V. G. Bisht (Retd.), Member (Judicial)
1. This Company Appeal 5/2016 is filed by Mr. Kiran R. Ganatra on under Section 58 and 59 of the Companies Act, 2019 seeking following reliefs: -
a. Respondent No.1 be directed to transfer the said 4,05,000 equity shares in favour of this Appellant including updating the members register/statutory records accordingly:
b. The Respondents be directed to rectify the Register of members and include the name of the Appellant with respect to the shares mentioned in para 9 of the Appeal Petition;
c. Condone the delay of 146 days in filing the present Appeal;
d. For appropriate orders, reliefs and directions under Section 58 and Section 59 of the Companies Act, 2013;
e. Costs of and incidental to this Appeal be paid by the Respondents;
2. The Respondent No. 1, E-Square Leisure Private Limited (formerly known as Ganatra Hotels Pvt. Ltd.) ("Respondent Company") was incorporated in 1985 as a Private Company Limited by shares under the provisions of the Companies Act, 1956. The Respondent No. 2 is a Director of the Respondent No.1 and the Respondent No.3 was also the then Director of Respondent No.1 Company. The Respondent No.4 is the Girish Popat HUF and the Respondent No.2 is the karta of the said HUF. The Respondent Nos. 2, 4 and 5 to 8 are hereinafter collectively referred to as referred to as "Girish and family".
3.1 The Respondent No.10 is the Anil Popat HUF and the Respondent No.3 is the Karta of the said HUF. The Respondent Nos. 3 and 9 to 14 are hereinafter collectively referred to as referred to as "Anil and family". The Respondent Nos.2 to 14 are collectively referred to as the "Popats".
3.2 The Appellant was the Promoter, and Chairman cum Managing Director of Respondent No.1 formerly known as Ganatra Hotels Private Limited (the "Company") since its inception in 1985. The Appellant alongwith his wife Mrs. Kalapana Ganatra and brother Kishore Ganatra were the first directors of the Company. Sometime in 1986 the Respondent Nos. 2 and 3 joined the Company as shareholders and later on became Directors.
3.3 Initially the shareholding pattern between this Appellant and his wife Smt. Kalpana Ganatra who jointly constituted the Ganatra Group and the Popats was in the ratio 2/3 for Ganatra Group and 1/3 for the Popats. Since the very beginning this Appellant was holding a majority stake in the Company and was responsible for the management and functioning of the Company. The Respondent No.1 had proposed to set up a Star Category Hotel ("Hotel Division") and was also engaged in the business of construction of ownership flats in the building "Construction Division".
3.4 In the year 1998, one Mr. Hemant Panchamia, Mr. Nitin Panchamia and Mr. Nitin Thakkar ("Panchamias") approached this Appellant and expressed their desire to join the Respondent No.1 for the purpose of setting up a Star Category Hotel and Multiplex Center. Accordingly, Shareholder's Agreement dated 5th January 1999 came to be executed between the Ganatras, Panchamias and the Respondent No.1 through the directors Respondent Nos.2 and Kishore ganatra as the Confirming Party. The Popats did not desire to join of Star Category Hotel and Multiplex Center i.e. Hotel Division and agreed to transfer their shareholdings in Respondent No.1 Company to the Appellant as provided in the Share Holders Agreement. The Shareholders Agreement contemplated transfer of 10,81,650 shares held by Popats in the Respondent No.1 Company and separating and transfer of the Construction Division in favour of the Appellant or one of the group companies under the control of the appellant.
3.5 In June 2000, certain disputes arose between the Panchamias and the Appellant and the said disputes were referred to arbitration of the Sole Arbitrator Learned Sole Arbitrator Mr. Justice A. N. Modi (Retd.) ("Arbitration").
