Kiran Devi Poddar vs Sundaram Clayton Limited & Ors
2022 Latest Caselaw 1666 Cal

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                    IN THE HIGH COURT AT CALCUTTA
                     CIVIL APPELLATE JURISDICTION
                            APPELLATE SIDE


BEFORE:
The Hon'ble Justice Soumen Sen
and
The Hon'ble Justice Ajoy Kumar Mukherjee


                           FAT 539 OF 2017
                           CAN 9763 of 2017
                            CAN 2 of 2022

                           Kiran Devi Poddar
                                Versus
                    Sundaram Clayton Limited & Ors.


For the Appellant                  : Mr. Siddhartha Banerjee, Adv.
                                     Mr. Supratik Roy, Adv.
                                     Mr. Soumajit Majumdar, Adv.


Hearing Concluded On               : 3rd March, 2022

Judgment On                        : 30th March, 2022


      Soumen Sen, J.: The appellant is aggrieved by the judgment and

decree dated 19th August, 2017 by which the learned 12th Bench of City

Civil Court at Calcutta dismissed the suit being T.S. No. 1525 of 2016

(Kiran Devi Poddar vs. Sundaram Clayton Limited and Ors.).


      The plaintiff filed a suit for declaration and permanent injunction

against the defendant.
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      Upon receiving the summons neither the defendants nor the

substituted defendants of deceased defendant no.3 appeared before the

trial court to contest the suit. Accordingly, the suit proceeded ex parte

against all the defendants.


      The suit is based on unusual facts and surrounded by suspicious

circumstances.


      The plaintiff alleged to have purchased 4 share certificates of 50

shares each, that is, 200 shares of M/s. TVS Motor Limited formerly

known as TVS Suzuki Limited from Gouri Dutt Parmanandka on 2nd May,

1990 on payment of Rs.4000/- and received share transfer deed and

certificate. The face value of each share Rs.10/- Gouri calimed to have

executed Form 7B, Share Transfer Form, on 2nd May, 1990 in the name of

the plaintiff in presence of the witness namely, Mr. Ramesh Mehta. On

20th January, 2011 Sundaram Clayton Limited (in short 'Sundaram'),

Share Transfer Agents of TVS addressed a letter to Gouri requesting her to

return the old share certificates of erstwhile TVS Suzuki Limited in lieu of

new share certificates of TVS Motor Company Limited to be issued in her

name. Since no response was received a reminder letter was issued on

25th July, 2011 requesting Gouri to forward the old share certificates

within 14 days from the date of the said letter failing which Sundaram

shall be constrained to transfer the said shares to "Unclaimed Suspense
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Account" with one of the Depository Participants (DPS) in a dematerialized

form.


        The plaintiff alleged that there has been a series of letters

exchanged between the plaintiff and Sundaram for revalidation of the 200

shares purchased by the plaintiff from Gouri but Sundaram refused to

register in view of merger of TVS with Sundaram under a scheme of

amalgamation sanctioned by Hon'ble High Court of Madras vide order

dated 10th December, 1999 following which new shares were issued in the

name of Gouri having distinctive Nos. 142880241 to 142882240, on 18th

July, 2013 under share certificate no. 7974 for the aforesaid 2000 shares

without surrender of the old share certificates nos. 71847 to 71850

aggregating to 2000 shares.          These 2000 shares were subsequently

transferred in favour of Arju Poddar on 20th May, 2015.             The plaintiff

requested Sundaram to stop transfer of shares in favour of Arju as the

plaintiff is the rightful owner of the shares to which Sundaram responded

stating that the plaintiff would be required to approach the Company Law

Board/ Jurisdictional Court for getting appropriate order.


        The plaintiff alleged that the defendants in collusion and connivance

with each other practiced fraud upon the plaintiff causing huge financial

loss and damages for which the defendants are liable to compensate.


        The cause of action arose on 24th July, 2015.


        In the suit the plaintiff has prayed for the following reliefs:
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1.

Decree for declaration that the plaintiff is entitled to get 2000+2000 shares converted original TVS Suzuki Ltd. Madras (TVS Motor Co. Ltd.) shares to be issued by the defendant no.1 and 2 and upon further declaration that the defendant no. 1, 2 and 3 have no right to transfer the shares in favour of defendant nos. 4 and 5 upon further declaration that the transfer of shares made in favour of 4 and 5 is forged and fraudulent and is not binding upon the plaintiff in the eye of law.

2. Mandatory injunction directing the defendant no. 1 and 2 to issue fresh shares as mentioned in favour of the plaintiff.

