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Judgment
JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)
The present appeal has been filed against the same impugned order dated 15.10.2024 passed by the Ld. NCLT, New Delhi in CP No.595/ND/2019, under Section 59 of the Companies Act, 2013 for rectification of the register of shares, alleging act of illegal share transfer by Sh. Kamal Jain in his favour in Respondent No.1 company and also allotment of shares to Respondent No.3 and
The said company petition was dismissed on the ground there are triable issues qua transfer of shares pending before the Ld. Trial Court and these are needed to be adjudicated first by such court, before a final decision on the rectification of register of the members can be arrived at by the Tribunal and hence this Appeal is filed by the appellant i.e. Mr Shiv Raj Singh challenging the dismissal of his Company Petition on the ground the Ld. NCLT only has jurisdiction over triable issues pertaining to Section 59 of the Companies Act, 2013.
Another Company Appeal (AT) No.403/2024 has been filed by Mr. Kamal Jain, primarily, on the ground the Company Petition ought to have been dismissed also on grounds of limitation and otherwise.
The present dispute between the appellant Mr Shiv Raj Singh and Mr. Kamal Jain has arisen on the ground that Mr. Kamal Jain, a Chartered Accountant of M/s Kempty Konstructions Pvt Ltd & Ors, had misused his position and got transferred 998 shares, out of 1000 shares, illegally and thus the appellant, Mr. Shiv Raj Singh has been divested of his shares. It is argued Respondent No.2 - Mr. Kamal Jain was a Chartered Accountant of the company w.e.f. 1991 till 2008 and thus held a fiduciary and trustworthy position in the company and got access to various sensitive information/documents pertaining to the company and in order to take over a piece of land, admeasuring 5 acres, belonging to the company, Mr. Jain with the help of digital signature of Shiv Raj Singh, got 998 shares of Mr. Shiv Raj Singh transferred in his name as well as in the names of Respondent No.3 and 4.
It was argued neither any statutory compliances were made nor any intimation(s) were given to the ROC in the matter and the allotment of 10 shares each to Respondents No.3 and 4 were without the knowledge of the appellant and till date there is no document on record to prove the appointment of Respondents No.3 and 4 as directors as well as the allotment of shares to them. It was argued Respondent no.2- Mr. Kamal Jain, CA had illegally transferred all shares of the appellant in his name without complying with the provisions of Companies Act and that too only on the basis of photo copy of MOU which had not seen the light of the day and he took over entire company by filing unsigned resignation(s) of the appellant - Shiv Raj Singh. Further, annual returns for the year 2008 were filed belatedly in December, 2009/January, 2010 by misusing the digital signatures of the appellant and without any statutory compliances.
Being aggrieved of the acts of Respondent No.2 to 4, the appellant Shiv Raj Singh had filed a Company Petition No.104/2011, under Section 397-399 of the Companies Act, 1956 making allegations qua his illegal removal as a director and his shareholding being diluted from 97.84% to 0%. However, the Company Petition No. 104/2011 was dismissed on 10.07.2017 by the Ld. NCLT on the ground that as per the MOU, a loan was taken by Shiv Raj Singh, which if remained unpaid, then Shiv Raj Singh was bound to transfer all his shares to Respondent no. 2 and admittedly the loan was never re-paid and thus the shares got transferred. It was also held that Forms 20B, 23AC/ACA and 32 were all filed by the appellant – Shiv Raj Singh and he digitally signed it through his Company’s Secretary showing Mr. Kamal Jain, Respondent no. 2 had become a director w.e.f. 25th September, 2008 and even the financial statement of 2007/2008 showed the shareholding of the appellant to be 0%. The Ld. NCLT also held the statutory charges for such transfer of 998 shares were all borne by the appellant - Shiv Raj Singh and the appellant even did not deny the Demand Promissory Note of Rs.80 lakhs which he had allegedly executed in favour of Respondent No.2 - Mr. Kamal Jain and also his cheque of even amount. Further the Ld. NCLT was also of the view the allegations qua misuse of digital signature was a mere averment and Respondents No.2 to 4 were rather appointed as directors in March, 2005 and whereas CP No.104/2011 was filed in 2011. Further references were made to a certificate issued by Mr. Anil Kumar Popli of M/s Popli and Associates, PCS to the effect the ROC filing fee and his professional charges towards efiling of above forms were all made good by Shiv Raj Singh - appellant herein. The remittances to the auditor were also co-related from the transfer account of the appellant herein.