3.6 The disputes also arose with respect to the transfer of the said 10,81,650 shares in favour of the Appellant. In the Arbitration, the Appellants learnt that the Popats along with Panchamias who were by then in charge of the Respondent No.1 Company purported to issue 10,81,650 duplicate shares in favour of Popats. The disputes between the Appellant and the Respondents related to the issuance of 10,81,650 duplicate shares and ownership of the said 10,81,650 shares. The Popats were not party to the Arbitration proceedings. Having become aware of the purported issuance of duplicate shares, the Appellant filed a suit being Suit No. 1579 of 2006 against the Popats, respondent No.1 Company Company and Ors (the "Suit") in the Hon'ble High Court of Bombay.
3.7 In the Arbitration, agreed terms dated 26th July, 2007 ("Agreed Terms") were executed by and between the Panchamias and Appellant:
Clause 3 of the Agreed Terms records as follows:
In case the Claimant succeeds in the High Court Suit No. 1579 of 2006 and gets the shares claimed by him in the said Suit, the Claimant shall transfer the said shares to the Respondent Nos. 2 to 4 or as directed by Respondent Nos.2 to 4 against payment of the price fixed between the parties. In case the parties do not agree upon the price, the same will be determined by the person to be appointed as Sole Arbitrator by the parties."
3.8 Pursuant to the above settlement arrived in the Arbitration the Appellant and the Respondent Nos.2 to 14 arrived at a settlement whereby it was confirmed that 4,05,000 shares of the Respondent No.1 were sold and transferred to the Appellant and the Appellant has paid valuable consideration for the same. The Appellant and the Popats executed the Consent Terms dated 7th April, 2015 ("Consent Terms") and the same was filed in the Suit. By an order dated 8th May, 2015, the Hon'ble High Court was pleased to pass an order and decree in terms of the Consent terms and dispose off the Suit. Clause 3 of the Consent Terms record the sale by the Popats of 4,05,000 equity shares of the Company (i.e. being the Defendant Nos. 1 to 13 in the Suit) in favour of Appellant.
3.9 In Clause 9 of the Consent Terms the Respondent No.2 represented and confirmed that during the meeting of the Board of Directors of the Respondent No.1 Company held on 21 March, 2015, the Board of Directors of the Company had informed the Respondent No.2 that the Company will transfer the said 4,05,000 equity shares in Appellants favour as and when the same come up for transfer subject to the procedures /compliances.
3.10 Thus, a clear representation was made to the Appellant and to the Hon'ble Bombay High Court of the convening of the Board meeting of Respondent No. 1 Company, to abide by the Consent Terms and also transfer the 4,05,000 equity shares in favour of the Appellant. Based on this assurance, the Appellant and the Hon'ble Court accepted the Consent Terms on record. Respondent No.2 at the relevant time was also the Director of the Respondent No. 1 company.
3.11 Thus, under the aforesaid terms, the 4,05,000 shares were to be transferred in favour of the Appellant by the Popats, who in turn subject to the price being finalized would transfer the same in favour of the Panchamias. Both the Panchamias and the Popats are in control of Respondent No. 1 company. Pursuant thereto, vide letter dated 10th July, 2015, the Appellant submitted the original 4,05,000 equity shares alongwith the duly executed transfer forms with the Respondent No.1.
3.12 Since no response / reply was received from the Respondent No.1 the Appellant by his letter addressed to Respondent Nos. 2 to 8 sent by Registered A.D. on 14th January, 2016, inter-alia pointed out that the Popats as recorded in Clause 9 of the Consent Terms they had represented to the Appellant that the Respondent No.1 had in the meeting of its Board of Directors of Directors held on 21 March, 2015 informed the Respondent No.2 that Respondent No.1 will register the transfer of 4,05,000 shares in favour of the Appellant as and when the same comes up for transfer subject to the procedures/compliances. By the said letter, the Appellant requested the Popats to expedite the register of transfer of the said 4,05,000 equity shares in the name of the Appellant at the earliest. The copy of the said letter was also marked and forwarded to the Respondent No.1. The Respondents have till date not replied to the Appellant's aforesaid letter.
