1. This is a petition filed under Section 111 of the Companies Act, 1956 (hereinafter called "the Act"), by Volvo Lastvagnar Komponenter AB, a company incorporated under the laws of Sweden having its registered office in Sweden. The respondents in this case are Morgardshammar India Limited, a company registered in India against whom reliefs have been sought. The second respondent against whom no relief is sought is Morgardshammar AB a company incorporated under the laws of Sweden having its registered office in Sweden.
2. The petitioner-company presently known as Volvo Lastvagnar Komponenter AB has assumed this name effective from May 31, 1990. The petitioner-company itself was earlier known by the name Morgardshammar AB, since July, 1965, but subsequently its name has been changed from time to time as follows and presently effective from May 31, 1990, it is known as Volvo Lastvagnar Komponenter : (a) The first respondent-company was incorporated in 1983, consequent to the collaboration agreement between the petitioner-company and S. K. Gupta and Associates. The collaboration agreement was followed by a shareholders' agreement dated June 3, 1982, between the petitioner-company and the Indian shareholders who are defined in the agreement.
(b) The first respondent-company is carrying on the business inter alia of manufacture and sale of roller mills guide equipment the technical collaboration in respect of which has been provided by the petitioner-company.
(c) During 1983-84, 80,000 equity shares of the first respondent-company amounting to 40 per cent, of the paid-up capital were issued and allotted to the petitioner-company in the name as it stood at that time, viz., Centro Morgardshammar AB. The balance 60 per cent, of the shares are held by the Indian shareholders.
(d) The shareholders' agreement contained various covenants, some of which have also been incorporated in the articles of association of the first respondent-company.
4. According to the petition the petitioner-company entered into an asset purchase agreement dated June 16, 1987, with the second respondent-company by which the latter acquired a majority of the assets, business trade marks, patents, etc., from the petitioner-company with an option to buy from them the 80,000 shares held by the petitioner-company in the first respondent-company.
Thereafter, around October 12, 1988, the second respondent-company, inter alia, assumed certain warrants and liabilities and renounced certain claims against the petitioner-company in exchange for certain assets including the abovesaid 80,000 shares of the first respondent-company. A specific agreement in this regard was also entered into on December 22, 1993. Consequently on or after December 22, 1993, the said 80,000 shares were formally transferred to the second respondent-company subject to the approval of the Reserve Bank of India. It is further stated that the board of directors of the first respondent-company have also agreed at their meeting held on March 9, 1989, that there would be no objection to transfer the shares to the second respondent and accordingly the petitioner-company also communicated this consent to the second respondent-company. Thus, the three agreements as well as the consent of first respondent-company in this regard go to recognise the second respondent-company as the owner of the shares. The name of the second respondent originally at the time of the first agreement being Premiaraktoren 689 Aktiebolag was subsequently changed to Morgardshammar AB which was the original name of the petitioner-company.
5. It is further stated that in 1993, the petitioner-company discovered that the relevant share certificates were lost and hence pursued with the first respondent-company for issue of duplicate share certificates and complied with the necessary formalities in this regard on the advice of the first respondent-company. This was done to get the changed name incorporated in the register of members as well as to obtain the certificate so that the same could be lodged for transfer with the first respondent-company. Thereafter in 1994 the approval of the RBI was also obtained for the transfer of the shares from the petitioner-company to the second respondent-company.
(a) Having complied with all the formalities for issue of duplicate share certificates and other requirements like RBI approval as required by the first respondent-company, the latter failed to issue the duplicate share certificates in the changed name of the petitioner-company and to record the transfer of the shares in the name of the second respondent-company. The requests of the nominee directors of the petitioner-company in the above regard were also not heeded to.
(b) On the requisition of the nominee directors to call a board meet ing with the specific agenda of transfer of shares though the meeting was called none of the other directors were present. It was also discovered at that time that another board meeting was purported to have been held without the knowledge of the nominee directors of the collaborators prior to that date. A similar incident of absence of other directors was noticed subsequently as well. Thereafter in yet another board meeting even though the item of issue of duplicate share certificate and registration of transfer of 80,000 shares was included along with the items regarding approval of accounts, etc., actually the item was not taken up on some pretext or the other, indicating the clear intention to delay the matter as much as possible in order to thwart the legitimate rights of the petitioner. In March, 1995, when the board meeting was again called the chairman of the first respondent-company further deferred the matter on the excuse that the petitioners have not supplied certain information required by the lawyers for giving a legal opinion.
