Satwinder Singh vs Ashish Dassgupta and Others

Surjit Singh, J.—This appeal was admitted vide order dated 8th November, 2001 impliedly, on the following substantial questions of law:

(a) Whether respondent No. 3 has authority to decide the fact regarding title of a person regarding shares in a company?

(b) Whether respondent No. 3 has authority to challenge the Balance Sheet submitted and signed by the statutory auditors and registered with the Registrar of Companies?

(c) Whether the consistent entries in the records registered with the Registrar of the Companies regarding Share holding can be ignored in comparison to the belated records submitted by one of the Directors under his sole signatures, which position is highly disputed?

(d) Whether the Respondent Board can direct particular share holder to transfer his share so as to transfer the entire share holding in favour of one person?

We have heard the learned Counsel for the parties and perused the record.

Factual matrix of the case, relevant for deciding the appeal, may be noticed. There is a Company, by the name and style of M/s Parwanoo Enterprises Private Limited. Respondent Ashish Dasgupta claiming himself to be the holder of 2000 shares in his individual name and 2000 shares in the joint names of himself and appellant Satwinder Singh, filed a petition u/s 186 of the Companies Act, before the Company Law Board, seeking a direction for holding of annual general meeting. Present appellant was impleaded as one of the respondents. It was alleged in the petition that the affairs of the Company are not being managed properly, the share-holders are not cooperating and, therefore, annual general meeting was required to be called. It was pleaded that there are only two share-holders i.e. respondent Ashish Dasgupta and present appellant Satwinder Singh. The petition was filed sometime in the year 1988. Notice was sent to the present appellant, who, in his reply, took the plea that the sharing pattern, as disclosed in the petition, was contrary to the actual position. He claimed that prior to 6.10.1995, the sharing pattern was as follows:

Parveen Kant 1000 shares. 2. R.K. Garg 1000 shares. 3. Ashish Dasgupta 1000 shares. 4. Ashish Dasgupta & 1000 shares present appellant Satwinder Singh Total: 4000 shares

He stated that on 6.10.1995, R.K. Garg and Parveen Kant transferred their 1000 shares each, in the joint names of respondent Ashish Dasgupta and himself (Satwinder Singh) and on 7th October, 1995 Ashish Dasgupta transferred his shares in the joint name of the appellant and himself on the previous date i.e. on 6.10.1995 for consideration and this way, appellant became the holder of 2000 shares in his individual name and 500 shares, on account of being joint holder with Ashish Dasgupta in 1000 shares. It was also stated that respondent stood ousted from the Directorship of the Company, for not attending three consecutive meetings and also on account of having bungled the funds of the Company, while managing its affairs earlier and that in one of the meetings held in March, 1997, respondent Bhushan Ahuja was taken as Additional Director of the Company and respondent Ashish Dasgupta was removed from the Directorship.

Respondent Ashish Dasgupta filed an additional application, under Sections 397 and 398 of the Act, alleging that no transfer of shares in favour of the appellant had taken place on 7.10.1995 and that, as a matter of fact, prior to 6.10.1995, appellant did not have any share whatsoever in the Company and that it was only on the basis of the transfer dated 6.10.1995 made by R.K. Garg and Parveen Kant, two of the share-holders, that he became a joint holder with him (respondent Ashish Dasgupta) in 2000 shares, to the extent of 50% of such shares. It was alleged that the records had been forged and fudged by the appellant to show himself as holder of majority of the shares. It was also alleged that Bhushan Ahuja was not taken as Additional Director, as no paper or minutes etc., indicating his having taken as Additional Director, had been filed with the Registrar of Companies, prior to the institution of petition, u/s 186 and this was done, for the first time only, in the year 1999, when return upto 30th September, 1997 was allegedly filed.

It was also denied that respondent Ashish Dasgupta did not attend any meeting of the share-holders. It was stated that respondent had been performing journey on the dates, on which the meetings had allegedly been held. It was claimed that the respondent, being the holder of majority shares, no meetings could have taken place unless he attended the meetings and that otherwise also, there was no meeting on any date and that the allegations were false and had been raised, for usurping the management of the Company. It was stated that under the garb of the false claim of transfer of shares by the respondent on 7.10.1995, the appellant had usurped the management of the Company and this constituted acts of mismanagement and oppression.

The Board vide its order dated 31st January, 2000, disposed of both the applications, holding that the appellant was joint holder of 2000 shares with respondent Ashish Dasgupta, both having equal shares, pursuant to the transfer of shares by R.K. Garg and Parveen Kant on 6.10.1995 and, that prior to that he did not hold any share. It was also held that the alleged removal of respondent Ashish Dasgupta from the Directorship had never taken place nor Bhushan Ahuja ever took as Additional Director of the Company. Respondent was held to be holder of 2000 shares in his individual name, in addition to his being joint holder in 2000 shares, as stated hereinabove. Directions were given by the Board that the Annual General Meetings be called within fixed period and the appellant was given option either to continue as joint share-holder with respondent Ashish Dasgupta, in respect of 2000 shares or to transfer his share in the said 2000 shares to Ashish Dasgupta, after getting the value assessed from a valuer.

Learned Counsel representing the appellant submits that the Board had no jurisdiction to determine the sharing pattern and to hold that respondent Ashish Dasgupta had not ceased to be the Director and that Bhushan Ahuja was never taken as Additional Director. According the learned Counsel, number of shares held by the share-holders could have been determined only by the Civil Court, as it involves the question of title, which can be determined only when full-fledged trial is held.

Without commenting as to which Forum has the authority to determine such a question, because in our considered view, there is no need to look into this aspect of the matter as the Board has given the aforesaid findings only for the purpose of deciding applications before it. We are of the view that the Board had the authority to find out what was the prima-facie sharing pattern because without doing so, it could not have been in a position to deal with the prayer made by the respondents under the two petitions. We clarify that the findings given by the Board are to be treated as observations that prima-facie the sharing pattern is what it has noticed, only for the purpose of decision of these two applications and not a final verdict or adjudication with regard to the shares of the parties.

We have been taken through various documents placed on record by both the parties. There is one annual return Annexure A2, which is for the period upto 30th September, 1996. The return is signed by both the parties. In the return, sharing pattern is what the respondent claims. Appellant is a signatory to this return. This return was filed almost a year after the alleged transfer of respondents share in 2000 shares, which Parveen Kant and R.K. Garg had transferred in favour of both sides on 6.10.1995. Non-reference of this alleged transaction on 7.10.1995 in the return itself is prima- facie proof that the claim made by the appellant is unfounded. It was for the first time, in the year 1999 after the respondent had filed the petition, u/s 186 and also after he had the notice of the said petition that the appellant submitted a return in February, 1999 to the Registrar of Companies, indicating therein that respondent Ashish Dasgupta has transferred his shares in 2000 shares in his favour and here the date of transfer was written as 31.3.1997, whereas, in his reply to the application u/s 186 before the Board, he claimed that transfer had taken place on 7.10.1995. All this is indicative of the hollowness of appellant''s claim. Directions given by the Board are in line with its powers conferred upon it u/s 402 of the Companies Act.

In view of the above stated position, we are of the view that first three questions do not arise in this matter and therefore leave them unanswered. As regards the fourth question, we hold that in view of the powers conferred u/s 402 of Companies Act, the Board had the authority and the jurisdiction to issue such directions. With these observations, we dismiss the appeal with the clarification that the findings given by the Board about the sharing pattern and other factual aspects shall not be used as final verdict or as a res judicata in any other proceedings before any Forum, which may have a jurisdiction to finally determine this kind of questions.