Ashok Kumar Singhal vs Daurli Ispat Pvt Ltd

Virendra Kumar Gupta (Technical)

Through this application the appellant is seeking following directions:

(i) Cancel the allotment of 5000 shares at Face Value of ₹10/- bearing Certificate No.12, distinctive Folio No.1115001 to 116500 and further 20,000 shares at Face Value of ₹10/- bearing Certificate No.10, distinctive Folio numbers 835001 to 1035000 issued by the Respondent No.1 company at the instance of respondent Nos.2 to 4;

(ii) Direct the Respondent No.1 company to return the amount of ₹25,00,000/-granted by the appellant/applicant as Loan to the Respondent No.1 company along with interest @ 18% per annum from the date of disbursal till the date of realisation.

In this appeal there are four respondents, i.e., respondent No.1 is the Company and respondent nos.2 & 3 are Directors of the Company. Respondent No.4 is Smt. Vineeta Singh who has the relationship with the company and its directors is not known. In this matter, notices were issued by the Registry of this Tribunal on 22.02.2022 which have been served on respondent No.1 company and respondent No.4. The respondent nos. 2 & 3 refused to receive such notices.

In this background all respondents were made set ex parte. The respondent No.1 is a Private Limited Company. It is alleged by the applicant that at the request of the respondent No.2, the appellant gave a loan of ₹25 lakh in two tranches of ₹20,000/- and ₹5 lakh on 20.07.2018 & 06.09.2018. When the appellant demanded the repayment of this loan from the respondent No.1 company, the loan was not repaid. However, from independent due diligence it came to the knowledge of the appellant that he was shown as a shareholder of the company and to him 25,000 shares had been allotted at face value ₹10/-each. It is further alleged that the appellant never signed any document to become a shareholder of the company by purchasing these number of shares. It is further claimed that no notice or any meeting or any report has ever been received by the appellant. It has been alleged that this mechanism has been adopted by the Directors of the Company to avoid liability to repay the loan. It is also claimed that it is a case of private limited company where any stranger cannot be made a shareholder/member of the company without strict compliance of the provisions of old Companies Act, 1956 and Companies Act, 2013.

The Ld. Counsel for the appellant appeared and narrated these facts and submitted that his name may be removed from the Register of members and the allotment may be cancelled made in favour of the appellant. We have considered the submissions made by the Ld. Counsel appearing for the appellant and material on record. In this case, though there is no written agreement as regard to the grant of loan, nor any other document has been brought on record, but it is also evident by the conduct of all the respondents that they are not in a position to controvert the claims made by the appellant as regard to the nature of the transaction.

We are further of the view that if the respondents were in a position to controvert the claims made by the appellant, they could have produced the letter of request or any other document signed by the appellant for purchase of shares of a Private Limited Company which are not freely transferable. Further, they could also produce that the shares, minutes and other share certificate showing the compliance to the provisions of law as regard to issue and allotment of shares.

In these circumstances, we direct the respondent No.1 Company to delete the name of the appellant from the Register of Members within two weeks from the date of this order and file requisite documents with RoC also, who shall take on record such documents in terms of the relevant provisions of law. As regard to the other grounds regarding the direction to the Company to repay loan, these cannot be granted in this petition, as for that appropriate remedies available under law need to be invoked as required.

This appeal shall, therefore, stand allowed and disposed of in terms of indicated above.

The Registry is directed to send e-mail copies of the order forthwith to all the parties inclusive of the Counsel.

Urgent certified copy of this order, if applied for be issued upon compliance with all requisite formalities.