However, the order dated 10.07.2017 of the Ld. NCLT was challenged before this Tribunal in Company Appeal (AT) No.292/2017 and though this Tribunal noted the original shares certificates were lying with the appellant and he did not sign the transfer deed but it did not interfere in the impugned order dated 10.07.2017 and rather allowed the appellant to file an application under Section 59 of the Companies Act, 2013 before the Ld. NCLT for deletion of the names of the person whose name(s) have been wrongly included as directors/shareholders. Three-month time was given to prefer such application.
Even this order was challenged before the Hon’ble Supreme Court in CA No.2524/2018 which was disposed of on 16.03.2018 vide the following order: -
We have heard learned counsel for the parties and perused the record.
We do not find any ground to interfere with the impugned order except to observe that if the company is no longer in existence as stated on behalf of the appellant, it will be open to the appellant to move the National Company Law Appellate Tribunal (NCLAT) with this submission so that National Company Law Appellate Tribunal may pass appropriate orders in accordance with law.
The appeal is disposed of in above terms.
Accordingly the appellant filed IA No.583/2018 in CA No.292/2017 alleging he could not take steps under Section 59 of the Act since the company was struck off and he sought an order of restoration of CP No.104/2011 under Section 59 of Companies Act, but such said application was dismissed on 21.05.2018.
On 08.04.2019 an appeal was filed by Mr. Kamal Jain and the name of the company was restored. However, pursuant to the order dated 21.05.2018, a letter was sent by Shiv Raj Singh to the company for rectification of register of members but such request was declined vide letter dated 19.07.2019, duly signed by Respondent no. 2 - Mr. Kamal Jain. Hence the petition under Section 59 of the Companies Act, 2013 was filed which was decided vide the impugned order as under: -
12.1In the previous record of litigation the Petitioner was given an opportunity by this Tribunal by its order dated 22.02.2017 to produce Share Certificates on the Next Date of Hearing, but the same was not produced by the Petitioner. Production of original share certificates, being the critical factor for the adjudication of the issues before the Tribunal, we fail to understand why the same was not produced by the Petitioner earlier especially when a particular direction with regard to the same was issued by the Tribunal. Subsequently, the matter was agitated before the Hon’ble NCLAT and Hon’ble Apex Court, but even then the Share Certificates were not produced by the Petitioner. The Petitioner produced the share certificates on 10.11.2023 only after another direction was issued by this Tribunal during the present proceedings.
12.2Similarly, the Respondent No.2 produced for the first time (after specific directions by this Tribunal) the notice of AGM, Annual Returns, list of shareholders as annexed with Annual Return for the FY 2007-08 only on 23.08.2024 by filing I.A. 297 of 2024 during the present proceedings.
12.3Furthermore, the authenticity of all the documents placed through Annexure--9-25 of IA 297/2024 placed by the Respondent, which is stated to have been filed earlier also in CP-104/(ND)/2011 through CA-43/2014 and CA-31/2016 has also been questioned by the Petitioner.
12.4At this juncture, we note that both the Petitioner as well as the Respondent No.2 were important stakeholders in Respondent No. 1 and are expected to be fully aware of the whereabouts of the financial records, title documents and other related documents, but for some strange reason both the parties have chosen to place only such documents, or copies thereof, supporting their contentions in a piecemeal manner before this Tribunal at various stages of litigation. Further, both the parties have traded the allegations that the documents produced by the opponent(s) are forged. To meet these allegations, the Respondent No. 2 has produced the Forensic Report in support of the authenticity of the documents submitted by him before the Tribunal. Per contra, the Petitioner has pointed out that the Forensic Auditor has made the following observation with regard to these documents:
“Reliance of R-2 on a private Forensic Lab report cannot be relied on, the said report is not based on any order passed by this Tribunal. Further, the documents sent for examination consist of photocopy of the Resignation Letter and MoU. The report categorically mentions that the above opinion is based on the presumption that the photocopies are a true representation of their respective originals. Therefore, the said report holds no evidentiary value.”
14.1Thus, the tests to be applied for deciding on the jurisdiction of this Tribunal are
(i)Whether the Petitioner has made out an open and shut case of fraud?
(ii)Whether under the garb of rectification, the parties are laying claim for an adjudication of such contentions and issues which falls within the jurisdiction of the Civil Court.