7. In view of the above conduct of the first respondent-company, it is the submission of the petitioners that though the first respondent company was aware of the change of the name of the petitioner company and though the petitioners have complied with all the requirements regarding change of name and loss of share certificates for issuance of duplicate certificates, the first respondent-company has failed and neglected to rectify the register of members and issue duplicate certificates. There has been unnecessary gross and undue delay in entering the name of the petitioner in the records of the company. The petitioners as trustees and as legal owners of the shares of which the beneficial ownership rests with the second respondent have been forced to file the petition.
(a) directions to the first respondent-company to rectify the register so as to show the petitioner's name as member and holders of the 80,000 shares ; (b) order and direct the first respondent-company to issue duplicate share certificates to effectuate and complete the relief as in (a) above ; (c) direct the first respondent-company to transfer the shares in the name of the second respondent-company and to deliver the share certificates to the latter and to direct the register of members to be rectified to show the name of the second respondent company.
9. In the reply by respondent No. 1-company certain preliminary objections were raised, viz.- (a) for maintaining a petition under Section 111 presentation of share certificates together with duly executed share transfer deeds is mandatory. Even assuming that a transfer has taken place, without presenting the documents a case cannot be made out ; (b) for issuing of duplicate certificates it is necessary to prove as a fact that the original certificate has been lost or destroyed under section 84 in respect of which the Company Law Board has no jurisdiction under Section 111 ; (c) the provisions of section 84(2)(a) are mandatory and as such no duplicate can be issued without proving the loss ; (d) Rule 1(2) read with Rule (3) of the Companies (Issue of Share Certificates) Rules, 1960, provides that issue of duplicate certificates may take place only after the board has given its prior consent for which reasonable evidence has to be produced ;Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp Cas 185 ; AIR 1977 SC 536, the board of directors have to comply with the provisions of the Act and until evidence is produced to the entire satisfaction of the board, no action could be taken by the board of directors ; (g) the petitioner has not come with clean hands and has suppressed material facts from the first respondent company, the RBI and the Company Law Board and hence the petition should be dismissed ; (h) the first respondent has been paying dividends in the name of the person registered whereas the intimation of transfer is being given after about two years of actual transfer ; (i) the petition is not in good faith as the purported transfer is in violation of the shareholders' agreement dated June 3, 1982, and the first respondent-company was misled to believe that the purported transfer was within the group.
10. The main contention of the first respondent-company is that the Volvo group of Sweden to which the petitioner-company belongs has sold some of the assets to a company belonging to another group, namely, Danieli group of Italy. The petitioner-company also sold the name "Morgardshammar AB" to the Danieli group which name is now assumed by respondent No. 2 but did not disclose the same to respondent No.1-company. No intimation was given to the first respondent-company about the change of name or about the purported transfer in 1987. In 1989 when the nominee director of the petitioner group wrote a letter regarding the transfer the board of directors of the first respondent-company resolved that there would be no objection subject to the necessary legal formalities. In September, 1993, the formalities to be complied with for issue of duplicate share certificates were also communicated to the petitioner-company. In July, 1994, a request was also received to substitute the name of the petitioner-company with its new name and to further transfer the shares to the second respondent-company as purportedly the formalities were complied with.
When the matter was placed before the board it was decided to seek legal opinion. For the purpose of considering the legal opinion certain information was also sought from the petitioner group. It is, thereafter that the first respondent-company became aware that the transaction of transfer has taken place from the Volvo group to the Danieli group. It was for the first time in April, 1995, that this fact came to light.
11. It is the contention of the first respondent-company that the change of name from Morgardshammar AB by the Volvo group and the agreement entered into in 1987-88 between the Volvo group and the Danieli group are in violation of the shareholders agreement and the collaboration agreement and that full and correct facts have not been disclosed to the RBI. It was thereafter pointed out to the petitioners' group that as per the shareholders' agreement the right to acquire the shares at the first instance vests with the Indian shareholders.
Further if the shares are eventually transferred to any other group the transferor (in this case the petitioners' group) shall ensure that the proposed transferee (Danieli group) agrees to be bound by the terms of the shareholders' agreement. Further, it was also pointed out that without the consent of the other party to the shareholders agreement the shares cannot be transferred. It was further pointed out that certain false affidavits have been filed by the Volvo group to state that the shares have not been sold or pledged or transferred while applying for the issue of duplicate shares but the facts are to the contrary. The first respondent-company therefore prayed for dismissal of the petition or alternatively, in view of the complicated questions involved, relegate the matter to suit.