3. Decree for damages @ Rs.500/- per diem from the date of refusal to issue shares till the shares are issued.

4. Ad-interim order of injunction restraining the defendant nos. 1, 2 and 3 from taking any steps or further steps to provide unlawful gain to the defendant nos. 4 and 5 respectively since the shares have been illegally and unauthorizedly and in deceptive manner transferred in their names, pending disposal of the instant suit.

5. An order of injunction should also be passed restraining the Company Sundaram Clayton Limited that the shares of the petitioner should not be 'Demat' in the holding of Arju Poddar and Jitendra Kumar Poddar and not to pay any corporate benefit to them, pending disposal of the instant suit.

6. Ad-interim order by way of direction upon the Company Sundaram Clayton Limited to revalidate and/or cause revalidation of the shares certificate no. 071847, 071848, 071849 and 071850 with distinctive no. 8143788 to 8143887 to 8143888 to 8143987 with folio no. G-1289 of M/s. TVS Suzuki Ltd. pending disposal of the instant suit.

7. Cost of the suit and Advocate's fees.

8. Any other relief or reliefs to which the plaintiff may be found entitled to in law and equity.

One Alok Kumar Poddar deposed as PW1 on behalf of the plaintiff as

a constituted attorney. He is the son of the plaintiff. The power of attorney

was executed on 2nd March, 2017. The plaintiff exhibited 11 documents.

The oral and documentary evidence would show that the plaintiff

purchased 200 shares through off market from the defendant no.3 for a

consideration. The plaintiff never informed or intimated the defendant

no.1 or 2 after the said purchase on 2nd May, 1990 as would appear from

the letter of 1st June, 2015 addressed to the defendant no.1 (Exhibit 6

series). The plaintiff stated in paragraph 2 of the letter that the said

shares could not be transferred within the validity period as the same was

kept at an untraceable place. It is thus, admitted that the defendant nos.

1 and 2 had no knowledge about the purchase of the said shares from

defendant no.3 until receipt of the letter dated 1st June, 2015. The

plaintiff was also aware that validity of transfer of shares was already over

by the time the plaintiff started communicating with the defendant no.1.

The exhibit 9 series would show that the plaintiff had never brought to the

notice of the defendant no.1 or 2 for almost 25 years in respect of transfer

of shares in her name. She never made any request for transfer of the

shares in her favour for the reasons best known to her. She did not even

communicate about the alleged misplacement of the original share

certificates until 7th July, 2015. Curiously the plaintiff did not immediately

assert her right as shareholder nor had claimed any dividend for almost

25 years. On the contrary the plaintiff in paragraph 4 of the plaint refers

to the letter of Sundaram dated 25th July, 2011 and affirmed the said

paragraph as true her knowledge. The plaintiff has not offered any

acceptable and trustworthy explanation for not asserting her right for

almost 25 years in relation to said shares. Even if, one assumes that

plaintiff was unaware of the fact that the shares continued to remain in

the name of Gouri even after alleged transfer, however, in 2011 she

became aware of such fact but she did approach the said defendant no.1

or 2 with proper documents to record her name instead and place of

Gouri. It is now claimed at the appellate stage that Gouri died sometimes

in 1995.

During the lifetime of Gouri the plaintiff had never asserted her

right in respect of the said shares. It appears from record that after

merger of TVS Suzuki with Sundaram Auto in terms of the order of the

Madras High Court dated 10th December, 1999 the company was renamed

as TVS Suzuki Limited (TSL). TSL thereafter issued new shares to its

shareholders in place of the old ones. It further appears on 7th November

2001 TVS Suzuki was again renamed as TVS Motor Company Limited and

the company issued new share certificates for 2000 shares of Rs.1 each to

shareholder Gouri in lieu of old certificate no. 71847 to 71850 and also

issued 2000 bonus shares in the name of Gouri. It further appears from

the record of the company that 2000 shares and 2000 bonus shares were

transferred in the names of defendant nos. 4 and 5 after the said transfers

lodged the shares.

In a declaratory suit the plaintiff has to establish his right, title and

interest over in respect of the property in question.

The power of attorney holder cannot have any personal knowledge

about the alleged purchase of shares or due execution of Form 7B. The

execution of Form 7B was not proved. The witness named in the said

Form was not examined. The stamp alleged to be the Registrar of

Companies appear to be faint and of doubtful character. The Form 7B was

not proved in accordance with law. When the plaintiff was alive and facts

required to be proved are within the special knowledge of the plaintiff one

would have expected the plaintiff to appear and depose. The power of

attorney holder cannot depose on facts which are within the exclusive and

special knowledge of the plaintiff.

The Companies Act 1956 and subsequently the Companies Act 2013

prescribes a procedure for transfer and transmission of shares. Transfer

cannot be registered except on production of instrument of transfer.

