ORDER
K.K. Balu, Member
1. This is a petition filed under Section 111(4) of the Companies Act, 1956 (“the Act”) seeking directions against M/s Shri Bhaarathi Cotton Mills Private Limited (“the first respondent company”) for rectification of its register of members by deleting the name of the second respondent company in respect of one equity share of the first respondent company and entering the name of the petitioner, as owner of the impugned share.
2. According to Shri R. Venkataraman, learned Counsel, the first respondent company was incorporated in January, 1984 for the purpose of manufacturing and selling cotton, yarn etc. The petitioner and his father M.S.D. Chandrasekar Raja, being the Managing Director are subscribers to the Memorandum and Articles of Association of the first respondent company each subscribing to 500 equity shares of Rs. 10/- each. By virtue of the allotment of shares from time to time the petitioner and his father each came to hold as at 30.03.1998, 2,84,000 equity shares of Rs. 10/- each. No share of the first respondent company was allotted in favour of the second respondent company. However, according to the respondents, the petitioner had on 05.03.1988 transferred one equity share out of his total holding of 2,84,000 equity shares in the first respondent company in favour of the second respondent company as reflected in some of the records including the annual returns of the first respondent company. The petitioner was under the bonafide impression that he was holding 2,83,999 equity shares and the second respondent company one equity share in the first respondent company. When the petitioner had on 14.07.2004 the opportunity of inspecting the share certificates book of the first respondent company containing the counterfoils/stubs and unissued share certificate forms produced by the first respondent company for inspection in relation to the company petition No. 2/2004 filed by the petitioner’s father, it came to light that the share certificate Nos. 1, 3, 6 & 8 are in the name of the petitioner’s father and the share certificate Nos. 2, 4, 7 and 9 in the name of the petitioner, but the share certificate No. 5 in the name of the second respondent carrys the endorsement “cancelled”. The share certificates book containing unissued blank share certificates reveals that no share has been allotted in favour of the second respondent company and that no split share certificates have been issued to the petitioner so as to transfer the impugned share to the second respondent company. Furthermore, the petitioner has not executed any transfer form transferring any share to the second respondent company. As a result, the name of the second respondent company has been wrongly and without sufficient cause entered in the register of members of the first respondent company in respect of the impugned share, which is required to be rectified by removing the name of the second respondent and entering the name of the petitioner. While the second respondent company has not produced the original share certificate, the first respondent company failed to make available the instrument of transfer. The board of directors of the first respondent company neither approved the transfer of one share reportedly effected by the petitioner in favour of the second respondent nor produced the original minutes of the board meeting said to have been passed on 05.03.1988 approving the impugned transfer of share or any other document substantiating the claim, and therefore, the Company Law Board must make every presumption against the respondents to their disadvantage as held by this Board in A. Devarajan v. N.S. Nemura Consultancy of India (P) Ltd.- 2005 (3) Comp LJ 177. The requirements of Section 108 of the Act, which mandate the delivery of a proper instrument of transfer duly stamped and executed by the transferor and the transferee together with the share certificate, as emphasized in the commentaries by Shri A.M. Chakraborti and Shri S.K. Gupta on Transfer and Transmission of Shares are not duly satisfied and therefore, any resolution by the board of directors for the transfer of any share by the petitioner in favour of the second respondent company cannot be valid. The action of entering the impugned transfer in the share register without due compliance of the provisions of law is illegal. The petitioner came to know about the disputed transfer on 14.07.2004, upon which came out with the present company petition on 20.07.2004 and therefore, the claim for rectification of the register of members is well within time. If there is any violation of law, the question of limitation does not arise. Moreover, delay is no bar to enforce the claim for rectification of the register on the ground of misrepresentation, as borne out by the commentaries of Gore-Browne on Companies. Shri Venkataraman, learned Counsel pointed out that the relevant columns reflecting the transfer of impugned share on 05.03.1988 by the petitioner in favour of the second respondent in the annual return for the year 1987-88 are found to be scored and further that the schedule forming part of the annual return for the year 2002-03 has not been signed by the petitioner and therefore, not binding on him. By virtue of Section 164, certain annual returns reflecting the transfer of impugned share in favour of the second respondent though signed by the petitioner would not conclusively establish the transfer in the absence of due fulfillment of the requirements of Section 108 and minutes of the board meeting approving the impugned transfer. Shri Venkataraman, learned Counsel in support of his legal submissions relied upon the following decisions:-
Dr. G.N. Byra Reddy and Ors. v. Arathi Cine Enterprises Pvt. Ltd. and Ors. – (1997) Vol.89 CC 745 – to show that Tribunals are not courts for all purposes. The Limitation Act is not applicable to tribunals including the Company Law Board. The Company Law Board is not covered by the provisions of the Limitation Act.
