ADESH KAUR vs. EICHER MOTORS LIMITED

1                REPORTABLE   IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION  CIVIL APPEAL NOS. 19426­19427  OF 2017                        

                      Versus

J U D G M E N T R.F.NARIMAN, J. The present case discloses a very sordid state of facts. The appellant before us is a resident of Punjab, and   had   acquired   in   all   903   equity   shares   in   the respondent No. 1­Company.   This acquisition took place way back in the year 1994­95.    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 Signature Not Verified Digitally signed by SHASHI SAREEN Date: 2018.07.07 10:36:46 IST Reason: before us that the standard procedure to be followed was not   followed   by   respondent   No.   2,   and   the   aforesaid change   of   address   was   despite   the   requirements   of 2 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 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   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 3 significant   order   that   was   passed   by   the   NCLT   on 09.11.2016, the NCLT recorded that it was acknowledged, both   by   the   Company   as   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: “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 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 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 4 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   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.” 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   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 the register under Section 59 of the Companies Act.  The aforesaid judgment of the NCLT was, therefore, set­aside and the appellant was relegated to a suit. Shri K.V.Vishwanathan, learned senior appearing for the   appellant,   has   commended   for   our   acceptance   the order   of   NCLT,   together   with   its   reasoning.     Learned 5 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 20.05.2016, that respondent No. 2 has issued duplicate shares without following the proper   procedure   and   without   exercising   due   care   and diligence.    Shri Pratap Venugopal, learned counsel appearing on behalf of SEBI reiterates this position and also agrees with   Shri   Vishwanathan   that   the   NCLT   order   should   be reinstated. 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 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 6 concerned depository. 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. 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 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/­. We are, therefore, of the view that the Appellate Tribunal   in   relegating   the   appellant   to   a   further proceeding   was   not   correct.     We,   therefore,   set­aside 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 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.  7   We, therefore, direct the Company 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. The appeals are allowed in the aforesaid terms. Pending applications, if any, shall stand disposed of.                                     ......................J.               (ROHINTON FALI NARIMAN)              ......................J.                                 (INDU MALHOTRA)             New Delhi, rd Dated: 3  July, 2018.             8 ITEM NO.50 COURT NO.10 SECTION XVII S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Civil Appeal No(s). 19426-19427/2017 ADESH KAUR Appellant(s) VERSUS EICHER MOTORS LIMITED & ORS. Respondent(s) (FOR ADMISSION and IA No.126711/2017-PERMISSION TO FILE ADDITIONAL DOCUMENTS and IA No.126712/2017-EXEMPTION FROM FILING O.T. ) Date : 03-07-2018 These appeals were called on for hearing today. CORAM : HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN HON'BLE MS. JUSTICE INDU MALHOTRA For Appellant(s) Mr. K.V.Viswanathan, Sr. Adv. Mr. K.V.Balakrishnan, Adv. Mr. S.M.Sundram, Adv. Mr. Ravi Raghunath, Adv. Mr. K. V. Mohan, AOR For Respondent(s) Mr. Shyam Divan, Sr. Adv. Mr. Anoop Dawar, Adv. Mr. Rajesh Ranjan, Adv. Mr. Sumit Teterrwal, AOR Mr. Pratap Venugopal, Adv. Ms. Surekha Raman, Adv. Ms. Niharika, Adv. Ms. Kanika Kalaiyarasan, Adv. M/S. K J John And Co, AOR Mr. Tushar Mehta, ASG, Mr. Bharat Singh, Adv. Mr. Arvind Kumar Sharma, Adv. Ms. Swati Ghildiyal, Adv. Mr. Mukesh Kumar Maroria, AOR 9 UPON hearing the counsel the Court made the following O R D E R The appeals are allowed in terms of the signed reportable judgment. Pending applications, if any, shall stand disposed of. (SHASHI SAREEN) (SAROJ KUMARI GAUR) AR CUM PS BRANCH OFFICER (Signed reportable judgment is placed on the file)