Shri. Hasmukh Kanubhai Shah vs Aurobindo Pharmaceuticals Ltd. & Anr.

Per: Justice Sharad Kumar Sharma, Member (Judicial):

In the instant Company Appeal, the Appellant claims himself to be the holder of 500 shares in the Respondent No. 1 Company and contends that through he was allotted the said 500 shares, the said share certificates were actually handed over to him and that only a Delivery Memo dated 31.03.2025 was received by him, which has been utilized by him as to be a document to establish that, he was a holder of the shares, in Respondent No. 1 Company.

In the instant Company Appeal, the Appellant questions the propriety of the impugned order dated 25.04.2023 as it was passed IA (CA) / 103 / 2022 in Company Appeal (IB) / 9 / 59 / HDB / 2022. The Appellant had filed the said Application before Ld. NCLT, Hyderabad, in Company Appeal (IB) / 9 / 59 / HDB / 2022, which was also filed by the Appellant under Section 59 of Companies Act, 2013. The said application had been filed for seeking condonation of delay of 308 days that has chanced in filing the Company Appeal, which was rejected by Ld. Tribunal by virtue of the impugned order.

The contention of the Appellant is that, the Appellant happens to be the rightful shareholder of the 500 shares of Respondent No. 1 Company and he contends that the said shares were allotted to him, by virtue of Folio No. APL004523, and that, no Share Certificate was actually issued or handed over to the Appellant till the date of filing of the proceedings under Section 59 of the Companies Act, 2013.

He contends and admits too in the pleadings, that vide email dated 10.08.2015, the Appellant for the first time was intimated that, the said 500 shares had been wrongfully transferred to a third party.

The Appellant contends that the Appellant had issued notices on 07.04.2016 to the Respondents, which was replied by them on 11.05.2016, replying that the shares had been transferred to the third Party as back as in 1998, and that as a very vague reply was extended by the Respondent on the controversy pertaining to the alleged transfer of shares, he filed a Commercial Civil Suit No. 90 / 2019 before the Court of Principal Senior Civil Judge, Commercial Court, Vadodara, on 14.06.2019.

It is an admitted case of the Appellant that, after the response dated 11.05.2016 of Respondent No. 1 Company he became aware of the alleged illegal transfer of the shares, and owing to the legal advice, which was extended, he had opted to file a Commercial Civil Suit, being Commercial Civil Suit, being Commercial Suit No. 90 / 2019, before the Court of Principal Senior Civil Judge, Commercial Court, Vadodara, which was instituted on 14.06.2019, seeking a recovery of Rs.3 Crores from the Respondents in lieu of share value and the interest that would be payable on it. The said suit was dismissed by an order of 05.10.2021 of the Ld. Commercial Court on the ground, that the proceedings drawn before the Commercial Court on 14.06.2019, was barred by limitation, having computed the period of limitation from the date when the Appellant had received the response to the notice given by him.

The said finding, which has been recorded by the Judgment of 05.10.2021 dismissing the suit filed by the Appellant herein by the Commercial Court, was on the ground of limitation and that would amount to be an adjudication of the controversy on merits by a Court created under law. Since, the proceedings before the Commercial Court was invoked by the Appellant, the Appellant would be bound by the outcome of the proceedings of Commercial Civil Suit No. 90 / 2019, and at this belated stage, the Appellant cannot take an excuse to submit that the Commercial Court did not have any jurisdiction to decide the controversy and particularly, when the Appellant himself had invoked the jurisdiction and had also faced the consequences of it by virtue of the Judgment which was rendered on 05.10.2021, which has been accepted by him, without any further challenge being given to it.