T.G. Veera Prasad (C.P. No. 2/111/SRB/91); (2) Tungabhadra Machinery and Tools Ltd. (C.P. No. 3/111/SRB/91) v. Sree Rayalseema Alkalies and Allied Chemicals Ltd. and Ors. – to show that proceedings before the Company Law Board are not governed by the provisions of the Limitation Act, 1963.
Mrs. Promila Bansal v. Wearwell Cycle Co. (India) Ltd. – (1978) 48 Comp. Cas. 202 – to show that mere acquiescence, waiver or laches does not defeat the grant of any equitable relief.
Mannalal Khetan and Ors. v. Kedar Natah Khetan and Ors. -(1977) 2 SCC 424 – to show that the provision contained in Section 108 is mandatory in character, which is strengthened by the negative form of language. The prohibition against transfer without complying with the provisions of the Act is emphasized by the negative language. Negative language is worded to emphasise the insistence of compliance with the provisions of the Act.
Mrs. S. Rehana Rao and Anr. v. Balaji Fabricators Pvt. Ltd. and Ors. – (Company Law Board, Additional Principal Bench, Chennai – CP No. 36/2003) – to show that that unless a transfer is duly approved by the board of directors which must be substantiated by production of minutes of the meeting of the board of directors, approving such transfer or instruments of transfer or any document evidencing the same, such transfer cannot be a valid one.
3. According to Shri Murari, learned Counsel, the petitioner had transferred the impugned share as early as on 05.03.1988 and failed to make out any prima facie case, but came out with the present frivolous company petition. The annual return made upto 11.07.1988, signed by both the petitioner and his father clearly discloses the transfer of one share by the petitioner in favour of the second respondent company. Though particulars in regard to the transfer of one equity share made on 05.03.1988 in favour of the second respondent, furnished under columns 5, 6 & 8 of Annexure-I, forming part of the annual return are scored, yet the name of the second respondent company and one share held by the second respondent company appearing under columns 2 & 4 of Annexure-I, remain unscored. The impugned transfer is reflected in the annual returns filed by the Company signed by the petitioner and his father for the period 1988-89, 1989-90, 1990-91, 2002-03 and 2003-04. The annual returns prima facie evidence the particulars contained therein. The schedule forming part of the annual return for the year made upto 29.09.2003 is not signed by the petitioner, but is binding him, especially when the return has been signed by the petitioner and his father. The transfer is reflected in the register of members of the Company. Though the petitioner reportedly came to realize that he did not effect any transfer of the impugned share in favour of the second respondent on 14.07.2004, when he undertook inspection of the share certificates book of the first respondent company in connection with the company petition No. 2/2004, he had nevertheless signed the annual return made upto 30.09.2004, wherein the impugned transfer by the petitioner in favour of the second respondent company is reflected. The petitioner having signed the annual return all these years and acknowledged the transfer of impugned share in favour of the second respondent company abandoned his rights over the share. Thus, the petitioner is well aware of the impugned transfer made in favour of the second respondent company as early as on 05.03.1988. The petition filed in July, 2004 is clearly barred by limitation, in view of applicability of the provisions of the Limitation Act, 1963 to the proceedings under Section 111 of the Companies Act, as held by this Board in Tommy Mathew v. Duroflex Ltd. – (2004) Vol.55 SCL 636. Shri Murari, learned Counsel further pointed out that Article 137 of the Limitation Act would apply to any petition for rectification of the share register, which prescribes a period of three years of the transfer of shares, as held in A. Devarajan v. N.S. Nemura Consultancy India (P) Ltd. – (2005) 3 Comp LJ 177, which is not satisfied by the petitioner. Moreover, any application for rectification of the register of members of a private limited company during the year 1988 ought to have been filed under Section 155 of the Act before the concerned High Court within a period of three years from the date when the cause of action arose for such relief. The impugned transfer took place on 05.03.1988, in which case the petitioner must have invoked jurisdiction of the High Court under Section 155 on or before 04.03.1991. In the meanwhile, Section 155 came to be omitted by virtue of