12. In the rejoinder it is stated that the first respondent-company has made it impossible to present the share certificates along with duly completed transfer forms for rectification. As such they cannot take advantage of their own wrong. The omission to submit the share certificates for transfer directly arises from the refusal to issue duplicate certificates. It is further stated that the transfer forms completed in all material aspects and duly stamped were kept ready at all material times so that as and when the duplicate certificates were issued the same would be presented for transfer. It is further stated that full compliance with the conditions for issue of duplicate certificates has been made including evidence of loss. It is also stated that there is no restriction under the articles for transfer of the shares outside the Volvo group. Any agreement between the shareholders so long as it is not incorporated in the articles cannot be enforced by the company which is based on the decision of the Supreme Court in V.B. Rangaraj v. V. B. Gopalakrishnan [1992] 73 Comp Cas 201 ; AIR 1992 SC 453. The petitioner therefore reiterated their prayers in the petition.
13. Elaborate arguments were submitted by R. A. Dada, senior advocate on behalf of the petitioner-company and A. N. Haksar, senior advocate for the first respondent-company. We propose to consider the pleadings and the arguments of counsel under three heads ; (1) preliminary objections, (2) whether the petitioner has made out a case, (3) if a case is made out, whether reliefs should be granted.
14. As regards preliminary objections, the major point made by the first respondent-company relates to jurisdiction, allegation of abuse of the process of law that the petitioners allegedly coming with unclean hands and thirdly, matters purportedly involving complicated questions cannot be tried by this forum but have to be relegated to a suit.
15. On behalf of the first respondent-company A. N. Haksar, senior advocate first stated that no petition under Section 111 can be considered by this Bench with regard to the issue of duplicate share certificates. The provisions for issue of duplicate share certificates are contained in section 84(2) of the Act and there is no jurisdiction granted under that section to the Company Law Board to consider a petition with regard to the issue of duplicate shares. The board of directors of the company have to be satisfied that the original share certificates are either lost or destroyed and so long as that is not satisfactorily established the duplicate share certificates cannot be issued. Reverting to Section 111, Haksar stated that the petition cannot be maintained as an appeal on the alleged non-transfer of shares since such a question arises only when a party lodges the relevant document and the company refuses to register the transfer. A company is not obliged to register a transfer of shares so long as the relevant transfer deeds duly stamped along with the share certificates are not lodged with the company. This is a mandatory requirement under Section 108 of the Act which has been upheld by the Supreme Court in Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp Cas 185 ; AIR 1977 SC 536, as early as in 1977. As such on this ground the petition is premature and cannot be entertained.
16. Taking the petition as one for rectification of register of members, Haksar cited the Punjab High Court decision in Benarsi Das Saraf v. Dalmia Dadri Cement Ltd. [1958] 28 Comp Cas 435 ; AIR 1959 Punjab 232, to state that a prayer for rectification presupposes the existence of a prior error, mistake or defect which has to be set right. The register of members rightly contains the name of the allottee, namely, "Centro Morgardshammar Aktiebolag" which is the correct name of the allottee, as such there is no error which needs rectification and the company also had been paying dividends in this name subsequently. The question posed by Haksar, therefore, is how a petition which does not fall within the requirements of Section 111 could be entertained by this Bench 17. Rafiq Dada, senior advocate on behalf of the petitioner-company, contends that a register of members must reflect correctly and accurately the name, address, holding of a member, etc. The jurisdiction under Section 111(4) can be exercised to correct any inaccuracies in the register in respect of any of the above particulars. He relies on the same decision of the Punjab High Court in Benarsi Das Saraf v. Dalmia Dadri Cement Ltd. [1958] 28 Comp Cas 435 to state that rectification implies the correction of an error or removal of defects or imperfection. For this purpose it has to be shown that the register is wrong and defective. It has been admittedly established that there has been a change in the name of the petitioner-company which also has been certified by the Swedish authorities. In the circumstances to the extent that the register contains the erstwhile name of the petitioner-company it is defective and needs to be rectified. As such prayer (a) falls very much within the jurisdiction of the Company Law Board under Section 111(4).