As per case of the Appellant, on the advice extended to him, the order of 05.10.2021, as it was rendered in Suit No. 90 / 2019, was not challenged, and that stands good and valid in the eyes of law, as against the Appellant. Instead, at a very belated stage, the Appellant had chosen to prefer an Appeal in Company Appeal (IB)/9/59/HDB/2022, under Section 59 of the Companies Act of 2013, on the basis of the Notice of 07.04.2016, pertaining to the controversy relating to the transfer of shares. The proceedings of the said Appeal were carried before the Ld. Adjudicating Authority i.e. the Ld. NCLT, Hyderabad, and the same was dismissed by the Impugned Order dated 25.04.2023, holding thereof that, the proceedings would not be maintainable having been preferred at a belated stage with the delay of 308 days, in filing the Company Appeal.

The argument of the Ld. Counsel for the Appellant is that, the Appellant would be entitled for the grant of benefit of provisions contained under Section 14 of the Limitation Act, owing to the fact that the proceedings preferred by the Appellant by way of Commercial Civil Suit No. 90 of 2019 was under a wrong advice and under a bonafide belief and hence, the period which was spent in pursuing the proceedings before the Commercial Court, deserves to be excluded while determining the aspect of limitation in the light of the provisions contained under Section 14 of the Limitation Act, to be read with Section 433 of the Companies Act, 2013, as the same would be attracted.

Having heard the Ld. Counsel for the Appellant, this Appellate Tribunal is of the view that, the Appellant cannot take the benefit of the exclusion of the period, which was used up by him in instituting and pursuing the proceedings of the Commercial Suit that is from 14.09.2019, till it was decided i.e. on 05.10.2021, because, he had instituted the proceedings and pursued the same. The issue of the judgment and the judgment was rendered on merits. It may be noted that the Principal Senior Civil Judge rejected the plaint with the following observation:

The decision thus rendered therein, since being a decision on merits, will stand, in the eyes of law, against the Appellant, because, the same has not been put to challenge and once the decision of 05.10.2021 was a decision on merits solicited by the Appellant himself, it will not provide him with an alibi to seek exclusion of time from the limitation period under Section 14 of the Limitation Act, 1963.

There is yet an another important feature, which is to be taken into consideration, that in the finding, which has been recorded by the Ld. Tribunal in Para 10 of the Impugned Order, it has been observed that, the Appellant had the knowledge of the transfer of the said shares as back as on 11.05.2016, that the suit before the Commercial Court was instituted much beyond the period of limitation as prescribed under Article 137 of the Limitation Act, 1963, that the Commercial Court dismissed the said Suit as barred by limitation, and that seeking a condonation of delay which has already been rejected by a competent Court on 05.10.2021, would be tantamount to settling on Appeal over the order of the Civil Court which is not provided in law.

If that be the situation where the suit before the Commercial Court itself has been held to be barred by limitation, then quite obviously, the period of limitation even if it is determined from 11.05.2016 for the purposes of the Company Appeal, as preferred before Ld. NCLT, would too be barred by limitation and hence, the aspect of condonation of delay which has been considered by the Ld. Tribunal in the impugned order of dismissing the Appeal on the ground that, it was barred by Limitation cannot be said to be suffering from any apparent defect for the reason being;

The period of limitation as prescribed under Section 433 of the Companies Act, 2013, to be read with Section 3 & Section 5 of the Limitation Act, 1963, has to be determined from the date when the knowledge was attributed to the Appellant, about the so called wrongful transfer of shares, which apparently in the instant case is 11.05.2016, if that be so, the period of limitation for the purposes of an Appeal under Section 59 of the Companies Act, 2013, would have expired long back and the Appeal would too be barred by limitation. Hence, the findings that has been recorded by the Ld. Tribunal, dismissing the Appeal holding it to be barred by limitation does not suffer from any apparent error, because, the Appellant under no set of circumstances would be entitled for the extension of benefit under Section 14 of the Limitation Act, 1963.

Apart from the above, the Appellant by his own conduct would be bound by the Judgment and Decree rendered on 05.10.2021 by the Commercial Court which will always operate as a constructive res judicata against the Appellant. Thus, holding the Appeal to be barred by limitation by Ld. NCLT does not call for any interference and the instant Company Appeal (AT) (CH) No. 97 / 2023, for the aforesaid reasons, would stand dismissed. All pending interlocutory Applications, would stand closed.