ADESH KAUR versus EICHER MOTORS LIMITED AND ORS. on 3 July 2018

200

[2018] 5 S.C.R. 200

SUPREME COURT REPORTS

[2018] 5 S.C.R.

A

ADESH KAUR

v.

EICHER MOTORS LIMITED AND ORS.

(Civil Appeal Nos. 19426-19427 of 2017)

BJULY 03, 2018

[R. F. NARIMAN AND INDU MALHOTRA, JJ.]

Companies Act, 2013 – s.59 – Rectification of register ofmembers – On facts, respondent no. 2 issued duplicate shares withoutfollowing proper procedure, in favour of impersonator, who in turnCtransferred the said shares to respondent no. 8 – Subsequently,appellant came to know about the fraud and sought issuance ofrevalidated fresh share certificate for the said equity shares –However, the same was not done – Company petition by appellant –NCLT held that the Company was liable for the acts of their RegisterDcum Share Transfer agents, and as such there was no reason forappellant to resort to civil court in order to prove her title – However,the appellate tribunal holding that since criminal complaint andSEBI investigation was pending, it was not correct for the tribunalto exercise its power to rectify the register u/s. 59, set aside thejudgment of NCLT and relegated the appellant to a suit – CorrectnessEof – Held: Not correct – Tribunal was correct in not relegating theappellant to any further proceedings since it was a case of fraudwherein the appellant was the victim, and respondent no. 2 was theperpetrator – Further, the due procedure of the RTI Circular wasnot followed – Thus, the appellate tribunal’s order is set-aside andFthat of the tribunal is upheld.

Allowing the appeals, the Court

HELD: The tribunal was absolutely correct in not relegatingthe appellant to any further proceedings inasmuch this was anopen and shut case of fraud in which the appellant has been theGvictim, and respondent no. 2 the perpetrator. Equally, it is clearthat the due procedure of the RTI Circular has not been followed.When the duplicate shares were issued, stock exchanges werenot informed and neither was an advertisement in a widelycirculated newspaper issued as the value of the shares were far H

greater than Rs. 10,000/-. The appellate tribunal in relegatingthe appellant to a further proceeding was not correct. Therefore,the appellate tribunal’s order is set-aside and that of the tribunalis reinstated. If respondent No. 8 does not happen to be on theregister at all, then there would be no difficulty whatsoever inrestoring the appellant back to its original position. Even ifrespondent No. 8 has been entered on the Register, his namewill have to be deleted in view of the fact that the transfer to himhas been declared to be void in law. The Company is directed torectify its register, insofar as the physical share certificates areconcerned, and the concerned depository to rectify the dematrecords in accordance with this order. [Paras 8-11][204-B-F]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 19426-19427 of 2017.

From the Judgment and Order dated 29.08.2017 of NationalCompany Law Appellate Tribunal at New Delhi in Company Appeal(AT) Nos.176 and 177 of 2017.

Mr. K. V. Viswanathan, Sr. Adv., K. V. Balakrishnan, S. M.Sundram, Ravi Raghunath, K. V. Mohan, Advs. for the appellant.

Mr. Tushar Mehta, ASG, Mr. Shyam Divan, Sr. Adv., AnoopDawar, Rajesh Ranjan, Sumit Teterrwal, Pratap Venugopal, Ms. SurekhaRaman, Ms. Niharika, Ms. Kanika Kalaiyarasan, M/s. K. J. John andCo., Bharat Singh, Arvind Kumar Sharma, Ms. Swati Ghildiyal, MukeshKumar Maroria, Advs. for the respondents.

The Judgment of the Court was delivered by

R. F. NARIMAN, J. 1. The present case discloses a very sordidstate of facts.

2. The appellant before us is a resident of Punjab, and had acquiredin all 903 equity shares in the respondent No. 1-Company. This acquisitiontook place way back in the year 1994-95.

3. It appears that sometime in 2012, another Ms. Adesh Kaur,who is a resident of Mumbai impersonated the appellant and requestedrespondent No. 2 to change the address from Punjab to Mumbai. It isnot disputed before us that the standard procedure to be followed wasnot followed by respondent No. 2, and the aforesaid change of address AB

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Awas despite the requirements of Circular No. 1 dated 09.05.2001. Theimpersonator then went on to execute an indemnity bond by forging theappellant’s signature for issue of duplicate share certificates of the 903equity shares mentioned above. This being done, on 28.09.2012,Respondent No. 2 issued duplicate certificates in favour of theimpersonator who, in turn, on 10.12.2012, transferred the said shares toBone Vikas Tara Singh, respondent No. 8, resident of Malad, Mumbai byusing the forged signature of the appellant. At this stage, it is importantto note that respondent No. 8, though served in the present proceedings,has not appeared either before the Tribunal or before the AppellateTribunal and has not appeared before us. The appellant, sometime inC2014, came to know through the Company Secretary of RespondentNo.1 that duplicate share certificates had been given to somebody elsewho had subsequently transferred them to a third party. As soon as shebecame aware of the fraud that was perpetrated on her, the appellantrequested the Company to issue revalidated fresh share certificates for the said 903 equity shares on 17.09.2014. Since this was not done,Ddespite repeated reminders for the same, a Company Petition was filedon 31.07.2015 before the Company Law Board, which was then takenup under the Amended Act by the National Company Law Tribunal. Ina significant order that was passed by the NCLT on 09.11.2016, theNCLT recorded that it was acknowledged, both by the Company asEwell as by the SEBI, that procedural aspects and due care were notadhered to in the process of issuance of duplicate shares, as otherwisesuch fraud would easily have been unearthed. In the order passed bythe NCLT, the NCLT adverted to the aforesaid facts and afforded reliefto the appellant in the following terms:

