Maghendra Pal Tyagi vs Jayant Davar & Ors

2. The short facts leading to the present proceedings are as under:-

3. On 05.01.1994, the fourth respondent-company got an Advertisement/Public Notice published in Newspapers calling upon to file objections, if any, against issue of duplicate Share Certificates to the appellant and also striking a note of caution to the public at large not to deal with the shares so specified in the advertisement. Having not received any objection from 3 any one, the fourth respondent-company on 03.02.1994 issued duplicate Share Certificates to the appellant. The appellant transferred his shares in favour of Jayant Davar - the first respondent herein, which were registered in his name by the fourth respondent-company on 18.10.1994. The first respondent had been offered 50 Bonus Shares by the fourth respondent-company, which offer was profitably availed by him. The first respondent sold/transferred 200 shares which he got from the appellant and 50 Bonus Shares consequently acquired by him, but the fourth respondent-company did not register the said transfer. This was done on the asking of the CBI, who was investigating the Share Transfer Scam, and advised the first respondent and the transferee to approach the Custodian - second respondent herein. The fourth respondent-company asked the appellant to enforce indemnity bond, but the appellant did not agree as the fourth respondent-company had not suffered any loss, etc. as a result of the transaction.

4. The case of the first respondent before the Special Court was that he purchased 800 shares of fourth respondent- 4 company through its broker M/s. Jamnadas Morarjee & Co. during the months of July-August, 1994 and thereafter the said shares were sent for transfer to the Registrar and Share Transfer Agent of respondent No. 3, i.e. MCS Limited. The shares were finally transferred in his name on the basis of valid instruments of transfer and, accordingly, a ledger folio No. 141982 has been allotted to him. The second respondent filed Miscellaneous Application No. 186/2000 before the Special Court claiming 200 shares which were transferred in his name from the appellant and 50 bonus shares in the ratio of 1:4 as issued by third respondent against those 200 shares. The first respondent stated before the Special Court that he had sold 250 shares in the open market through his share broker M/s. TRC Securities Pvt. Ltd. in the month of May/June, 1997. Upon lodgment of the said 250 shares with MCS Limited, they, vide their letter dated 26.06.1997 refused to transfer/register the shares in the name of the lodger i.e. Morgan Stanley Assets Management Inc., A/c Morgan Stanley Institutional Fund Inc. Emerging Markets Portfolio. Subsequently, the 250 shares were returned to first 5 respondent as `Bad Delivery' under two different covering letters dated 26.06.1997 and 10.07.1998 respectively. MCS Limited received a letter bearing No. 5696/Cus/Mob/UR- CBI/96 (533B) dated 29.02.1996 from the second respondent- Custodian regarding stop transfer of the shares in favour of any person without permission of the Custodian. The MCS Limited also enclosed copy of transfer deeds, share certificates and Custodian's letter dated 29th February, 1996 along with their letter to the second respondent who on going through the same, came to know that 117335 shares of fourth respondent- company belonged to the Notified Persons of the group of Late Harshad S. Mehta which were seized by CBI and remained in their custody. The letter also revealed that Late Harshad S. Mehta and his group were notified by the Custodian on 8.6.92 under the provisions of the Act and all properties belonging to them stood attached simultaneously with the issue of the notification and the fourth respondent-company was informed not to deal with those shares in any manner including transfer, pledge, issue of duplicate etc. and all corporate 6 benefits admissible on these shares may be held in abeyance till the orders passed by the learned Special Judge.

5. In view of the above stated circumstances, the first respondent requested the fourth respondent-company to transfer the shares in the name of the buyer who purchased the same in the open market. The fourth respondent- company vide their letter dated 8th October, 1997 informed the first respondent that one Mr. Mahendra Pal Tyagi - appellant herein was holding the said 200 shares under Ledger Folio No. 128027 bearing Share Certificate Nos. 58193, 46706, 179855 which he claimed having been lost and requested the fourth respondent-company to issue duplicate shares in lieu of the aforesaid original lost share certificates. The appellant also submitted the Police Report, indemnity bond, affidavit along with the request letter to the fourth respondent-Company who issued duplicate shares to the appellant under Share Certificate Nos. 191549-191552. The duplicate shares subsequently were lodged by the first respondent for transfer in his name and, accordingly, the fourth respondent-company 7 transferred the said shares on 18th October, 1994 in the name of the first respondent.

6. The fourth respondent-company thereafter received a letter dated 29th February, 1996 from the office of the second respondent-Custodian whereby the Custodian asked the fourth respondent-company to "stop transfer" of certain shares including the shares which are the subject matter of these proceedings and also held in abeyance all the benefits accruing on those shares as the said shares were seized by the CBI at the time of raid laid on the places of Late Harshad S. Mehta. The letter of 8th October, 1997 revealed that the list furnished by the second respondent-Custodian includes original shares of the appellant which he allegedly lost. The fourth respondent-company, therefore marked "stop transfer"

15. The undisputed facts are that the first respondent purchased 800 shares including 200 shares (the subject matter of the proceedings) of fourth respondent-company in open market in the months of July and August, 1994 through its share broker M/s. Jamnadas Morarjee & Co., C-4 Defence 1 Colony, New Delhi-24. The fourth respondent-company allotted 50 bonus shares to him against the said 200 shares in the ratio of 1:4. In all, the dispute before the learned Special Judge was limited to 250 shares. Late Harshad S. Mehta, who was a party - third respondent herein, is represented through his legal representatives Nos. 3(i), (ii) and (iii) respectively. Indisputably, deceased Harshad Mehta was a notified person under sub-Section (2) of Section 3 of the Act and the appellant transacted the said shares with the deceased Harshad S. Mehta entered after the first day of April, 1991 and on or before 1st June, 1992, the stipulated period covered under the Act. Claim submitted by the first respondent before the learned Special Judge would arise out of the transaction of the said 250 shares between Late Harshad S. Mehta and the appellant during the aforesaid period. The entire properties belonging to the notified party on the day of notification would stand attached in terms of Section 3(2) of the Act. The appellant knowing fully well that he has already sold the shares to late Hashad S. Mehta, he made a false representation to the fourth respondent-company that as the 1 appellant had lost original shares, therefore, duplicate shares were allotted to him which stood in his name since late Harshad S. Mehta had not applied for change of the name. The whole exercise was done by the appellant on the basis of his mis-representation. This Court in L.S. Synthetics Ltd. v. Fairgrowth Financial Services Limited & Anr. (2004) 11 SCC 456, held that Section 3(3) of the Act should be literally construed and all properties belonging to the notified party on the date of notification would stand attached.

8. Again, the appellant preferred Misc. Application No.263 of 2004 for restoration of the Review Petition, which was dismissed and the following order came to be passed on 18.08.2004:-

18. In the backdrop of the facts and circumstances and in the light of the provisions of law, in our view, the orders of the learned Special Judge impugned in these appeals do not suffer from any infirmity or illegality warranting interference in exercise of appellate power.

19. For the reasons aforementioned, we do not find any merit in these appeals which are dismissed, accordingly. Parties are left to bear their own costs.