18. Dealing with prayer (b) and the jurisdictional aspect thereof, Dada contends that the jurisdiction to issue duplicate certificate is incidental, consequential and ancillary to rectification for which he relies upon the provisions of Section 111(5), (6) and (7). Further he also seeks to invoke the inherent powers of the Bench to make orders for the ends of justice. He also relies upon the observation of the Supreme Court in Central Bank of India Ltd. v. P. S. Rajagopalan, AIR 1964 SC 743, para. 16 in Central Bank of India Ltd. v. Hartford Fire Insurance Co. Ltd. [1965] 35 Comp Cas 378 (SC) citing Maxwell that "where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution". He further cited the decision of the Company Law Board in Chambal Fertilisers and Chemicals Ltd. v.A. Venkata Reddy [1996] 86 Comp Cas 145 ; [1996] 1 Comp LJ 536 and in Tracstar Investments Ltd. v. Gordon Woodroffe Ltd. [1996] 87 Comp Cas 941 ; [1996] 1 Comp LJ 462 wherein incidental powers were used for issue of duplicate certificates and cancellation of such certificates respectively. The exercise of the inherent powers according to Dada has been commended as the duty of a judge to extend his jurisdiction in this regard and has found favour in Broom's Legal Maxims, 10th edition, pages 44 and 45.
19. As regards prayer (c) Dada submits that it has been factually established that the first respondent-company refused to register the shares in the name of the second respondent. It has been proved from the minutes of the board of directors that the first respondent-company has on one pretext or another refused/delayed registration and in the reply has categorically stated that it does not recognize the transfer in favour of respondent No. 2. In the circumstances the prayer to rectify the register to incorporate the name of the second respondent is well within the jurisdiction of the Company Law Board under Section 111. To justify the refusal the company has been relying on the provisions of the shareholders' agreement to which the company is not a party. So long as such provision is not incorporated in the articles of association of the company, according to Dada, it cannot deny the right of a member to transfer the shares. The provisions of a private agreement are not binding on the company which principle has been already upheld by the Supreme Court in V. B. Rangaraj v. V. B.Gopalakrishnan [1992] 73 Comp Cas 201; AIR 1992 SC 453. He further argues that without prejudice to the above submissions, the petitioner-company with the consent of the transferee offered the share,s to the Indian shareholders to which there is no response. As such even though the agreement is not binding on the company the requirement as per the agreement has also been complied with by the petitioner-company. Even assuming that the provision forms part of the articles so long as the offeree does not exercise the option the transfer has to go through. In a similar situation where the articles contained such a provision the matter was disposed of, approving the transfer, by a Division Bench of the Bombay High Court when due compliance with the prescribed procedure has been proved, as reported in Sakal Papers Pvt. Ltd, v. Shanta Genevieve Pommeret Parulekar [1995] 84 Comp Cas 534.
20. In view of these submissions Dada insists that the Company Law Board has jurisdiction to try and dispose of the matter on the merits.
21. We are conscious of our jurisdiction under Section 111 which can arise either as an appeal on refusal by the board of directors of a company to register a transfer or on a prayer by any aggrieved person or otherwise for rectification of the register in case of any error, mistake or defect in the register or in case of undue delay in registering the transfer of the shares. The prayers in this case have been arranged in a sequence which ordinarily should be so in view of the facts of the case, i.e., the name of an existing member which has changed has to be corrected in the register, a corrected share certificate (which has to be a duplicate certificate due to loss of the original) has to be issued and then transfer in the name of the transferee has to be registered. The two prayers, namely prayer (a) and prayer (c) are in the nature of substantive prayers for the rectification of the register, namely prayer (a) to incorporate the new name of the company due to change and prayer (c) to recognise the transfer of the shares in the name of the second respondent-company.
Prayer (b) in either case is an incidental prayer since a rectification is incomplete without a corresponding certificate which reflects the factual position as contained in the register of members.
22. Both the parties have relied on a decision of the Punjab High Court in Benarsi Das Saraf v. Dalmia Dadri Cement Ltd, [1958] 28 Comp Cas 435 wherein the court denied the relief under Section 155 of the Act to the petitioners on the ground that a separate remedy has been provided in some other section of the Act which has been resorted to by the petitioners but was later on given up. The High Court in that case did recognise that the expression "rectification is significant and purposeful". It is further stated that rectification (page 444) "implies that the register, either in what is, or what is not upon it, is wrong" ; but the register cannot be wrong unless there has been a failure on the part of the company to comply with the directions in the Act as to the kind of register to be kept : for if the Act has been complied with the register must be right and not wrong". In that case since the entry in the register was made after complying with the provisions of Section 395 consequent to the acceptance of an offer for purchase of the majority of shares and so the minority has to fall in line, the court held that Section 155 cannot be used in the circumstances of that case to rectify the register to upset what has been duly carried out as per Section 395 of the Act. The ratio of the Punjab High Court judgment is that the existence of an error, inaccuracy or defect is a must. This is a matter of fact which has to be tested from the facts, which we shall do.