3.13 The Agreed Terms provides for transfer of the shares received by the Appellant in the Suit to the Panchamias at the price to be fixed by the parties and in the event the parties did not agree on the price the same was to be determined by Sole Arbitrator to be appointed by the parties. The Agreed Terms also recorded that the Ld. Arbitrator had to inter-alia decide on the valuation of the shares. By an Award dated 5th April, 2016, the Learned Arbitrator was pleased to decide the value of the share of the Company as on 31.03.2007 at Rs.94.43/- (Rupees Ninety Four and Paise Forty Three only) per share. Further, the Learned Arbitrator had awarded interest @ 10% p.a. from 31.03.2007 till payment or realization. Thus, the price as on April 2016 (together with interest stood at Rs 94.43/- per equity share).
3.14 In the circumstances, the Appellant by his letter dated 10th May, 2016 addressed to the Respondent No.1 and the Panchamias placed the aforesaid facts on record and in compliance of the Agreed terms offered to transfer 4,05,000 equity shares at Rs. 180/- which was in terms of the Award passed by the Ld. Arbitrator (Rs.94.43/- plus 10% interest from 1.04.2007 till that date). The same was also in accordance with the compliances required under the Articles of Association.
3.15 In reply to the Appellant's letter dated 10th May, 2016, the Advocates for the Respondent No.1 and Panchamias refused to accept the offer of the Appellant and instead offered to purchase the shares at the face value of Rs. 10/- on completely false and erroneous ground that the Appellant had allegedly recently transferred 1,79,700 shares to his brother Kishore Ganatra at Rs. 10/-. By the said letter, a ridiculous price was sought to be offered contrary to the binding Award passed by the Ld. Arbitrator dated 5th April, 2016 as rectified on 25th May, 2016. The transfer within the family members of the Appeliant did not trigger the pre-emption clause.
3.16 In view of the stand adopted by the Panchamias, it was clear that the Panchamias did not desire to acquire the shares of the price determined by the Ld. Arbitrator. Consequently, the Appellant was entitled to have the shares transferred in his favour, as the title of 4,05,000 equity shares of Respondent No. I was undisputed in view of the orders passed by the Hon'ble Bombay High Court. The Respondent No.1 was bound to register and transfer the said 4,05,000 shares in Appellant's favour. However, the Respondent No.1, being under the control of the Panchamias and the Popats did not register the transfer of the said shares and instead deliberately enquired as to when the said shares were transferred in favour of the Appellant. The Appellant denies all the false allegations contained in the said letter dated 7th June, 2016.
3.17 In reply thereto, the Appellant by his letter dated 04th July, 2016 inter-alia placed the true and correct facts on record including the fact of Respondent No.1 being aware of the Consent Terms entered into by their Directors of the Respondent No. 2 and 3 and their family members whereby 4,05,000 shares were sold in favour of the Appellant and also the representation given by them that Respondent No.I will register the transfer of 4,05,000 shares in favour of the Appellant as and when the same come up for transfer. By the said letter, the Appellant denied the false allegations contained in the Advocate for the Respondent No.1 and Panchamias’s letter dated 7th June, 2016 and requested to transfer the 4,05,000 shares in favour of the Appellant within 7 days.
3.18 In light of all the regulatory requirements being complied with, the Appellant submits that there can be no impediment in transfer of 4,05,000 shares in favour of the Appellant in the records of the Respondent No. 1. The title of Appellant has been confirmed in the order dated 8 May, 2015 passed by the Bombay High Court. The Appellant therefore prays that this Tribunal be pleased to direct the Respondent No.1 to register the transfer of the said 4,05,000 equity shares in favour of this Appellant including updating the members register.
4 The Respondent filed affidavit in reply stating that appeal filed by the Appellant is clearly barred under Section 58 of the Companies Act, 2013. Admittedly, the Appeal is not filed under section 58 within the time prescribed therein. The above appeal is liable to be dismissed as time barred. It is submitted that there is no provision under the Companies Act, 2013 for condoning the delay in filing appeal before this Hon'ble Tribunal.