14.2As regards the first issue, we have already observed that the Petitioner has not been very transparent in submitting all the purported evidence in his possession, including the share certificates in original before the Tribunal at the time of filing its earlier application in 2011. Furthermore, the Petitioner, has been recently directed by the Ld. ACMM (Special Acts) in his Order dated 24.04.2023 to hand over the statutory books of the company to the Respondents. His denial of the documents produced by the Respondent on the ground that the same are false and fabricated is not supported by any evidence to prove his contention beyond any semblance of doubt. Thus, we do not accede to the prayer of the Petitioner for rectification of the Register of Members on the ground of insufficiency of evidence being brought on record by him.
14.3On the second issue regarding the jurisdiction of this Bench to decide the present matter, we have already observed that most of the issues relating to the authenticity of the documents placed before us in the present proceeding are now before the Ld. Trial Court under a direction by the Hon’ble Delhi High Court in its Order dated 02.04.2024. Based on the elaborate discussion in the foregoing paragraphs, we hold that several issues placed before us in the present proceedings for rectification of registration of members under Section 59 of the Companies Act, 2013 fall clearly within the jurisdiction of the Civil Court. We are of the view that certain related issues which are pending before the Ld. Trial Court need to be adjudicated first before a final decision on the rectification of the register of members can be arrived at. Therefore, we believe that in the present petition, the Petitioner is requesting an adjudication of these highly contentious issues, which do not fall under the purview of "rectification" under Section 59 of the Act.
Admittedly the impugned order noted the original share certificates were produced by the appellant only on 10.11.2023 and similarly Mr Kamal Jain, Respondent No.2 produced notice of AGM, annual returns, list of shareholders as annexed with the annual return for the financial year 2007-08 only on 23.08.2024. The Ld. NCLT also noted the appellant was not transparent in submitting purported evidence in his possession and thus declined to accede to the prayer of the appellant herein for rectification of the register of members on the ground of insufficient evidence brought on record but then also noted most of the issues relating to the authenticity of the documents placed before it were before the Ld. Trial Court and thus it had no jurisdiction till such related issues be adjudicated upon by the Ld. Trial Court and only thereafter, the final decision on rectification of register could be arrived at. Heard.
We need to note Section 430 of the Companies Act, 2013 in this regard which read as under: -
Section 430 Civil court not to have jurisdiction.—No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal.
In Gireesh Kumar Sanghi v. Sanghi Industries Ltd. & 19 Ors., Company Appeal (AT) (Ch) No. 95/2023, the Hon’ble court held as under: -
13.Therefore, in our considered opinion, once the legislature has created a complete bar of the jurisdiction of the Civil Court by enacting Section 430 in the Act as per which no civil court shall have the jurisdiction to entertain any suit or proceedings in respect of any matter which the Tribunal or Appellate Tribunal is empowered to determine by or under this Act or any other law for the time being in force and no civil court has the jurisdiction to grant injunction in respect of any action taken or to be taken in pursuance of any power conferred by or under the act or any other law for the time being in force by the Tribunal or Appellate Tribunal, there is no shred of doubt that the jurisdiction to decide the rectificatory jurisdiction under Section 59 of the Act shall be available to be exercised even where there are contested facts and disputed questions and regard may be had to the decision in the case of Shashi Prakash Khemka (Supra) as decided by the Hon’ble Supreme Court while referring to Section 430 of the Act.
Thus considering Girish Kumar Sanghi (Supra) we are in no doubt it is only the Ld. NCLT who also has the power to look into the disputes interse the parties qua rectification of register and the impugned order so far as it says such issues fall within the jurisdiction of Civil Court and cannot be looked into by the Ld. NCLT till the Ld. Trial Court takes a view in this regard, to our mind is wholly an incorrect approach. Thus we set aside the impugned order on this ground alone and remand the matter to the Ld. NCLT requesting it to decide it on merits without waiting for judgement of any Civil Court per Section 430 of the Companies Act, 2013. The Ld. NCLT should also examine the contentions raised by the respondent herein and the effect of issuance of promissory note, cheque of Rs, 80 lacs for purchase of such shares, including of limitation and admissions made by the Company Secretary, to take an overall view.
Be heard and disposed of as expeditiously as possible, preferably within 3 months from today. Parties to appear before Ld. NCLT on 27.01.2026.
Both appeals are disposed of accordingly. Pending applications viz I.A. No. 8522/2024, 8523/2024 and 8630/2024 are also disposed of.