23. The objective of the Act is that a proper register of members shall be kept by each company under Section 150 of the Act. Apart from this being an obligation on the company it is the right of every member of a company to be satisfied that it reflects his name correctly and also the entries should state the factual position. Even an aggrieved person due to his name either being deleted or being entered has a cause of action to file a petition for rectification. This can also be done by the company itself. The objective in all such cases is that as required by the statute the register of members should reflect the true and correct position particularly since a company is an artificial personality and certain rights and liabilities accrue to the members, i.e., constituents of the company based on the register. As such if a company refuses or delays in correcting the register a case under Section 111(4) would lie the objective being the purity of the register. Looked at from this perspective the petitioner-company is genuinely aggrieved by the first respondent-company's delay in recognising the changed name. The facts clearly show that factual inaccuracy remains in the register which needs to be rectified. Hence we are convinced that a case does exist for rectification consequent to the change in the name and the provisions of Section 111(4) are rightly invoked.
24. We may look at the petition from a different angle also. The crux of the petition and the grouse of the petitioner-company relates to the recognition of the transfer of 80,000 shares to the second respondent-company for which preliminarily all the steps were initiated including obtaining the approval of the RBI. Incorporating the new name of the petitioner or issue of duplicate share certificates are all incidental, the main contentious issue and the prominent transaction which has become a contentious question is the transfer of the shares to respondent No. 2. In other words the prayer is essentially to recognise the second respondent as the lawful owner of the shares and accordingly to direct the rectification of the register of members by incorporating its name. As such the petitioner could have confined itself to the third prayer and incidentally to pray for issue of proper certificates on recognition of the second respondent as the lawful pwner and consequently a member of the company. Though Haksar had argued on the non-maintainability of the petition before the Company Law Board under section 84 as well as under Section 111(2) without complying with the requirements of Section 108, the real issue between the petitioner company and the first respondent-company has not been touched upon. While considering a petition the real issue has to be identified and peripheral issues will fall in place so long as the real issue is decided. If we do not do that we will be missing the woods for the trees. On going through the entire petition we are convinced that the real issue is the registration of the transfer of the shares from the petitioner-company to the second respondent. The arguments with regard to this real issue and whether on this issue the petition should be maintained under Section 111(4) have not been dealt with by the first respondent-company at all. Though we are in agreement with Haksar that a petition under Section 111(2) cannot be maintained without complying with the statutory requirements under Section 108 as held by the Supreme Court in Mannalal Kketan v. Kedar Nath Khetan [1977] 47 Comp Cas 185 a case under Section 111(4) could still be made in situations where the register of members ought to be rectified but there is undue delay on the part of the company, The petitioner has primarily attempted to highlight the undue delay on the part of the company in recognising the transfer of the shares to respondent No. 2.
This aspect has not been dealt with in the preliminary objection by the respondent. The provisions of Section 111(4) are precisely intended to consider rectification other than refusal of registration though that also in a sense is rectification. All other situations which warrant a correction of register of members provided they fall within the situations narrated under Section 111(4) could be considered by the Company Law Board. The first respondent in this case has not spelt out as to how the prayer for rectification under (c) cannot be considered.
In the circumstances we are convinced that the petition is maintainable and the Company Law Board has jurisdiction in this case.
25. Another preliminary objection is that the petitioners have come to this Bench with unclean hands, the petition is an abuse of the process of law and in view of the objectionable conduct of the petitioner-company the petition should not be entertained. In this context on behalf of the first respondent-company, the following were stated, namely, (a) it gave wrong information not only to respondent No. 1 but also to the Bench with regard to the change of its name. The petitioner has changed its name a number of times without informing the first respondent and asked the respondent only in 1993 to change the name ; (b) the petitioner never informed till 1994 that the sale of shares is being made to the Danieli group and kept the first respondent-company under the impression that the shares were being transferred within the group ; (c) the petitioner misled the Bench as if the board of the company had given its consent in 1989 for the transfer but omitted to state that the consent was given on a misrepresentation. It is also stated that the petitioner-company made misrepresentation before the RBI in obtaining the permission for transfer in 1994 ; (d) The petitioner-company issued false indemnities to obtain duplicate share certificates with a statement that the shares were neither pledged/hypothecated nor transferred whereas the fact is otherwise ; (e) the transfer is in violation of the shareholders' agreement and the nominee directors never disclosed that the transferee-company is a competitor and that it has already established an Indian company to carry on the same business.
