Case Note & Summary
The appellant, Rathnam P.V., filed an appeal against the order of the Company Judge dismissing his application under Section 536(2) of the Companies Act, 1956. The application sought confirmation/recognition of transfer of 3498 equity shares of Rs.100 each fully paid up in Elmot Engineering Company Private Limited (in liquidation). The company was ordered to be wound up on 22 March 1990. The appellant claimed that he was appointed as a director on 3 March 1990 and that 3498 shares were transferred in his favour at that meeting, making him a majority shareholder. He filed the application on 25 September 2009, nearly 19 years after the winding up order. The court considered whether the appellant was entitled to confirmation under Section 536(2), which requires court approval for transfers made after the filing of a winding up petition but before the winding up order. The court held that the application must be made within a reasonable time and the applicant must prove the transfer was bona fide and for valuable consideration. The appellant failed to explain the inordinate delay and did not produce any documentary evidence to support the transfer. The court dismissed the appeal, affirming the Company Judge's order. The decision emphasizes that delay and lack of evidence are fatal to claims under Section 536(2).
Headnote
A) Company Law - Winding Up - Transfer of Shares - Section 536(2) Companies Act, 1956 - Confirmation of Transfer - The appellant sought confirmation of transfer of 3498 shares made after filing of winding up petition but before winding up order. The court held that the application under Section 536(2) must be made within a reasonable time and the applicant must prove the transfer was bona fide and for valuable consideration. The delay of about 19 years in filing the application was fatal. (Paras 1-10) B) Company Law - Winding Up - Delay and Laches - Section 536(2) Companies Act, 1956 - The court observed that the appellant failed to explain the inordinate delay in seeking confirmation. The transfer was allegedly made in 1990, but the application was filed only in 2009. The court held that such delay disentitles the applicant to any relief. (Paras 5-10) C) Company Law - Winding Up - Burden of Proof - Section 536(2) Companies Act, 1956 - The appellant did not produce any documentary evidence to prove the transfer of shares. The court noted that the appellant's case was based on self-serving statements and lacked corroboration. The burden to prove the transfer was on the appellant, which was not discharged. (Paras 6-10)
Issue of Consideration
Whether the appellant is entitled to confirmation/recognition of transfer of shares made after filing of winding up petition but before winding up order, under Section 536(2) of the Companies Act, 1956, particularly when the application was filed after a delay of about 19 years.
Final Decision
The appeal is dismissed. The order of the Company Judge dated 13 October 2011 dismissing the application under Section 536(2) of the Companies Act, 1956 is confirmed.
Law Points
- Section 536(2) of Companies Act
- 1956
- transfer of shares after winding up petition
- confirmation by court
- delay and laches
- burden of proof on applicant