Transfer of shares take place either by a fully executed document

such as was contemplated by Regulation 18 of Table A of the Indian

Companies Act, 1913, or by what are known as "blank transfers". In such

blank transfers, the name of the transferor is entered, and the transfer

deed signed by the transferor is handed over with the share scrip to the

transferee, who, if he so chooses, completes the transfer by entering his

name and then applying to the company to register his name in place of

the previous holder of the share. The company recognises no person

except one whose name is on the register of members, upon whom alone

calls for unpaid capital can be made and to whom only the dividend

declared by the company is legally payable. Of course, between the

transferor and the transferee, certain equities arise even on the execution

and handing over of a blank transfer', and among these equities is the

right of the transferee to claim the dividend declared and paid to the

transferor who is treated as a trustee on behalf of the transferee. These

equities, however, do not touch the company, and no claim by the

transferee whose name is not in the register of members can be made

against the company, if the transferor retains the money in his own hands

and fails to pay it to him. The company recognises, only a person who, as

a shareholder, has his name entered on the register of members. A similar

view of the Companies Clauses Consolidation Act, 1845, was taken in

Nanney v. Morgan. The learned Lords Justices held that under section 15

of that Act, the transferee had not the benefits of a legal title till certain

things were done, which were indicated by Lopes. L.J., in the following

passage:

"Therefore the transferor, until the delivery of the deed of transfer to the secretary, is subject to all the liabilities and entitled to all rights which belong to a shareholder or stockholder, and, in my opinion, until the requisite formalities are complied with, he continues the legal proprietor of the stock or shares subject to that proprietorship being divested, which it may be at any moment, by a compliance with the requisite formalities."

The same position obtain in India, though the completion of the

transaction by having the name entered in the register of members relates

it back to the time when the transfer was first made. See Nagabushanam

v. Ramachandra Rao, ILR 45 Mad 537: (AIR 1923 Mad 241). (See. M/s.

Howrah Trading co. Ltd. v. Commissioner of Income Tax, Central,

Calcutta: AIR 1959 SC 775)

Transfer of shares is complete when duly executed and stamped

transfer deed is delivered to the company irrespective of the fact whether

the company registers it or not. [K.N. Narayanan v ITO, (1984) 55 Comp.

Cas.182 (Ker)]

Before the instrument of transfer is signed by the transferor and

before any entry is made therein it shall be presented to the prescribed

authority appointed by the Government. Such officer shall put on the

instrument the date of its presentation before him. This form will then be

executed by the transferor and the transferee and completed in all other

respects and delivered to the company for registration. Where shares are

quoted on or dealt in a recognized stock exchange such form shall be

delivered to the company within twelve months from the date put on the

form by the prescribed authority or before the register of members of the

company is closed, whichever is later.

As per Rule 5A* of the Companies (Central Government's) General

Rules and Forms, 1956, for the purposes of clause (a) of sub-section (1A)

of section 108, the prescribed authority shall be the Registrar or such

other authority as the Central Government may from time to time appoint

in that behalf by Notification in the Official Gazette. Such was the

requirement of law when the alleged transfer had taken place in favour of

the plaintiff.

In Mathrubhumi Printing and Publishing Co. Ltd. vs. Vardhaman

Publishers Ltd. and Ors. reported in 73 CC 80 the Division Bench of the

Kerala High Court in discussing the legal effect of Transfer of shares and

rights of shareholders' have stated thus:

"The question, therefore, is: when would the transfer become effectual as between the company and the transferees? The deed of transfer shall not have any effect so as to put the transferee into the position of the transferor until it has been lodged with the company, and it must be not only lodged, but accepted by the company as properly lodged, because if the company finds that it does not comply with the provisions of the Act it is its duty to refuse to receive it (see the decision of the Chancery Division in Nanney v. Morgan [1888] 37 Ch 346). Until the lodgment, the transfer may be effective between the transferor and the transferee. The transfer, however, becomes complete and the transferee becomes a shareholder in the true and full sense of the term with all the rights of a shareholder, only when the transfer is registered in the company's register. In the same strain is the statutory mandate to the company discernible from Section 108, not to register the transfer of shares unless a proper instrument of transfer duly stamped and executed is delivered to the company. Until such time as registration is granted, the person whose name is found in the register alone need be treated as the shareholder by the company. During the interregnum, that is, from the date of the transfer till the date

