ADESH KAURversusEICHER MOTORS LIMITED AND ORS.

200                      [2018]REPORTS
               SUPREME COURT    5 S.C.R. 200                  [2018] 5 S.C.R.


A                                 ADESH KAUR
                                         v.
                   EICHER MOTORS LIMITED AND ORS.
                     (Civil Appeal Nos. 19426-19427 of 2017)
B                                 JULY 03, 2018
             [R. F. NARIMAN AND INDU MALHOTRA, JJ.]
            Companies Act, 2013 – s.59 – Rectification of register of
      members – On facts, respondent no. 2 issued duplicate shares without
      following proper procedure, in favour of impersonator, who in turn
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      transferred the said shares to respondent no. 8 – Subsequently,
      appellant came to know about the fraud and sought issuance of
      revalidated fresh share certificate for the said equity shares –
      However, the same was not done – Company petition by appellant –
      NCLT held that the Company was liable for the acts of their Register
D     cum Share Transfer agents, and as such there was no reason for
      appellant to resort to civil court in order to prove her title – However,
      the appellate tribunal holding that since criminal complaint and
      SEBI investigation was pending, it was not correct for the tribunal
      to exercise its power to rectify the register u/s. 59, set aside the
      judgment of NCLT and relegated the appellant to a suit – Correctness
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      of – Held: Not correct – Tribunal was correct in not relegating the
      appellant to any further proceedings since it was a case of fraud
      wherein the appellant was the victim, and respondent no. 2 was the
      perpetrator – Further, the due procedure of the RTI Circular was
      not followed – Thus, the appellate tribunal’s order is set-aside and
F     that of the tribunal is upheld.
            Allowing the appeals, the Court
            HELD: The tribunal was absolutely correct in not relegating
      the appellant to any further proceedings inasmuch this was an
      open and shut case of fraud in which the appellant has been the
G     victim, and respondent no. 2 the perpetrator. Equally, it is clear
      that the due procedure of the RTI Circular has not been followed.
      When the duplicate shares were issued, stock exchanges were
      not informed and neither was an advertisement in a widely
      circulated newspaper issued as the value of the shares were far
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                                        200
          ADESH KAUR v. EICHER MOTORS LIMITED                                  201


greater than Rs. 10,000/-. The appellate tribunal in relegating                A
the appellant to a further proceeding was not correct. Therefore,
the appellate tribunal’s order is set-aside and that of the tribunal
is reinstated. If respondent No. 8 does not happen to be on the
register at all, then there would be no difficulty whatsoever in
restoring the appellant back to its original position. Even if
                                                                               B
respondent No. 8 has been entered on the Register, his name
will have to be deleted in view of the fact that the transfer to him
has been declared to be void in law. The Company is directed to
rectify its register, insofar as the physical share certificates are
concerned, and the concerned depository to rectify the demat
records in accordance with this order. [Paras 8-11][204-B-F]                   C
     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 19426-
19427 of 2017.
      From the Judgment and Order dated 29.08.2017 of National
Company Law Appellate Tribunal at New Delhi in Company Appeal
(AT) Nos.176 and 177 of 2017.                                                  D

     Mr. K. V. Viswanathan, Sr. Adv., K. V. Balakrishnan, S. M.
Sundram, Ravi Raghunath, K. V. Mohan, Advs. for the appellant.
      Mr. Tushar Mehta, ASG, Mr. Shyam Divan, Sr. Adv., Anoop
Dawar, Rajesh Ranjan, Sumit Teterrwal, Pratap Venugopal, Ms. Surekha           E
Raman, Ms. Niharika, Ms. Kanika Kalaiyarasan, M/s. K. J. John and
Co., Bharat Singh, Arvind Kumar Sharma, Ms. Swati Ghildiyal, Mukesh
Kumar Maroria, Advs. for the respondents.
      The Judgment of the Court was delivered by
       R. F. NARIMAN, J. 1. The present case discloses a very sordid           F
state of facts.
        2. The appellant before us is a resident of Punjab, and had acquired
in all 903 equity shares in the respondent No. 1-Company. This acquisition
took place way back in the year 1994-95.
       3. It appears that sometime in 2012, another Ms. Adesh Kaur,            G
who is a resident of Mumbai impersonated the appellant and requested
respondent No. 2 to change the address from Punjab to Mumbai. It is
not disputed before us that the standard procedure to be followed was
not followed by respondent No. 2, and the aforesaid change of address
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202            SUPREME COURT REPORTS                            [2018] 5 S.C.R.


