Tubos De Acero De Mexico vs Oil Country Tubular Limited

Tubos de Acero de Mexico, SA A Company incorporated and existing under the Laws of Mexico, having its office at : Km 433.7 Carr. Mexico-Veracruz, Via Xalapa (91697) Veracruz, Ver. Mexico ... Appellant

Versus

Oil Country Tubular Limited, A company incorporated and existing under And existing under the Companies Act, 1956 and having its registered office at : 108, Kanchenjunga, King Kothi Road, Hyderabad - 500001, Telangana ... Respondent

Present: Shri Sanjeev Puri, Senior Advocate with Shri Aditya Chatterjee and Ms. Aishwarya Modi, Advocates for the Appellant.

Shri Sri Harsha Peechara and Shri Ashish Tiwari, Advocates for the Respondent.

JUDGEMENT

25.01.2018 This appeal has been filed by Original Petitioner against

the impugned order dated 13th July, 2017 passed by the National

Company Law Tribunal, Hyderabad Bench, Hyderabad (hereinafter

referred to as 'NCLT') in C.P. No. 24/59/HDB/2017.

2. The Appellant incorporated Company under the Laws of Mexico

sought rectification of the Register of Members claiming that the Appellant

was joint-holder of shares as mentioned in the Company Petition in which

the first holder was 'Tamtrade Ltd.'. Tamtrade Ltd. was Grand Cayman

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 2

Company and a subsidiary of Appellant. The Appellant claimed before

NCLT that the shares were held by the Appellant in which Tamtrade Ltd.

was the first holder and the Appellant was the joint-holder. The copy of

the share certificates is at Annexure -A4 in the appeal. The Appellant

claimed before the NCLT that on 29th September, 1994 it had entered into

a Share Sale Agreement with Tamtrade Ltd. (Copy of which is at Page 141

of the appeal memo at Annexure-A5). Tamtrade Ltd. was dissolved on

30th September, 1999 of which Dissolution Certificate is on record (Copy

of which is at Annexure -A6 at Page 147 of the Paper-Book). The Appellant

claimed that the Respondent was approached for rectification of the

Register of Members but the Respondent refused and thus the company

petition was filed.

3. Being aggrieved by the impugned judgement, whereby the NCLT,

inter alia, referred to Laws of Cayman Islands in order to decline the

request of the Appellant, the present appeal has been filed.

4. We have heard the learned counsel for both sides. The learned

counsel for the Appellant submits that the Appellant had entered into the

Share Sale Agreement with Tamtrade Ltd. and copy of the document is

available on record, which clearly shows that the present shares held

jointly by the Appellant and the Respondent company were agreed to be

sold and transferred to the Appellant by Tamtrade Ltd. and the first clause

of the agreement itself makes it clear. The learned counsel fairly submits

that the Appellant after such agreement should have really moved the

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 3

Respondent Company earlier for rectification of records in view of the

purchase the Appellant had made. The counsel submits that the

Appellant, a foreigner with disadvantage of distance, remained under

impression that when it is a joint holder of the shares and Tamtrade Ltd.

had already transferred its rights to the Appellant, it was not necessary

for the Appellant to take further steps. Learned counsel submits that

subsequently Tamtrade Ltd. came to be dissolved on 30th September,

1999 regarding which a Dissolution Certificate has been filed with the

appeal (Copy of which is at Annexure- A6 at Page 147). Thus, according

to the learned counsel, the Appellant becomes the surviving company and

by transmission, the Appellant was entitled to be considered as the sole

shareholder of the shares in dispute. Learned Counsel submits that the

Appellant approached the Respondent in the year 2012 but the

Respondent, vide Annexure -A 20 on 9th October, 2012, stated that it

cannot accede to the request of the Appellant for transfer of the shares in

the joint name due to non-compliance of the requirements of the laws of

this country. Learned counsel submits that in this letter, the fact that

the shares were jointly held by Tamtrade Ltd. and the Appellant, was not

disputed. Learned counsel submits that after this letter, the Appellant,

who is placed in Mexico, entered into correspondences with the

Respondent as well as Reserve Bank of India (RBI) and ultimately the RBI,

by letter dated 24th November, 2014 (Annexure - A 24) informed the

Appellant that the matter was outside the purview of the Foreign

Exchange Management Act, 1999 ('FEMA') and it was for the Respondent

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 4

to register the said shares in favour of the Appellant after satisfying itself

regarding the sole ownership of the Appellant. Learned counsel submits

that this was followed by further correspondence but as the Respondent

vide letter dated 17th April, 2015 (Annexure -A30) asked the Appellant to

seek declaration of ownership from appropriate forum, the Appellant

moved the NCLT. The learned counsel submits that the NCLT has wrongly

declined the prayers of the Appellant.