4.1 Admittedly, there is delay of 146 days in filing the above appeal. I submit that the purported explanation given in the appeal is not an explanation at all. I submit that no explanation is given explaining the delay of 146 days in filing the appeal. It is now well settled that each day’s delay is to be explained.
4.2 Section 59 is sought to be invoked only to cover up the delay in filing the appeal under section 58 of the Act. It can be seen that only the case made out by the Appellant in the above Appeal is that 4,05,000 shares submitted by him are not registered by the Respondent No.1 in the Appellant's name.
4.3 Without prejudice to the other submissions made herein, the instrument of transfer submitted for transfer of the said 4,05,000 shares by the Appellant are not in conformity with the requirement of section 56 of the Companies Act, 2013. The instruments of transfer submitted by the Appellant are not executed by the Appellant. The instruments of transfer are allegedly executed by the Transferors only. The alleged execution of instruments of transfers by the Transferors is not witnessed by two witnesses as required in the instruments of transfer. In the absence of a valid instruments of transfer delivered to the Respondent No. 1 as required under Section 56 of the Act, the Appellant cannot seek any relief in the present appeal. Section 56 of the Act, inter alia, provides that no Company shall register a transfer unless a proper instrument of transfer in such form as may be the prescribed duly stamped, dated and executed by or on behalf of the transferor and the transferee has been delivered to the Company. In the present case, the instruments of transfer are incomplete. In view of the aforesaid, the Appellant cannot seek any relief of transfer in this appeal.
4.4 The contention of the Appellant that a clear representation was made to him and to the Hon'ble Bombay High Court for convening a Board Meeting of Respondent No.1 for transfer of 4,05,000 equity shares in favour of the Appellant appears to be mis-conceived.
4.5 The purported transfer of 4,05,000 shares by the Respondent Nos. 2 to 14 in favour of the Appellant is not in conformity with the Articles of Association of the Respondent No. 1.
4.6 The correspondence on record and in particular letter of the Appellant dated 10th May, 2015 and letter dated 7th June, 2016 of Messrs. Vivek Kantawala & Company that the Appellant is not entitled to transfer the said shares in his personal name. The Appellant is holding the shares for and on behalf of the other shareholders viz. Panchamias and Thakkars. There seems to be dispute between the parties only in regard to price to be paid to the Appellant.
4.7 There appears to be dispute amongst the shareholders and an award dated 5th April 2016 is made and published by the learned Arbitrator, which is a subject matter of challenge before the Hon'ble Bombay High Court in the Petitions filed under Section 34 of the Arbitration and Reconciliation Act. Commercial Arbitration Petition No. 44 of 2016 (Ganatra Hotels Private Limited & Ors. Versus Kiran Ranchodas Ganatra & Others) is filed by the 1st Respondent. Commercial Arbitration Petition (L) No. 106 of 2016 (Kiran Ranchodas Ganatra Versus Ganatra Hotels Private Limited & Ors.) is filed by the Appellant herein.
5 Heard learned counsel for both sides and perused the materials available on record.
5.1 We note that as per Clause 9 of the Consent Terms duly executed by the Popats and the Appellant, the Popats were to transfer 4,05,000/- shares of Respondent Company in favor of the Appellant and this fact was acknowledged and confirmed by the Respondent Company stating that Respondent No.1 will register the transfer of 4,05,000 shares in favour of the Appellant as and when the same comes up for transfer subject to the procedures/compliances. The Respondent Company is stated to have not transferred these shares as the Share Transfer form didn’t have signature of the Appellant and two witnesses. It is also noted that these shares were to be ultimately transferred by the Appellant in favor of Panchamias at the price to be determined by the Arbitrator, which was so determined at Rs. Rs.94.43/- plus 10% p.a. interest from 1.04.2007 till the date of determination of the price. Accordingly, the appellant is stated to have asked a price of Rs. 180/- per share after including the interest @ 10% from 1.4.2007 to April, 2016, however, the Panchamias disputed the said price by stating that the Appellant had allegedly recently transferred 1,79,700 shares to his brother Kishore Ganatra at Rs. 10/-and asked the appellant to accept the same consideration.