26. In view of the above facts it was argued by Haksar that the petition should not be entertained and no relief should be granted.
27. On behalf of the petitioner-company it was pointed out in reply that the various correspondence from the petitioner-company indicate that the first respondent-company is aware of the change in the petitioner-company's name from time to time. It is stated that correspondence was addressed about the change of name which is sufficient indication that the first respondent-company was aware of the changes in the name. As regards the allegation that the petitioners have misled the first respondent that the transfer is within the same group, it is pointed out that the correspondence was exchanged between the first respondent and the second respondent as early as in 1988-89.
Even thereafter the letters exchanged between the first respondent and the second respondent clearly show that the first respondent company has already recognised the second respondent thus clearly showing even the second respondent as collaborator and the intention of the second respondent to increase its shareholding in the first respondent-company was noted. It was, therefore, argued that there is no case for the first respondent-company to state that they were not aware that the shares are being transferred to a different group.
28. As regards the allegation of misleading the RBI and obtaining its approval, Rafiq Dada submitted that the first respondent cannot go into the validity of the approval granted by the RBI and for this he draws support from the decision of the Supreme Court in Life Insurance Corporation of India v. Escorts Ltd. [1986] 59 Comp Cas 548 ; AIR 1986 SC 1370. He specifically pointed out that once permission is obtained before or after the purchase of shares of the company it cannot, thereafter, refuse to register the transfer of shares nor is it open to the company or any other authority or individual to take upon itself or himself the task of deciding whether the permission was rightly granted by the RBI. He continued to cite the Supreme Court and stated that (page 1413 of AIR 1986 SC) "there is no provision of the Act which enables an individual or authority functioning outside the Act to determine for his own or its owm purpose whether the RBI was right or wrong in granting permission under Section 29(1) of the Act". The reference in the decision is to the Foreign Exchange Regulation Act, 1947. He, therefore, submitted that this question cannot be gone into in proceedings for the transfer of the shares.
29. As regards the allegation of false indemnity while applying for the duplicate certificate Dada submitted that regarding pledge or hypothecation there is no inaccuracy. As regards the transfer the agreement to transfer has not resulted in the shares being registered in the members' register as such the statement is not factually incorrect. Further the indemnity was so worded at the insistence of the first respondent-company after being fully aware of the transaction. As such it is the first respondent who is to be blamed for inclusion of such a statement despite knowledge of the transaction.
30. As regards the allegation of violation of shareholders' agreement Dada reiterated the contention that so long as it does not form part of the articles the same does not bind the company. All the same in compliance with the provisions of the agreement the petitioners offered the shares to the Indian shareholders with the consent of the second respondent. Hence the objection is no longer valid. This argument according to him also answers the allegation that the shares have been offered to another group without the knowledge of the first respondent-company.
31. We do recognise the argument of Haksar inasmuch as there is no formal communication of the various changes in the name of the petitioner-company since 1984. It is also worthwhile to note that the second respondent itself assumed the identical name of Morgardshammar AB in September, 1987, which identical name was that of the petitioner-company earlier. To this extent the benefit of doubt should be given to the first respondent with regard to the identification of the party with whom the first respondent-company has been dealing. This would have been true if there were no other dealings between parties.
However, a scrutiny of the correspondence since November 1988, with respondent No. 1-company which is on record clearly brings out that respondent No. 1 should be aware that the party on the other side does not belong to the Volvo group but is a part of the Danieli group. There has also been specific mention of the name of the Danieli group as a shareholder. Further it also appears from the correspondence that the representatives of the first respondent and the second respondent have met and had discussions as well. The correspondence also indicates that the first respondent is aware that the second respondent will be the new collaborator with the same name Morgardshammar AB under the Danieli group in place of the Volvo group but what perhaps has irked the first respondent-company is that this new group has set up its own business in India in 1994 and, therefore, perhaps there was an apprehension that the collaboration may not be available. As regards the allegation of violation of the agreement we would prefer not to express any view since it is outside the purview of the petition and the parties may have their own submissions before any other forum. However, it is noted that the petitioners during the proceedings before us and as per our suggestion made an offer to the Indian shareholders for the purchase of the shares before further pursuing the petition.