5. Learned counsel referred to Table -'A' of Schedule-I - Regulation 25

of the Companies Act, 1956, which reads as under :-

Transmission of shares

"Regulation 25. (1) On the death of a member, the

survivor or survivors where the member was a joint

holder, and his legal representatives where he was a

sole holder, shall be the only persons recognised by the

company as having any title to his interest in the shares.

(2) Nothing in clause (1) shall release the estate

of a deceased joint holder from any liability in respect of

any share which had been jointly held by him with other

persons."

6. Learned counsel submits that in addition to the above, the Articles

of Association of the Respondent Company itself in Article 69 specifies as

under :-

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 5

"In the case of the death of anyone or more of the

persons named in the Register of Members as the Joint-

holders of any share, the survivor or survivors shall be

the only persons recognized by the Company as having

any title to or interest in share, but nothing herein

contained shall be taken to release the estate of a

deceased joint holder from any liability on shares held

by him jointly with any other person."

7. Thus, according to the learned counsel, when the Regulations

provide and the Articles of Association have adopted these Regulations,

the Articles of Association are binding on the Respondent and the

Respondent could not have declined to recognize the Appellant as the

survivor for rectification of the Register of Members.

8. The learned counsel relied on the case of Ram Govind Misra Vs.

Allahabad Theatres (P) Ltd. and Others - (1985) SCC OnLine All 1084

in which Paragraph 7 reads as under :-

"7. Section 28(2) of the Companies Act lays down

that, in the case of any company limited by shares

which is registered after the commencement of this Act,

and in so far the articles do not exclude or modify the

Regulations contained in Table "A" of Schedule-1 of the

Companies Act, those regulations shall, so far as,

applicable be the regulations of the company in the

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 6

same manner and to the same extent as if they were

contained in a duly registered articles. Similar

provisions existed in the corresponding Sections

17 and 18 of the Companies Act, 1913 as well.

Regulation 25 of Table "A" to Schedule I to

the Companies Act, 1956 and corresponding

Regulation 21 of Table "A" to Schedule I to

the Companies Act, 1913 lay down that on the death of

a member, the survivor or survivors where the member

was a joint holder and his legal representative where

he was a sole holder, shall be the only persons

recognised by the company as having any title to his

interest in the share. There is nothing on the record of

this case to show that there was anything in the articles

of the company which excluded or modified the

applicability of Regulation 25 of Table "A", Schedule I

to the Companies Act, 1956 or of Regulation 21 of Table

"A" Schedule I of the old Companies Act. According to

the aforementioned regulation, where shares are held

jointly and one of such joint shareholders dies, it is the

survivor who alone is to be recognised as having title to

the said shares. The question of a legal representative

of a shareholder becoming entitled to the shares arises

only in a case of a sole shareholder."

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 7

9. The learned counsel submitted that the legal position on this count

of entering names of the survivor was considered even in the case of Afzal

Khan & Anr. Vs. Mehboob Ayub Khan & Ors. - 2016 SCC OnLine Bom

1445. The learned counsel referred to Paragraph 23 of that judgement to

submit that the High Court accepted that the Company Law Board in that

matter rightly relied on Article 25 of the Articles of Association of that

Company while dealing with the death of one of the joint-holders, relevant

portion of which reads as under :

"On sufficient cause so far as the refusal to

transmit is concerned, the CLB rightly relied on Article

25 of the Articles of Association of the Company, under

which, in case of death of one or more joint holders, the

survivor/s is/are the only person/s recognized as

having title to or interest in the shares. In the case of a

will, Article 28(f) of the Articles came into play. The CLB

held that the company was bound to follow its Articles

and could not have denied transmission/registration of

the shares in the sole names of Mehboob and Yasmin".

