Case: Rahul Subodh Windoors Ltd Vs. A.K.Menon

no allotment of shares at all inasmuch as there can be no allotment of shares in blank and in the copies of the share certificate produced before the Special Court no names have been entered. No application had been filed by the second respondent in terms of Section 41(2) of the Companies Act agreeing to become a member of the company and his name be entered in the Register of Members. On examination of the Register of Member, the Special Court found that there were certain suspicious circumstances which clearly indicated the fact that the second respondent had never made an application in writing for allotment of shares. The Special Court further examined the matter with reference to the distinctive numbers of the shares which revealed a lot of suspicion to the effect that their names in the Register of Members were made sometime after the letter was sent by the Custodian only to over-come the difficulty of an application being made by him and long after the second respondent was notified. Therefore the allotment is purportedly to be made in his name without any application in writing and only with a view not to return the money belonging to the notified party. Further, there is no intimation to the Registrar of Companies either for filing a return of the statement starting the number, the nominal amount of the shares, the names, addresses, occupation of the allotees and the amounts, if any, paid or due and payable on each share. 3. Thus on the basis of these circumstances and certain other attendant circumstances, the Special Court came to the conclusion that there was no allotment of shares and it is not now open to the appellant to make such an allotment of shares and, therefore, it directed the repayment of the sum of Rs. 20 lakhs with interest. Alternatively, the Special Court held that the sale/purchase of the share was on a `buy-back basis and it was only an arrangement for financing and even on that basis the price must be the original price plus come amount for interest at a reasonable rate and that must be repaid. In conclusion, the Special Court directed the appellant to pay the Custodian for and on behalf of the second respondent a sum of Rs. 20 lakhs together with interest thereon @18% per annum from November 13, 1991 till payment.4. Challenging this order several grounds have been raised in the appeal but at the time of hearing only two contention are put forth before us by the learned counsel for the appellant. In the first place, he contended that the Special Court had no jurisdiction to entertain the application of respondent No. 1, the Custodian, since the matter did not relate to any offence contemplated under Section 3 of the Act. The learned counsel drew our attention the scheme of the Act to impress upon us that the Special Court does not have any jurisdiction to entertain an application for declaration to the effect that a sum of Rs. 20 lakhs in question belong to the second respondent. Section 7 of the provides for the jurisdiction of the Special Court in respect of transaction for any offence referred to in Section 3(2) of the Act and bars the jurisdiction of any other court. If the matter stood thus, the contention put forth on behalf of the appellant perhaps need further examination. Now after the insertion of Section 9A with effect from 25 January, 1994 the Special Court exercises the jurisdiction of a civil court in relation to any matter or claim "(a) relating to any property standing attached under Section 3(3) of the Act, and (b) arising out of transaction in securities entered into after the Ist day of April, 1991 and on or before the 6th day of June, 1992, in which a person is notified under Section 3(2) is involved as a party, broker, intermediary or in other manner." Sub-section (3) of Section 9A bars the jurisdiction of other courts in respect of these matter. Therefore, the Special Court is the only court which can inquire into the deal with the matters of this nature where the transaction covered by Section 9A or property standing attached under Section 3(3) is involved and, therefore, we think the first contention urged on behalf of the appellant is plainly misconceived and stands rejected.5. The second contention put forth on behalf of the appellant is that the shares are granted and, therefore, on the allotment of shares the money does not belong to respondent No. 2 but to the appellant. In the narration of facts made earlier while referring to the proceedings in the Special Court out of which this appeal arises we have stated the various circumstances taken note of by the Special Court in not accepting that there had been any allotment of shares. A few of these circumstances are firstly, there can be no allotment of shares to unknown person; secondly, allotment can be made to a person who becomes a member of the company when an application is made to that effect, and thirdly, no application was made to the company by the second respondent in that regard was forthcoming. Cloud of doubts was cast upon the entries in the Register of Members and the distinctive numbers of the shares and, therefore, the finding of fact recorded by the Special Court that there had been no allotment was notified under the Act to avoid payment of money of a sum of Rs. 20 lakhs cannot be seriously disputed. We find no good reason to interfere with the said finding and the second contention urged also stands rejected.6. The Special Court was also justified in noticing that the transaction between the parties was really a financial arrangement with the `buy-back agreement and even on that basis a sum of Rs. 20 lakhs with interest can be ordered to the paid to the Custodian. We cannot take any exception to this view either.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In the narration of facts made earlier while referring to the proceedings in the Special Court out of which this appeal arises we have stated the various circumstances taken note of by the Special Court in not accepting that there had been any allotment of shares. A few of these circumstances are firstly, there can be no allotment of shares to unknown person; secondly, allotment can be made to a person who becomes a member of the company when an application is made to that effect, and thirdly, no application was made to the company by the second respondent in that regard was forthcoming. Cloud of doubts was cast upon the entries in the Register of Members and the distinctive numbers of the shares and, therefore, the finding of fact recorded by the Special Court that there had been no allotment was notified under the Act to avoid payment of money of a sum of Rs. 20 lakhs cannot be seriously disputed. We find no good reason to interfere with the said finding and the second contention urged also stands rejected.6. The Special Court was also justified in noticing that the transaction between the parties was really a financial arrangement with the `buy-back agreement and even on that basis a sum of Rs. 20 lakhs with interest can be ordered to the paid to the Custodian. We cannot take any exception to this view either.