F“The objection of Respondent No. 1 that the case in hand cannotbe adjudicated by the Tribunal is a frivolous attempt to escapeany liability and or grant relief to the petitioner. This Bench failsto understand why the petitioner should resort to a civil court inorder to prove her title. Apart from her oral testimony and heroriginal share certificates, there is little else to be adduced inGevidence even in a Civil Suit. She has her original certificates inhand. The respondents are aware of the fraudulent actsperpetuated on her and have even initiated criminal proceedings.There is no reason for the petitioner to be deprived of her assetsfor the outcome of the criminal investigation or wait for the criminal H

to be brought to book. Her documents and her entitlement arenot denied to by the respondents. Under such circumstances,vague denial to escape any liability and to suggest that the petitionerinitiates a Civil Suit is viewed as an attempt not to redress thegrievance which has primarily arisen out of the fraud played bythe employees of the Respondent Company or their Agents. Apartfrom guidelines of Respondent No. 3 that unequivocally makethe Respondent Company liable for the acts of their Register cumShare Transfer Agents, the law on the point is clear that thePrincipals are liable for the acts of their agents.”

4. The NCLT then went on to state that the original sharecertificates, which were still in physical form with the appellant, couldget demated after due confirmation from the register which would becarried out pursuant to the aforesaid order. In appeal to the AppellateTribunal, the Appellate Tribunal referred to the fact that a criminalcomplaint and SEBI investigation were both pending, as a result of whichit would not be correct for the Tribunal to exercise its powers to rectifythe register under Section 59 of the Companies Act. The aforesaidjudgment of the NCLT was, therefore, set-aside and the appellant wasrelegated to a suit.

5. Shri K.V.Vishwanathan, learned senior appearing for theappellant, has commended for our acceptance the order of NCLT,together with its reasoning. Learned senior counsel has stated that thereis really no contest in the present proceedings inasmuch as respondentNo. 8, who would be affected by the NCLT order, has chosen not toappear in the proceedings throughout. He has also referred to and reliedupon a RTI Circular No. 1 dated 09.05.2001 and the fact that SEBI has,in its application to delete itself from the array of parties stated, on20.05.2016, that respondent No. 2 has issued duplicate shares withoutfollowing the proper procedure and without exercising due care anddiligence.

6. Shri Pratap Venugopal, learned counsel appearing on behalf ofSEBI reiterates this position and also agrees with Shri Vishwanathanthat the NCLT order should be reinstated.

7. Shri Shyam Divan, learned senior counsel appearing for theCompany, when faced with the fact that there is no real contest in thepresent case, has further submitted that this Court should be careful in A

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Areinstating the Tribunal’s order inasmuch as it is not at all clear as towhether respondent No. 8 has, in fact, been entered on the register ornot. It is his further submission that since the shares are now demated,it is not his client that should be directed to put the appellant back on theshare register but the concerned depository.

B8. We are of the view that the Tribunal was absolutely correct innot relegating the appellant to any further proceedings inasmuch this isan open and shut case of fraud in which the appellant has been thevictim, and Respondent No. 2 the perpetrator.

9. Equally, it is clear that the due procedure that has been outlinedCin paragraph 23 of the RTI Circular dated 09.05.2001 has not beenfollowed. When the duplicate shares were issued, stock exchangeswere not informed and neither was an advertisement in a widely circulatednewspaper issued as the value of the shares were far greater thanRs. 10,000/-.

D10. We are, therefore, of the view that the Appellate Tribunal inrelegating the appellant to a further proceeding was not correct. We,therefore, set-aside the Appellate Tribunal’s order and reinstate that ofthe Tribunal dated 20.03.2017. It goes without saying that if respondentNo. 8 does not happen to be on the register at all, then there would beno difficulty whatsoever in restoring the appellant back to its originalEposition. Even if respondent No. 8 has been entered on the Register, hisname will have to be deleted in view of the fact that the transfer to himhas been declared to be void in law.

11. We, therefore, direct the Company to rectify its register, insofaras the physical share certificates are concerned, and the concernedFdepository to rectify the demat records in accordance with this order.

12. The appeals are allowed in the aforesaid terms.

13. Pending applications, if any, shall stand disposed of.

GNidhi Jain

Appeals allowed.

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