Adesh Kaur v. Eicher Motors Limited and Ors.

R. F. NARIMAN, J. 1. The present case discloses a very sordid 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, 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 ADESH KAUR v. EICHER MOTORS LIMITED 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 f avour of the impersonator who, in turn, on 10.12.2012, transferred the said shares to 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 Ap pellate Tribunal and has not appeared before us. The appellant, somet ime in 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, 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, t he NCLT recorded that it was acknowledged, both by the Company as well as by the SEBI, that procedural aspects and due care we re not adhered to in the process of issuance of duplicate shares, as other wise such fraud would easily have been unearthed. In the order pa ssed by the NCLT, the NCLT adverted to the aforesaid facts and afforded relief to the appellant in the following terms: “The objection of Respondent No. 1 that the case in hand cannot be adjudicated by the Tribunal is a frivolous attempt to esca pe 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 b e adduced in 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 203 to be brought to book. Her documents and her entitlement are 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 re dress the grievance which has primarily arisen out of the fraud playe d by the employees of the Respondent Company or their Agents. Apart from guidelines of Respondent No. 3 that unequivocally mak e 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 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 t hat 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 the register under Section 59 of the Companies Act. The af oresaid judgment of the NCLT was, therefore, set-aside and the appellant was relegated to a suit. 5. Shri K.V.Vishwanathan, learned senior appearing fo r the appellant, has commended for our acceptance the orde r of NCLT, 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 t o 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 pa rties stated, on 20.05.2016, that respondent No. 2 has issued duplicate shares without following the proper procedure and without exercising due care a nd diligence. 6. Shri Pratap Venugopal, learned counsel appearing on behalf of SEBI reiterates this position and also agrees with Shri Vi shwanathan 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 conte st in the present case, has further submitted that this Court should be careful in ADESH KAUR v. EICHER MOTORS LIMITED [R. F. NARIMAN, J.] reinstating the Tribunal’s order inasmuch as it is not at a ll clear as to whether respondent No. 8 has, in fact, been entered on the r egister 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. 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 in paragraph 23 of the RTI Circular dated 09.05.2001 has not been followed. When the duplicate shares were issued, stock e xchanges 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/-. 10. We are, therefore, of the view that the Appellate Tribunal in relegating the appellant to a further proceeding was not corr ect. 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 t o its original 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, an d the concerned 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. Nidhi Jain Appeals allowed.