the Companies (Amendment) Act, 1988, with effect from 31.05.1991. Thus, the period of limitation under Section 155 for the petitioner to file an application for rectification of the register of members of the first respondent company expired even during the existence of Section 155 of the Act. In view of this, the present claim barred by limitation cannot be revived by resorting to the provisions of Section 111 of the Act. Furthermore, the petitioner is guilty of gross laches and there is inordinate delay in filing the present company petition and therefore, the company petition must be rejected as held by this Board in C. Mathew v. Cochin Stock Exchange Limited – (1997) 4 Comp LJ 455 and by the High Court of Haryana in S. Gurucharan Singh Mahant v. Rattan Sports (P) Ltd. – (1986) Vol.59 CC 279, wherein the relief for rectification of the register of members was declined on the ground of, inter-alia, long delay in taking action by the petitioner under Section 155 of the Act. The petitioner in his telegram dated 20.03.2004 addressed to the second respondent categorically admitted that the first respondent company is a closely held company with three shareholders including the second respondent company and further the petitioner in his communication dated 26.03.2004 conveyed his willingness to purchase the impugned share held by the second respondent company in the first respondent company. The share held by the second respondent company has been categorically admitted by the petitioner in the earlier proceedings under Section 397/398 (C.P. No. 2/2004) as well as in the connected SLP proceedings before the Supreme Court. The acquiescence on the part of the petitioner estops him from challenging the impugned transfer in favour of the second respondent company. In this connection, Shri Murari relied on the decision in Suresh Kumar Manchanda v. Prakash Roadlines Ltd. – (1996) 87 CC 102 – to show that the relief being equitable in character considerations like delay and laches, acquiescence etc. would be relevant while granting or refusing the same. The decision in Promila Bansal v. Wearwell Cycle Co. (India) Ltd. (supra) holding that mere acquiescence or laches or delay does not deny the grant of an equitable relief, according to Shri Murari, learned Counsel is applicable only in case of an executory contract and will not apply in the facts of the present company petition, in support of which reliance has been placed on Sha Mulchand & Co. v. Jawahar Mills Ltd., Salem – 1953 vol. XXIII CC 1.
4. Shri R. Venkataraman, learned Counsel in his rejoinder submitted: Mere signing of the annual reports by the petitioner containing particulars of the impugned transfer would not amount to abandonment of his rights over the impugned transfer. The petitioner was constrained to sign the annual report made upto 29.10.2004 without prejudice to his rights in the company petition as borne out by copies of the communication dated 14.10.2004 and 27.10.2004 addressed by the petitioner to his father and with a view to avoid deadlock in the affairs of the Company. The name of the second respondent company is appearing in the register of members of the first respondent company and until the register of members is rectified by deleting the name of the second respondent company, the petitioner is bound to recognize the shareholding of the second respondent company in the first respondent company. The second respondent company never made any application under Section 41 for allotment of shares by the first respondent company. In the present circumstances, if the claim of the petitioner for rectification of the register of members is declined without removing the name of the second respondent company, it would result in violation of the provisions of Section 41. The petitioner never made any representation that the impugned transfer of share was made in favour of the second respondent company, in which case, the question of estoppel does not arise. The second respondent company has not proved any payment of consideration towards the transfer of share by the petitioner in its favour. The decision in Suresh Kumar Manchanda v. Prakash Roadlines Limited cited on behalf of the respondents is in relation to the dispute with the official liquidator and therefore, not applicable to the facts of the present company petition. Mere waiver, acquiescence or laches not amounting to an abandonment of one’s right cannot disentitle him from claiming any relief in equity, as held in Sha Mulchand & Co. v. Jawahar Mills Ltd. (supra) and therefore, the second respondent cannot make any claim for the impugned share.