32. In view of the above findings we are convinced that there has not been any intentional act of misleading the company or the Bench on the part of the petitioners. There is perhaps the omission to formally intimate the change of name of the petitioner from time to time which is not of much consequence as there is no obligation cast on the member of the company to indicate the change in the name or status so long as he does not find fault with the company for not changing the name, status, address, etc. In any case an undesirable conduct of the party cannot lead to the dismissal of a petition in limine but can be a valid consideration while granting reliefs. In the present case we are convinced that even such a necessity has not arisen.
33. Another preliminary objection on behalf of the respondents is that the Company Law Board may relegate the matters to a suit in case the matter involves complicated questions. Haksar stated in this connection that matters relating to the validity of the agreement for transfer of shares, false affidavit regarding loss of share certificates, the petitioner providing false information to the RBI, for obtaining approval and the consequential effect of the failure of collaboration, etc., are complicated questions which cannot be dealt with in summary proceedings before the Company Law Board. The provisions of Section 111 are not intended for settling controversies under several heads warranting a regular investigation and since serious disputes are involved the proper forum for adjudication is a civil suit. In this connection he cited the decision of the Punjab High Court in S. Bhagat Singh v. Piar Bus Service Ltd. [1960] 30 Comp Cas 300. Citing this decision Haksar stated that "this remedy is not available without the court having discretion to refuse it". Dada arguing on this question dealt with the extensive powers available to the Bench in order to do justice. He stated that even though the Bench has the discretion to relegate a matter to suit in case complicated questions arise as it may not be viable in summary proceedings, in the present case the facts are absolutely clear and there are no complicated questions which need to be determined through elaborate trial.
34. After going through the facts in this case in the context of the provisions of the articles of association as well as the shareholders' agreement we find that there is no complex question which needs a trial. The only issue raised by the first respondent relates to alleged false information to the RBI and alleged false affidavit with regard to the loss of share certificate. These matters have been already considered by us. Further the shareholders' agreement not being germane to the present petition need not also hold us up from deciding the question. As regards the contention that the contracts and the consideration for the shares as well as genuineness of such contracts between the petitioner-company and the second respondent, these are all issues which are not relevant to the transfer of the shares. So long as a duly executed transfer deed is available which the petitioner in this case con- ' firms that it exists, we are not required to go into the contracts or the consideration which has culminated in the transfer of shares. As such we do not see any complex question which needs any trial in a suit for the purpose of deciding the title to the shares or registration of the transfer of the shares.
35. As regards the discretionary power vested in us, we need not get into the precedents cited by both counsel in view of the recent decision of the Delhi High Court in Ammonia Supplies Corporation Private Ltd. v. Modern Plastic Containers Pvt. Ltd. [1994] 79 Comp Cas 163 ; AIR 1994 Delhi 51, which has conclusively established that the discretion is vested in the company court. The exercise of the discretion would depend upon the facts and circumstances in each case.
In this case taking into account the facts and circumstances we are of the view that it is unnecessary to relegate the matter to suit.
36. Coming to the facts of the case, it is an admitted position that the petitioner-company has entered into certain contracts in 1987 and 1988 for the transfer of their business and also certain assets including the impugned shares to the second respondent-company. It is also clear from the records that these transfers were within the knowledge of the first respondent-company. The case of the first respondent-company is that it was under a misapprehension based on information furnished by the petitioner-company that the transfer is within the same group. Incidentally the original name of the petitioner-company, viz. ; the Morgardshammar AB is assumed by the second respondent-company. We have to now proceed to analyse the facts on two presumptions, namely (a) that the first respondent-company was really misled to believe that the transfer is within the same group and (b) that the first respondent-company was fully aware that the transfers are outside the group. We have already dealt in detail with the various correspondence between the second respondent and the first respondent to show that the first respondent-company was actually aware that the transfer is to another group. In fact the correspondence refers to the coming in of the Danieli group to India as a major shareholder of the first respondent-company instead of the Volvo group which is the original shareholding group. In fact the Danieli group also expressed a desire to increase their percentage of holding in the first respondent company. It is further evident that there had been meetings between the executives of the first respondent and the second respondent companies. A careful study of the copies of correspondence from pages 35 to 51 of the counter reply shows clearly that the first respondent-company was aware that the shares have been transferred to the Danieli group. The crucial letters in January and February, 1993, indicate the real issue which appears to be the controlling interest in the first respondent-company and the threat of the Danieli group to choose another alternative by starting a Danieli company. Thereafter a Danieli company has come to be established. This appears to be the rub when the first respondent-company started adopting a hostile attitude.