10. It has been submitted that the NCLT should have allowed the

petition in terms of Prayer 8(b) (Page 283) of the petition and should have

directed the Respondent Company to rectify Register of Members. The

Prayer 8(b) reads as under :-

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 8

"(b) to direct the Respondent Company to rectify its

Register of Members by deleting the name of

Tamtrade Ltd. in Reg. Folio No. OCT701946

bearing certificate no. 1485 in respect of

14,97,000 equity shares of the Respondent

Company bearing distinctive no.(s) 5483001 -

6980000 and in its place record the name of the

Petitioner, Tubos De Acero De Mexico S.A. the

Second Shareholder, as the sole shareholder."

11. The learned counsel further submitted that the Appellant is ready

to give Indemnity Bond to the satisfaction of the Respondent Company to

safeguard the interest of the Respondent Company in case any liability is

fastened on the Respondent because of such rectification of Register.

12. Learned counsel for the Respondent fairly submitted that the

Respondent Company has neutral approach to the problem. Learned

counsel, however, submitted that the Company Petition sought

rectification of the Register of Members and not claimed rights by way of

transmission. Before NCLT, transfer of share rights on the basis of Share

Sale Agreement was claimed and not on the basis of amendment due to

dissolution of Tamtrade Ltd. Learned counsel further submitted that

apparently the Appellant hopelessly delayed taking steps. In spite of

Share Sale Agreement of 1994, the Appellant did not move the Respondent

Company till 2012. Even after the Tamtrade Ltd. was dissolved in 1999,

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 9

steps were taken only in 2012, when the Respondent Company was moved

and even thereafter there was much delay as the Company Petition was

filed only in 2017. According to the learned counsel, the first time

Respondent refused was on 17th April, 2015 but the Company Petition

was filed only on 20th January, 2017. The counsel further submitted that

under Section 124 (6) of the Companies Act, 2013, the Respondent

Company has already taken steps and the concerned shares have been

transferred to the Investor Education and Protection Fund on 6 th

December, 2017.

Sub-Section (6) of Section 124 of the Companies Act, 2013 reads as

under :-

"124. Unpaid Dividend Account -

xxx xxx xxx

(6) All shares in respect of which dividend has not

been paid or claimed for seven consecutive years or

more shall be transferred by the company in the name

of Investor Education and Protection Fund along with

a statement containing such details as may be

prescribed :

Provided that any claimant of shares transferred

above shall be entitled to claim the transfer of shares

from Investor Education and Protection Fund in

accordance with such procedure and on submission of

such documents as may be prescribed."

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 10

The learned counsel for the Respondent fairly states that they leave

the matter to the Tribunal to take appropriate decision.

13. Looking to the provisions of Regulation 25 pointed out by the

learned counsel for the Appellant as well as the Articles of Association on

similar lines, we find that the Respondent is bound to recognize the Joint

holder - survivor of the share(s) in case of the joint-holding. No doubt, the

Appellant was not prompt in taking decision to take steps but after

Tamtrade Ltd. got dissolved in 1999, the rectification of transmission was

required to be done. Although there is delay, the right is a continuing

right and it would not be appropriate to throw out the Appellant when

request of rectification of Register is made. In view of the Appellant

surviving on dissolution of the Tamtrade Ltd., the Register needs to be

rectified by way of transmission. We find that the submissions made by

the learned counsel for the Appellant have substance and the same could

not have been ignored by the NCLT while dismissing the company petition.

Learned counsel for the Appellant is submitting that if the appeal is

allowed, they will move the Authorities under the Investor Education and

Protection Fund to seek transfer of shares as per Proviso and the benefits

in the name of the Appellant.

14. For the above reasons, the appeal is allowed in terms of the Clause

(b) of Prayer 8 of the Company Petition reproduced above. The Appellant

is entitled to be treated as Sole Shareholder of the shares in dispute and

admissible benefits. The Respondent will rectify the Register of Members

Company Appeal (AT) No. 317 of 2017 - 25.01.2018 11

once the Appellant moves the Investor Education and Protection Fund

Authorities and has orders of transfer in its favour. Before rectification

by Respondent, the Appellant will submit the original Share Certificates

along with Indemnity Bond to the satisfaction of the Respondent to protect

the interest of the Respondent in case any liability is fastened on the

Respondent.

There shall be no order as to costs.

[Justice A.I.S. Cheema] Member (Judicial)

[Balvinder Singh] Member (Technical)

/ng/nn

Company Appeal (AT) No. 317 of 2017 - 25.01.2018