5. Before dealing with the main issue of rectification of the register of members of the Company on merits, I shall proceed to consider the preliminary objections regarding (a) applicability of the provisions of the Limitation Act, 1963 to the Company Law Board; and (b) enforceability of the claim for rectification of the register of member under Sub-section (4) of Section 111. The contentious issue regarding limitation came before this Board many a time and the decision rendered in this behalf in Tommy Mathew v. Duroflex Ltd. (supra) after considering, inter-alia, the decisions in Dr. G.N. Byra Reddy v. Arathi Cine Enterprises Pvt. Ltd. and T.G. Veera Prasad v. Sree Rayalseema Alkalies and Allied Chemicals Ltd. cited by Shri R. Venkataraman, learned Counsel assumes importance, relevant portion of which reads thus: –
“The issue as to whether the provisions of the Limitation Act, 1963 are applicable to proceedings under Section 111 when came to be considered before the CLB time and again, it was consistently held in several of the decisions viz., Shiv Dayal Agarwal v. Siddhartha Polyster (P.) Ltd. [1997] 88 Comp. Cas. 705 (CLB), T.G. Veera Prasad v. Sree Rayalseema Alkalies & Allied Chemicals Ltd. [1997] 89 Comp. Cas. 13 (CLB) and Dr. G.N. Byra Reddy v. Arathi Cine Enterprises (P.) Ltd. [1997] 89 Comp. Cas. 745 (CLB) that the Limitation Act does not apply to applications under Section 111. However, by virtue of the decision of a Division Bench of the Calcutta. High Court in the case of Smt. Nupur Mitra v. Basubani (P.) Ltd. [1999] 2 Cal.LJ 264, which was later confirmed in appeal by the Apex Court, after an analysis of various contentions as regards the limitation and delay, it was categorically held that in proceedings under Section 111, the provisions of the Limitation Act would apply. It may not be out of place to mention that in the case of Basubani (P.) Ltd. (supra), the petition under Section 111 was filed nearly 50 years after the allotment of shares and the CLB dismissed the petition as time barred, which order was set aside by the Calcutta High Court, which decision was confirmed by the Supreme Court. Thus, in view of the Supreme Court upholding the decision of the Calcutta High Court that the provisions of Limitation Act are applicable to the proceedings under Section 111, the said decision is binding on the CLB and accordingly, followed in all the subsequent decisions. ”
I may further draw beneficial reference to the judgment of the Supreme Court in the case of L S Synthetics Ltd. v. Fairgrowth Financial Services Ltd. – [2004] 62 CLA 153 on the scope of the Limitation Act, 1963 in relation to the proceedings under the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 the relevant applicable recitals of which are as under: –
“30. .. The Limitation Act, 1963 is applicable only in relation to certain applications and not all applications despite the fact that the words “other proceedings ” were added in the long title of the Act in 1963. The provisions of the Act are not applicable to the proceedings before bodies other than courts such as quasi-judicial tribunals or even an executive authority. The Act primarily applies to civil proceedings or some special criminal proceedings. Even in a Tribunal where the Code of Civil Procedure or the Code of Criminal Procedure is applicable, the Limitation Act, 1963 per se may not be applied to the proceedings before it. Even in relation to certain civil proceedings, the Limitation Act may have any applications. As for example, there is no bar of limitation for initiation of a final decree or proceedings to invoke the jurisdiction of the court under Section 151 of the Code of Civil Procedure or for correction of accidental slips or omission in judgments, orders or decrees, the reason being, that these powers can be exercised even suo motu by the court and, thus, no question of any limitation arises. See Nityananda M Joshi v. LIC AIR 1970 SC 209; Hindustan Times Ltd. v. Union of India [1998] 2 SCC 242 and Mt Laxmibhai v. Tukaran (supra). ”
The Supreme Court subsequently while considering the question whether the Special Court constituted under the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 has power to condone the delay in filing a petition under Section 4(2) of that Act in Fairgrowth Investments Limited v. Custodian – [2004] 63 CLA 9, clarified the decision in L S Synthetics Ltd. (supra) by holding that the provisions of the Limitation Act, 1963 have no application in relation to a petition under Section 4(2) of the Special Courts (Trial of Evidences relating to Transactions in Securities) Act, 1992 in the following words: –