A     was despite the requirements of Circular No. 1 dated 09.05.2001. The
      impersonator then went on to execute an indemnity bond by forging the
      appellant’s signature for issue of duplicate share certificates of the 903
      equity shares mentioned above. This being done, on 28.09.2012,
      Respondent No. 2 issued duplicate certificates in favour of the
      impersonator who, in turn, on 10.12.2012, transferred the said shares to
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      one Vikas Tara Singh, respondent No. 8, resident of Malad, Mumbai by
      using the forged signature of the appellant. At this stage, it is important
      to note that respondent No. 8, though served in the present proceedings,
      has not appeared either before the Tribunal or before the Appellate
      Tribunal and has not appeared before us. The appellant, sometime in
C     2014, came to know through the Company Secretary of Respondent
      No.1 that duplicate share certificates had been given to somebody else
      who had subsequently transferred them to a third party. As soon as she
      became aware of the fraud that was perpetrated on her, the appellant
      requested the Company to issue revalidated fresh share certificates for
      the said 903 equity shares on 17.09.2014. Since this was not done,
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      despite repeated reminders for the same, a Company Petition was filed
      on 31.07.2015 before the Company Law Board, which was then taken
      up under the Amended Act by the National Company Law Tribunal. In
      a significant order that was passed by the NCLT on 09.11.2016, the
      NCLT recorded that it was acknowledged, both by the Company as
E     well as by the SEBI, that procedural aspects and due care were not
      adhered to in the process of issuance of duplicate shares, as otherwise
      such fraud would easily have been unearthed. In the order passed by
      the NCLT, the NCLT adverted to the aforesaid facts and afforded relief
      to the appellant in the following terms:
F             “The objection of Respondent No. 1 that the case in hand cannot
            be adjudicated by the Tribunal is a frivolous attempt to escape
            any liability and or grant relief to the petitioner. This Bench fails
            to understand why the petitioner should resort to a civil court in
            order to prove her title. Apart from her oral testimony and her
            original share certificates, there is little else to be adduced in
G           evidence even in a Civil Suit. She has her original certificates in
            hand. The respondents are aware of the fraudulent acts
            perpetuated on her and have even initiated criminal proceedings.
            There is no reason for the petitioner to be deprived of her assets
            for the outcome of the criminal investigation or wait for the criminal
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          ADESH KAUR v. EICHER MOTORS LIMITED                                   203
                   [R. F. NARIMAN, J.]

      to be brought to book. Her documents and her entitlement are              A
      not denied to by the respondents. Under such circumstances,
      vague denial to escape any liability and to suggest that the petitioner
      initiates a Civil Suit is viewed as an attempt not to redress the
      grievance which has primarily arisen out of the fraud played by
      the employees of the Respondent Company or their Agents. Apart
                                                                                B
      from guidelines of Respondent No. 3 that unequivocally make
      the Respondent Company liable for the acts of their Register cum
      Share Transfer Agents, the law on the point is clear that the
      Principals are liable for the acts of their agents.”
       4. The NCLT then went on to state that the original share
certificates, which were still in physical form with the appellant, could       C
get demated after due confirmation from the register which would be
carried out pursuant to the aforesaid order. In appeal to the Appellate
Tribunal, the Appellate Tribunal referred to the fact that a criminal
complaint and SEBI investigation were both pending, as a result of which
it would not be correct for the Tribunal to exercise its powers to rectify      D
the register under Section 59 of the Companies Act. The aforesaid
judgment of the NCLT was, therefore, set-aside and the appellant was
relegated to a suit.
       5. Shri K.V.Vishwanathan, learned senior appearing for the
appellant, has commended for our acceptance the order of NCLT,                  E
together with its reasoning. Learned senior counsel has stated that there
is really no contest in the present proceedings inasmuch as respondent
No. 8, who would be affected by the NCLT order, has chosen not to
appear in the proceedings throughout. He has also referred to and relied
upon a RTI Circular No. 1 dated 09.05.2001 and the fact that SEBI has,
in its application to delete itself from the array of parties stated, on        F
20.05.2016, that respondent No. 2 has issued duplicate shares without
following the proper procedure and without exercising due care and
diligence.
       6. Shri Pratap Venugopal, learned counsel appearing on behalf of
SEBI reiterates this position and also agrees with Shri Vishwanathan            G
that the NCLT order should be reinstated.
      7. Shri Shyam Divan, learned senior counsel appearing for the
Company, when faced with the fact that there is no real contest in the
present case, has further submitted that this Court should be careful in
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204                SUPREME COURT REPORTS                         [2018] 5 S.C.R.


A     reinstating the Tribunal’s order inasmuch as it is not at all clear as to
      whether respondent No. 8 has, in fact, been entered on the register or
      not. It is his further submission that since the shares are now demated,
      it is not his client that should be directed to put the appellant back on the
      share register but the concerned depository.
B            8. We are of the view that the Tribunal was absolutely correct in
      not relegating the appellant to any further proceedings inasmuch this is
      an open and shut case of fraud in which the appellant has been the
      victim, and Respondent No. 2 the perpetrator.
            9. Equally, it is clear that the due procedure that has been outlined
C     in paragraph 23 of the RTI Circular dated 09.05.2001 has not been
      followed. When the duplicate shares were issued, stock exchanges
      were not informed and neither was an advertisement in a widely circulated
      newspaper issued as the value of the shares were far greater than
      Rs. 10,000/-.
D            10. We are, therefore, of the view that the Appellate Tribunal in
      relegating the appellant to a further proceeding was not correct. We,
      therefore, set-aside the Appellate Tribunal’s order and reinstate that of
      the Tribunal dated 20.03.2017. It goes without saying that if respondent
      No. 8 does not happen to be on the register at all, then there would be
      no difficulty whatsoever in restoring the appellant back to its original
E     position. Even if respondent No. 8 has been entered on the Register, his
      name will have to be deleted in view of the fact that the transfer to him
      has been declared to be void in law.
            11. We, therefore, direct the Company to rectify its register, insofar
      as the physical share certificates are concerned, and the concerned
F     depository to rectify the demat records in accordance with this order.
              12. The appeals are allowed in the aforesaid terms.
              13. Pending applications, if any, shall stand disposed of.

G     Nidhi Jain                                                     Appeals allowed.




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