of lodgment the transferee no doubt, becomes the owner of the beneficial interest though the legal title continues with the transferor. This antecedent right in the transferee is enforceable, so long as no obstacle to it is shown to exist in any of the articles of association of a company or a person with a superior right or title, legal or equitable, does not appear to be there. This in brief is the law stated by the Supreme Court in the decision in Pranlal's case (1975)45 Comp Cas 43 (SC) and Escort's case (1986) 59 Comp Cas 548. The principles deducible from the above judicial pronouncements can be stated thus : Until the transfer of the shares is actually registered it should be held that the transferee's title to the share is inchoate, and that the legal title remains vested in the transferor (see Colonial Bank v. Hepworth [1887] 36 Ch 36 at pg.54). This line of reasoning is reinforced by Article 19 of Table A of Schedule I to the Act which provides that until the name of the transferee is entered in the register of members, the transferor shall be deemed to remain the holder of the shares transferred, thereby clearly stating that the legal title remains vested in the transferor. It is true that delay in the registration involves danger to the transferee if some already existing prior equity may come to light, as in the case in Ireland v. Hart [1902] 1 Ch 522, where a husband mortgaged shares of which he was trustee for his wife and, before the mortgagee had become the registered holder of the shares, the wife took proceedings claiming that her equitable title prevailed over that of the mortgagee, a claim which the court upheld ; or a second transfer may be passed and registered and thus the first transfer may be defeated (see para 39.07 of Palmer, 23rd edition). The position has been illustrated by Palmer thus :

"The rule on this point is that, as between two persons claiming title to shares in a company like this, which are registered in the name of a third party, priority of title (i.e., equitable title) prevails, unless the claimant second in point of time can show that as between himself and the company, before the company received notice of the claim of the first claimant, he, the second claimant, has acquired the full

status of a shareholder ; or at any rate that all formalities have been complied with, and that nothing more than some purely ministerial act remains to be done by the company, which as between the company and the second claimant the company could not have refused to do forthwith ; so that as between himself and the company he may be said to have acquired, in the words of Lord Selborrie, 'a present, absolute, unconditional right to have the transfer registered, before the company was informed of the existence of a better title'."

It, therefore, follows that the equitable right of the transferee gets

metamorphosed into the absolute right of a shareholder only when the

names of the transferees after the recognition of the transfer, are entered

on the register."

The provision contained in Section 108 of the Act states that "a

company shall not register a transfer of shares...unless a proper

instrument of transfer duly stamped and executed by or on behalf of the

transferor and by or on behalf of the transferee has been delivered to the

company along with the certificate relating to the shares or debentures or

if no such certificate is in existence along with the letter of allotment of the

shares."

The said provision was held to be mandatory in Mannalal Khetan

and Ors. vs. Kedar Nath Khetan and Ors. reported at 47 CC 185. It was

stated thus:

"The words shall not register" are mandatory in character. The mandatory character is strengthened by the negative form of the language. The prohibition against transfer without complying with the provisions of the Act is emphasised by the negative language. Negative language is worded to emphasise the insistence of compliance with the provisions of the Act.

Negative words are clearly prohibitory and are ordinarily used as a legislative device to make a statutory provision imperative."

Admittedly the plaintiff did not file any application for transfer. The

bald statement of the plaintiff that the original shares along with transfer

form alleged to have been executed by Gouri was traceable only in the year

2014 is clearly unacceptable. Moreover, in the mean time third party

interest has accrued. The defendant no.1 and 2 cannot be held

responsible for not recording the name of the plaintiff in the share

register. At this distant time it is not possible for Court to hold that there

has been any connivance between the defendants due to lack of evidence.

According to the plaintiff Gouri died in the year 1995. The amalgamation

of TVS Suzuki took place on 10th December, 1999 and thereafter on 7th

November, 2001 TVS Suzuki was renamed as TVS Motor Company

Limited. It was during such time bonus shares were issued. Even the

suit is barred by limitation as it was clear to the appellant by her own

admission in paragraph 4 of the plaint that the plaintiff became aware of

the shares being held in the name of Gouri in 2011 and no transfer had

taken place in her name. By the said date, it was quite clear to the

plaintiff that the name of the plaintiff was not reflected in the share

register and the share register still records the name of Gouri. Three

years have passed since then. The right to sue accrued in the year 2011

itself by reason of the letter dated 25th July, 2011, if we take a liberal view

in this regard. The plaintiff made no attempt soon thereafter for

rectification of the share register. There is an unreasonable and

unexplained delay of almost 21 years in first ascertaining the status of the

shares alleged to have been purchased by the plaintiff on 2nd May, 1990

and thereafter more than three years had passed in not approaching the

company for rectifying the register of members. It is thus ex facie barred

by limitation. (See. Naveen Kumar v. Karnataka; AIR 1999 Kar 71 )

On such consideration we do not find any reason to interfere with

the judgment and decree passed by the learned Judge 12th Bench, City

Civil Court at Calcutta.

The suit stand dismissed along with CAN 9763 of 2017 and CAN 2

of 2022.

There shall be no order as to costs.

      I agree                                           (Soumen Sen, J.)




      (Ajoy Kumar Mukherjee, J.)