22. The decision by a larger Bench in L S Synthetics Ltd. (supra) holding that the provisions of the Limitation Act, 1963 do not apply to the Act may not have, by itself, concluded the question formulated by us at the outset. That case was, as has been rightly contended by learned counsel appearing on behalf of the appellant, limited to a consideration of Section 11 of the Act and the proceedings by the Special Court thereunder. It was in that context that the court had said that the Act had not provided for any period of limitation. But for the reasons already stated by us we concur in the final conclusion reached by the court in L S Synthetics (supra) to the extent that the provisions of the Limitation Act, 1963 have no application in relation to a petition under Section 4(2) of the Act. “, viz., The Special Courts (Trial of Evidences relating to Transactions in Securities) Act, 1992.
In the light of the foregoing discussions, it is absolutely far from doubt that the Company Law Board is covered by the provisions of the Limitation Act, 1963. The plea that any violation of law would result in postponement of limitation period is unknown to the Limitation Act, 1963 and therefore, must fail. The defence put forth by the petitioner that the delay is no bar to enforce the claim for rectification of the register on the ground of mis-representation as borne out by the commentaries of Gore-Browne will have no application to the facts of the present case, which are distinguishable, in the context of the very same commentaries on Companies, which read thus: –
“If there is in fact no contract, or the contract under which the alleged shareholder is supposed to have taken his shares is void from the beginning and not merely avoidable, his name may be removed from the register even after a winding up has commenced; for he never agreed to take the shares, and in such a case delay is not a bar to the claim to rectify the register, as it is where relief is sought on the ground of misrepresentation.”
However, these commentaries are of little assistance to the petitioner, especially when any such delay to enforce the claim for rectification of the register of members will be governed by the law of limitation, it shall now be seen whether the present company petition filed under Sub-section (4) of Section 111 of the Act seeking rectification of the register of members of the first respondent company is within time as prescribed in the Limitation Act. There is no time limit provided for making an application for rectification of the register of members under Sub-section (4). In this context, the decision in Jagjit Rai Maini v. Punjab Machinery Works (P) Ltd. – (1995) 4 Cmp LJ 110 assumes relevance, wherein this Board relying upon the decision of the apex court in Kerala State Electricity Board v. T.P. Kunhaliumma – AIR 1977 (SC) 282 came to hold that Article 137 of the Limitation Act, 1963 would apply to any petition for rectification of the share register, which prescribes a period of three years of the transfer of shares. In the case before me, the impugned share was reportedly transferred on 05.03.1988, but the company petition has been filed after a lapse of more than sixteen years on 20.07.2004. According to the petitioner, when he had, on 14.07.2004, the occasion to inspect the share certificates book of the Company containing the counter-foils and unused share certificates produced in Section 397/398 proceeding (CP No. 2/2004) in the affairs of the first respondent company, it came to his notice that the counter-foil for share certificate No. 5 carrying the name of the second respondent company stood cancelled, that no share was allotted in favour of the second respondent company and that no split share certificates were issued to the petitioner for the purpose of transfer of one share to the second respondent company. While it is quite probable that the petitioner on 14.07.2004 came to know of non-issuance of the share certificate to the second respondent company, the plea that the petitioner never executed any share transfer form transferring any share to the second respondent company has to be very carefully considered on account of the long delay which has taken place in moving the company petition. The annual returns made upto 11.07.1988, 13.09.1989, 29.09.1990, 30.09.1991, 29.09.2003 and 30.09.2004 signed by the petitioner and his father are on record. The annual return made up to 11.07.1988 being shrouded with controversies is ignored. The schedule forming part of the annual return made upto 29.09.2003, though unsigned by the petitioner remains signed by the Managing Director which by itself cannot render the return invalid in view of the fact that the annual return is admittedly signed by the Managing Director as well as petitioner. All these annual returns list out the members and debenture holders of the first respondent company which include the second respondent company holding one equity share covered by ledger folio No. 3. The ledger folio number of the second respondent