5.2 The Appellant has filed this appeal in terms of section 58 and section 59 of the Companies Act, 2013. Section 58 provides or appeal against the refusal for transfer of shares, when lodged for such transfer, and section 59 provides for rectification of register where the name of any person is, without sufficient cause, entered in the register of members of a company or after having been entered in the register is without sufficient cause omitted there from or if a default is made or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member.
5.3 The Respondents have challenged the Appeal on the ground of limitation stating that Section 58 of the Companies Act, 2013 provides for filing of an appeal within a period of sixty days of refusal of transfer or where no intimation has been received from the company, within ninety days of the delivery of the instrument of transfer or intimation of transmission. The present appeal has been filed and the Respondent No. 2 was told by the Respondent Company in its board meeting 21 March, 2015 that 4,05,000 shares shall be transferred in name of the Appellant subject to completion of formalities. The Appellant has prayed for condonation of delay in filing of this appeal, which the Respondents have opposed on the ground that the section 58 does not provide for condonation of delay and the appellant have not explained the reasons of delay, which they ought to have stated for seeking intervention of this Tribunal.
5.4 We find that there is no dispute that 4,05,000 shares were to be transferred to the Appellant by Popats and these shares were to be transferred by Appellant to Panchamias for valuable consideration to be decided by the Arbitrator, however, there arose a dispute between appellant and Panchamias in relation to the consideration payable for transfer of such shares. It is not in dispute that the consideration payable by Panchamias was to be determined by the Arbitrator, who has determined such consideration to be Rs. 94.43 per shares alongwith interest @ 10% p.a. from 1.4.2007 to April, 2016, though the award determining the price which is a subject matter of challenge before the Hon'ble Bombay High Court in the Petition filed under Section 34 of the Arbitration and Reconciliation Act. It is not in dispute that Panchamias has beneficial interest in these 4,05,000 shares and the appellant is a legal owner thereof till Panchamias pays the consideration to the Appellant, which is payable after the award determining the price of shares attains finality.
5.5 This explains the position why the transfer form lodged with the Respondent company had no name of transferee and witness signatures. However, it can not be denied that the Respondent Company has itself acknowledged that 4,05,000 shares of Popats shall have to be transferred to appellant. Accordingly, we find it a fit case to condone the delay in filing of present appeal in terms of section 5 of the Limitation Act.
5.6 Having condoned the delay, we direct the Respondent Company to return the transfer form in relation to these 4,05,000 shares to the Appellant, if not done so far, and the appellants shall complete the transfer forms and lodge the same for transfer of these shares in their name. However, it is made clear that the appellant shall be bound with the agreement with Panchamias to transfer these shares to them after the award determining the price of shares attains finality. It is also clarified that the dividends/bonus accruing on such shares shall be paid/issued to the Appellant till these shares are finally transferred to Panchamias.
5.7 We also find that section 59 of the Companies Act, 2013 provides for rectification of register if a default is made or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member. In the present case, it is not in dispute that the Appellant is admitted as valid holder of these shares, till Panchamias do not pay the valuable consideration as payable in terms of Arbitration award and these shares are not transferred to Panchamias consequent to such payment. The shares could not be transferred in the name of the appellant on account of name of transferred not found in the transfer deed, which is curable defect and ought to have been got rectified by the Respondent Company. Accordingly, we are of considered view that an appropriate order can be issued in terms of section 59 of the Companies Act also in this relation. However, since we are allowing the appeal in terms of section 58 of the Companies Act, 2013, the prayer for rectification becomes infructuous.
6. In terms of above, the Company Appeal 05 of 2016 is allowed and disposed of accordingly. CA 59 of 2021 was filed for seeking interim relief, since we have decided the appeal finally, the CA 59 of 2021 is rendered infructuous.
