Kiran Raj

The Calcutta High Court, Division Bench comprising Justice Sabyasachi Bhattacharyya and Justice Uday Kumar, has issued a judgment in favor of the plaintiff regarding a dispute over the ownership and transfer of 2290 equity shares of the defendant company. The court recorded that "the plaintiff/appellant is the owner of 2290 equity shares of Rs.10/- each in the defendant/respondent no.1-Company." The judgment further directed the defendant company and its share registrar to re-transfer 1550 shares and issue duplicate certificates for the remaining 740 shares.

The court also issued a permanent injunction, stating that "the defendants/respondent nos.1 and 2 are restrained from transferring equity shares bearing Distinctive Numbers 21298121 – 9170; 21299871 – 9970; 16678601 – 8640; 16677501 – 8600, in the name of anyone else other than the plaintiff."

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The dispute arose when the plaintiff, Deeplok Financial Services Limited, filed a suit for declaration and permanent injunction regarding 2290 shares of the defendant company, Tata Iron & Steel Company. The plaintiff contended that these shares were originally issued in the name of Gaylord Textile Industries Limited, which was later renamed Deeplok Financial Services Limited. The plaintiff submitted that the shares had been sent to the company's share registrar for transfer but were lost or wrongfully intercepted.

The plaintiff claimed that the defendant company and its share registrar later informed them that 1550 of the shares had already been transferred to third parties. A letter from the share registrar advised the plaintiff to obtain an injunction to prevent further transfers. The plaintiff argued that the transfer deeds produced by the defendants contained forged signatures and that the defendants failed to establish a valid transfer of the shares.

The defendants, including various brokers and transferees, contended that the shares had been transferred in accordance with market practices. They submitted share certificates and transfer documents bearing the signatures of the company's authorized signatories as evidence of legitimate transactions. However, the plaintiff disputed the authenticity of these documents, asserting that no valid transfer deeds had been executed.

The legal arguments in the case involved provisions of the Companies Act, 1956, particularly Section 84, which states that a share certificate serves as "prima facie evidence of the title of the member to such shares," and Section 108, which mandates that a transfer of shares is valid only if accompanied by a duly executed transfer deed.

The court examined the provisions of the Companies Act, 1956, and stated that "the primary presumption of title would be in favor of the certificate holder in whose name the certificate stands." The court observed that the share certificates in question continued to stand in the previous name of the plaintiff, and no valid transfer had been established by the defendants.

Regarding the absence of contest from the company and its share registrar, the court noted that "since the defendant nos.1 and 2 never contested the suit, the allegations made against them are proved by the doctrine of non-traverse." The court further recorded that "none of the shares allegedly transferred in favor of the defendants were registered by the defendant no.1-Company."

The judgment also addressed the defense based on market practices, stating that "business practice, to facilitate easy transfer of shares, particularly in the pre-DEMAT era, was merely to facilitate market transfer but did not operate to create title or effect a valid transfer in the event there is no such actual transfer in accordance with Section 108 of the 1956 Act."

The court further stated that "Section 108(1) is couched in a negative language and as such, the defendant no.1-Company was justified in not registering the 1550 shares in the name of third parties in the absence of any valid transfer deed."

In relation to the additional 740 shares, which were not alleged to have been transferred, the court held that "in the absence of any contest by the defendant/respondent nos.1 and 2, we do not find any justification on the part of respondent no.1 for not issuing duplicate shares in favor of the appellant."

The court decreed the appeal in favor of the plaintiff and set aside the judgment of the trial court. The judgment declared that "the plaintiff/appellant is the owner of 2290 equity shares of Rs.10/- each in the defendant/respondent no.1-Company."

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A permanent injunction was granted restraining the defendants from transferring the disputed shares to any third party. The court further directed that "defendants/respondent nos.1 and 2 shall re-transfer the 1550 shares as detailed in Schedule-A of the Title Suit No.1087 of 1995 and issue duplicates of the remaining 750 shares in lieu of all 2290 shares."

The judgment also ordered that a formal decree be drawn up and that all pending applications in the matter stand disposed of.

Advocates Representing the Parties

• For the appellant: Ms. Somali Mukhopadhyay

• For respondent no.4: Ms. Jyoti Singh

• For respondent nos. 5(i) to 5(vii): Mr. Mukul Lahiri, Sr. Adv., Mr. Ranjit Kumar Rath, Mr. Asish Chakraborty

• For respondent no.6: Mr. Asis Kumar Laha

Case Title: Deeplok Financial Services Limited v. The Tata Iron & Steel Company and Others
Case Number: F.A. No.16 of 2012 with CAN 1 of 2011, CAN 7 of 2020, CAN 8 of 2024
Bench: Justice Sabyasachi Bhattacharyya, Justice Uday Kumar

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