ORDER
1. Shri C. Mathew, the petitioner herein, has filed this petition under Section 111 of the Companies Act, 1956 (hereinafter referred to as “the Act”), seeking rectification of the register of members of the Cochin Stock Exchange Ltd. (hereinafter referred to as “the company”) so as to show that the petitioner holds 10 shares in the company.
2. According to the petitioner, he is one of the original signatories to the memorandum of association of the company incorporated in 1978. At that time he had taken one share in the company along with 13 other signatories who were also holding one share each. In the year 1980, all the 14 signatories to the memorandum were allotted additional nine equity shares each in the company. Thus, the petitioner came to possess 10 shares for which a share certificate was also issued to him. He left for Zambia in the year 1984 and when he returned to India in 1994 he came to know that the company had cancelled the 9 additional shares issued to him and now he is shown in the register of members as holding only one share. He has also relied on the fact of allotment of nine additional shares in the annual reports for the years 1981 to 1984. His efforts to get the register rectified through correspondence with the company have failed and, accordingly, he has filed this petition seeking relief in this regard.
3. According to the company, the allotment of nine shares was wrong inasmuch as the company being a public company the provisions of Section 81 had not been followed, the persons who had signed the share certificates were not authorised to do so and even the return of allotment had been filed by an unauthorised person. Due consideration had not been paid by the petitioner in respect of the shares and only the membership fee that had been paid had been adjusted towards the shares wrongfully. The cancellation of the shares was on the basis of an adverse audit report and the same was done after approval by the general body. In other words, according to the company, the shares allotted against the provisions of law by unauthorised persons is null and void and according to it the company was right in cancelling the shares and removing the name of the petitioner from the register of members in respect of the nine shares. The company has taken a stand that not only the petitioner’s shares were cancelled but the shares allotted to the other 13 persons also were can-celled and all of them were informed of the cancellation through its letter dated April 12, 1984, and the requisite returns were also filed before the Registrar of Companies, Kerala, at Cochin. Eight of the aggrieved share-holders filed a suit in the civil court challenging the cancellation of the shares by the company, which was later dismissed for non-prosecution. The petitioner did not choose to agitate the matter till the instant petition has been filed. According to the company, since the cancellation took place in 1984 and the petitioner has come before the Company Law Board only in September, 1995, the petition should be dismissed on account of delay and laches.
4. When the matter was heard Shri R. Murari, advocate, appearing for the petitioner, submitted that the petitioner had gone to Zambia in the year 1984 before the receipt of the alleged letter intimating of the cancellation and that when he returned to India in 1994 he had been corresponding with the company after knowing that the shares were cancelled. Therefore, as far as his knowledge is concerned, it was only in 1994, and he has filed the petition in the year 1995 without loss of time and as such, the objection of the respondent in regard to limitation should not be considered. Further, according to him, the Limitation Act is not applicable here and as long as the petitioner has given sufficient reasons for the delay, the petition should not be dismissed on this score alone.
5. He reiterated the submissions made in the petition and submitted
that the company is not authorised to cancel shaves either by the articles
or by the Companies Act resulting in reduction of share capital for which
the approval “of the court should have been obtained and the cancellation
does not also fall within the provisions of Section 94 of the Act. In view
of the fact that the petitioner is in possession of the share certificate
indicating therein that he is the holder of 10 shares, that all the balance-
sheets from 1980 to 1984 show the share capital inclusive of the nine
additional shares issued to each of the 14 subscribers to the memorandum
and that the various returns filed during this period including the return
of allotment also indicate the allotment of nine additional shares, the
action of the company is ultra vires its articles as well as the Companies
Act.