company reflected in the disputed annual return made upto 11.07.1988 is explicitly furnished in the annual returns made upto 29.09.2003 and 30.09.2004, which are not repudiated by the petitioner. Though the petitioner claims that the annual return made upto 30.09.2004 has been signed without prejudice to his rights, he never denied the execution of the share transfer form in favour of the second respondent company in respect of the impugned share at any prior point of time. According to the petitioner, as at 01.04.1985 himself and his father each held 34,000 equity shares of the Company. The annual returns produced for the periods made upto 30.09.1991 clearly indicate that the petitioner held 33,999 shares, while his father continued to hold 34,000 equity shares. Similarly, the annual returns made upto 29.09.2003 and 30.09.2004 reveal that the petitioner’s equity shares accounted for 2,83,999, while 2,84,000 equity shares are reflected against his father’s name. The petitioner, while signing the annual returns in my view failed to exhibit in the performance of his duties such care as an ordinary man might expected to take on his own behalf. Thus, the petitioner is guilty of acquiescence. Moreover, equity goes to aid the diligent and not any who is guilty of laches. Under these circumstances, the company petition filed on 20.07.2004, after a lapse of more than sixteen years in my considered view is hit by Article 137 of the Limitation Act, 1963, which prescribes a period of three years when the right to apply accrues. The petitioner’s claim for rectification of the register of members of the Company said to be made within three years of acquiring the knowledge of transfer of share must be seen in the light of his conduct and the materials on record. The petitioner categorically treated the second respondent company as a shareholder holding one share in the first respondent company in the earlier Section 397 and 398 proceedings and the connected Special Leave petition preferred before the Supreme Court by the petitioner in or about January, 2005, even though he reportedly became aware of the disputed transfer much earlier in July, 2004. This discrepancy treating the second respondent company as a shareholder of the first respondent company even in January, 2005 is not satisfactorily explained. Furthermore, the correspondence exchanged between the petitioner and his father subsequent to filing of the company petition throw adequate light on this aspect. The petitioner in his telegram sent on 20.03.2004 clearly admitted that there are only three shareholders in the first respondent company including the second respondent company. The petitioner, in fact, has expressed his willingness to purchase the one share held by the second respondent company and further stated that the said share may be transferred in his name, which are found reiterated in his subsequent communication dated 26.03.2004. The sequence of events and the correspondence on record show that the petitioner has unequivocally recognized and acknowledged the fact that the second respondent company has been a member of the first respondent company since 05.03.1988 holding one equity share covered under the folio No. 3 and that the petitioner never challenged the transfer of one share in favour of the second respondent company prior to filing of the company petition. The plea that the petitioner came to know that no share was allotted in favour of the second respondent company as late as in July, 2004 does not substantiate his plea that he became aware that no share transfer form was executed by him only in July, 2004, especially when, the share certificates book only shows that share issued in the name of the second respondent company is cancelled. Whereas, the petitioner is challenging the transfer of one share made in the name of the second respondent company which, in my considered view, is within his knowledge for several years as borne out by the annual reports, correspondence on record and his own admission in the other proceedings elaborated hereabove. In the result and keeping in view the totality of the circumstances of the present case, the plea of the petitioner made belatedly after more than sixteen years that the name of the second respondent company has been wrongly and without sufficient cause entered in the register of members of the first respondent company, which came to be known during his inspection of the share certificates book of the first respondent company on 14.07.2004, is wholly unjustifiable. Therefore, the company petition having been filed on 20.07.2004, beyond the period of limitation, in my view, is barred by limitation. Accordingly, the company petition is dismissed without, however, considering the merits of the company petition and the case laws cited thereon. No order as to costs.