As such the objections are unrelated to the transfer of shares. In the circumstances it is difficult for us to accept that the first respondent-company was not aware that the transfer is to a different group.
37. Even the contention that the transfer is outside the Volvo group and hence cannot be allowed was also considered by us. If the transfer from an existing group to another group is not to be allowed such a provision should be contained in the articles of association of the company. The first respondent-company being a public company, its articles do not contain any restrictive clause with regard to the transfer of the shares even though it does incorporate some of the covenants of the shareholders agreement with regard to the composition of the board, use of brand name, etc. We are in agreement with Dada that so long as there is no restrictive stipulation in the articles of association, the board of directors of the company cannot enforce the contents of a private agreement between two shareholders. On this the case law is unambiguous and, therefore, the petition has to be granted.
Even the restrictive stipulation contained in the shareholders' agreement does not bar a transfer of the shares but only prescribes two conditions ; namely, that (a) before transferring to any other persons, the shares shall be offered to the other party to the agreement ; (b) it is the burden of a transferring party to ensure that the transferee is bound by the shareholders' agreement. The petitioners have complied with the first part by offering the shares to the other party to the agreement which, however, has not been accepted. As regards the second stipulation, it is for the other party to enforce the provisions of the shareholders' agreement through appropriate proceedings. The company, however, has no prerogative to stop or stall the transfer on this score since it is not a party to the agreement.
38. We have also considered the arguments from the respondent that the transfer would not be in the interest of the company since the collaboration might cease. We are not convinced on this score since the board of directors do not have an absolute power to refuse registration of transfer particularly after the amendments in Section 111 of the Companies Act from time to time which have totally taken away the power of refusal. Even the provisions of Section 22A of the Securities Contracts (Regulation) Act which had provided certain limited powers for refusal of transfer subject to confirmation by the Company Law Board have been now taken away. Consequently so long as a properly executed instrument of transfer duly stamped is presented, there is no discretion vested in the board of directors to refuse registration of transfer. We are, therefore, convinced that the petitioners have established their case for rectification of the register and as such it has to be granted. The relief of rectification, however, cannot be complete without our exercise of incidental powers with regard to the issue of relevant share certificates. The share certificates reflect the contents of the register of members and accordingly an appropriate certificate has to be issued as per the provisions of Section 113(1) of the Act. Since in the present case an endorsement in the original certificate cannot be done due to loss of the certificate there is need for a direction to issue a duplicate certificate. On going through the material on record we are satisfied that the petitioner-company has complied with all the requirements for issue of duplicate certificates.
Though it may be possible for us to order the issue of a duplicate certificate directly in the name of the second respondent-company since the petitioner-company has already complied with the requirements it is appropriate that a duplicate certificate be issued in the name of the petitioner-company first and thereafter such a certificate is endorsed in favour of the second respondent in view of the provisions of section 84 of the Act. While issuing the duplicate certificate since it is already admitted by the first respondent-company that the petitioner-company's name has been changed to "Volvo Lastvagnar Komponenter AB", it shall incorporate that name and, thereafter endorse the certificate in the name of the second respondent-company. We are also convinced that to enable the first respondent-company to register the transfer compliance under Section 108 has to be made. Accordingly it is essential for the petitioner-company to present a duly executed and stamped transfer deed for effecting the transfer, Since the duplicate certificate should be already available with the first respondent-company the share certificates need not accompany the transfer deed. Accordingly the following directions are given : (1) The first respondent-company shall rectify the register by changing the name of the existing holder, viz., the petitioner-company and issue a duplicate certificate in the present name of the petitioner-company which, however, need not be delivered immediately.
(2) The petitioner-company shall lodge within ten days from the receipt of a copy of this order a duly executed and stamped transfer deed with the first respondent-company.
(3) The board of directors of the company, shall, subject to any discrepancy in the transfer deed, register the transfer in the name of the second respondent-company within ten days of the lodgement of the transfer deed and rectify the register accordingly. The relevant share certificates duly endorsed shall be delivered to the second respondent-company within one month from the registration of the transfer. The petition stands disposed of. No order as to costs.