6. Shri Moti Philip, appearing for the company, submitted that any allotment made without authority and without following the procedure of law, especially Section 81 of the Act according to which the existing members are to be offered shares in proportion to the capital paid-up, was null and void and as long as the allotment is null and void, the same has been corrected by the company by cancelling the shares illegally issued. The consideration appropriated from the membership fee had also been recredited to the member and as such, the petitioner has not suffered any financial loss in this regard. He further stated that even though this aspect was reported in the audit report for the year 1981 itself and repeated in the subsequent reports, the company could get the approval of the shareholders for cancelling the shares only in the year 1984 and the cancellation was also intimated to all the shareholders vide letter dated April 12, 1984. The members who moved the civil court did not pursue the case because they were fully aware that they had no case to fight for.
7. We have considered the arguments of counsel. A preliminary objection has been raised by the respondent-company that there has been undue delay in filing this petition and as such the petition should be dismissed. The contention of the petitioner is that the Limitation Act is not applicable to the Company Law Board and that since the petitioner was away in Zambia right from 1984 and that he had the knowledge of cancellation of the shares only in 1995, there is no delay in moving this Bench. The admitted position in this regard is that the shares were issued in 1980 and were cancelled in 1984. The company’s stand that the cancellation of the shares was intimated to all the allottees through a letter dated April 12, 1984, as is evident from the suit filed by some of the affected allottees in June, 1984. The petitioner claims that he has not received this letter. According to Section 53 of the Companies Act, 1956, where a document is sent by post, service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter to the registered address of the shareholder. Since there is no doubt about the factum of sending this communication to other allottees, there is no reason for us to suspect that the said communication was not sent to the petitioner. Even though the petitioner claims that he was not in the knowledge of the said letter on account of his being away in Zambia in the year 1984, the petitioner has not stated as to exactly when he left for Zambia. From the photocopy of the passport produced before us, we find that the passport had been issued on 19th March, 1985 (No. W-518811). This passport had been issued in lieu of another passport No. K-301703 dated June 19, 1975. From the perusal of the copy of the passport produced before us, we are not in a position to ascertain the exact date of departure from India to find out whether he left for Zambia before or after April 12, 1984. From the copy of this passport, we also find that the petitioner has made quite a few trips to India from 1986 onwards. Even assuming that he had left prior to April 12, 1984, from the entries in the passport, we find that he had visited India in 1986, 1988 and 1992. Keeping this background in mind, we shall now consider the arguments of counsel for the petitioner that since the Limitation Act is not applicable to the Company Law Board, this preliminary objection should not be considered by us. Counsel for the petitioner cited a large number of cases to reinforce his argument in this regard. While we do agree with him that the Limitation Act is not applicable to the Company Law Board, which stand, we have also taken in a number of cases before us, yet when there is undue delay in moving this Bench after the cause of action arose, whether the Company Law Board can, on the basis that the Limitation Act is not applicable, proceed with the matter. In the present case, as we have already pointed out, the factum of posting of the letter dated April 12, 1984, is established. The petitioner is not in a position to establish that he had left India before the date of this letter. It is also seen that he has visited India a number of times later. It was also told to us during the hearing that someone else was trading on the membership of the petitioner in this stock exchange. Eight of the allottees who were co-promoters along with the petitioner, had filed a suit in 1984 challenging the cancellation. The shares held by him are not in an ordinary company but in a stock exchange in which the members have a right to trade. Considering all these facts, we find it difficult to believe that the petitioner was not aware, for a long period of 11 years, about the cancellation of the impugned shares. Thus, signifying the fact, the petitioner had not chosen to challenge the cancellation for such a long period. Therefore, even though we have held that the Limitation Act is not applicable in proceedings before the Company Law Board, yet we are conscious that a person who delays exercising his right of action cannot expect the Company Law Board to close its eyes to the inaction on the part of such a person for a long period.
8. Therefore, considering the entire matter in totality, we find that the petitioner had not been able to satisfy us properly regarding his inaction for over a period of 11 years in moving this petition and as such on account of delay and laches, the petition should be dismissed. Accordingly, without going into the merits of the various contentions raised by the parties in regard to the validity of the cancellation of the shares, we dismiss this petition as time-barred and as such not maintainable.
9. No order as to costs.