Sathish Kumar. It was clear from the Forensic Science Department that late E. Sathish Kumar did not sign on the purported will. Further the respondents requested the Bench to send the will to the Forensic Science Department, Hyderabad for its verification. This Bench by its order dated 14.10.2009 dismissed the said request of the respondents on the ground that sending the same document once again to the other agency without any justification will set as bad precedent. The Hon'ble High Court of Madras in its order dated 13.03.2013 at para 23 made it clear that the petitioners successfully made out a case for transfer of shares held by late E. Sathish Kumar in favour of his legal heirs i.e wife, son and mother. It was of the view that this Bench was not right in coming to the conclusion that the matter could be adjudicated only after the decision by the Civil Court. Further the Hon'ble High Court made it clear that the dispute pending in the Civil Court is regard R. Eswaramoorthy (HUF) and can wait for rectification till the outcome of the decision of the Civil Court. It is crystal clear that the petitioners and the second respondent are the legal heirs of the late E. Sathish Kumar and the legal heirs are entitled to the shares of the late E. Sathish Kumar equally. The petitioners have made prima facie case seeking transmission of shares. In view of the reasons as stated above, I hereby direct the company to transmit the shares of the late E. Sathish Kumar to the extent of 37,515 in favour of the petitioners I & 2 and the second respondent equally i.e 12,505 shares each to be transmitted in favour of first petitioner and the second petitioner and 12,505 shares in the name of second respondent. Since the second petitioner is the minor, the minor cannot hold shares in a company, the shares to the extent of 12,505 have to be transmitted in the name of the first petitioner who is
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the mother and natural guardian of the second petitioner. The company shall transmit the shares within a period of 30 days from the receipt of copy of this order and rectify the register of members by showing the names of petitioners and the second respondent to the extent of the shares they hold after this transmission' The company is hereby directed to issue the share certificates to the petitioners and the second respondent thereafter within a period of I 0 days. The petitioners and the second respondent are entitled to receive dividend if any issued and bonus shares and entitled to get all benefits accrued on those shares. There was no dissent opinion from the respective counsel with regard to holding of AGM. The company shall hold its Annual General Meeting time to time by issuing the mandatory notice to all the shareholders as per articles and law. With the above directions the CP is disposed of. Thereby the directions of the Hon'ble High Court of Madras complied with.