K.B. MADHAVAN Vs. FEDERAL BANK LIMITED

JUDGEMENT

(1.) THIS company petition is filed under Section 111A of the Companies Act, 1956 ("the Act") seeking rectification of the register of members of M/s. Federal Bank Limited ("the Company") in respect of 1167 partly paid up shares bearing Folio No. 13410 covered under certificate Nos. 139670 to 139683, by restoring the name of the petitioner for the reasons set out therein.

(2.) ACCORDING to Mr. P.P. Zibi Jose, learned Practising Company Secretary, the petitioner being a non -resident Indian has been staying in Dubai for the last 26 years as borne out by a certificate dated 24.04.2006 issued by Tripunithura Branch of the Company. The petitioner has been holding 1167 partly paid up shares of the Company, in respect of which no call notice was received by him to remit any balance unpaid amount. However, the petitioner during his recent visit to India came across a final notice of forfeiture of shares dated 13.11.2004 at his residence and thereafter on enquiries with the Company, he was advised that the impugned shares were forfeited for the alleged non payment of the call money. The Company has not given any opportunity to meet the demand towards the arrears due on calls. The forfeiture of shares was not in compliance with the relevant articles of association of the Company. The postal acknowledgement produced by the Company evidencing service of the final notice on the representative of the petitioner clearly indicates that the notice was forwarded by M/s. Integrated Enterprises (India) Ltd. which is un -connected with the forfeiture of shares. The unpaid call money in respect of the partly paid up shares became due as early as in August 1996, but the shares were forfeited after a delay of more than 8 years. This belated forfeiture of shares would reveal the negligence on the part of the Company. Further, the interest amount claimed on the unpaid amount as per the notice dated 13.11.2004 is excessive and incorrect. Therefore, the forfeiture is illegal and liable to be set aside. Mr. P.P. Zibi Jose in support of his legal contentions relied on the following decisions:

(3.) I have considered the arguments - oral and written - advanced for the parties. The submissions made in the written arguments but not advanced at the time of oral submissions have not been considered. The issue before me is whether the impugned shares have been lawfully forfeited, as claimed by the Company. A close scrutiny of the available records reveals that the petitioner was allotted 1167 partly paid up equity shares which are covered under Folio No. 13410, in terms of the letter of offer dated 23.12.1995 governing the issue of equity shares opened on 18.01.1996 on a rights basis to the existing equity shareholders of the Company. It is not under dispute that an amount of Rs. 1,18,800/ - being the balance payable by the petitioner on his partly paid up equity shares remained unpaid, at the time of forfeiture of the share. While the Company claims that necessary notice in accordance with the relevant articles has been duly served upon the petitioner, before forfeiture, the petitioner stoutly denies service of any such notice on him, apart from disputing the quantum of interest purportedly claimed on the final call money by the Company. The petitioner is bound by the terms and conditions forming part of the letter of offer dated 23.12.1995 and shall accordingly pay interest on the outstanding amount payable by him. The letter of offer provides that ''Failure to pay the amount due on allotment/calls on or before the last date appointed for payment of the allotment/call money or such extended date as the Board may in its sole and absolute discretion determine, shall render the allottee(s) liable to par interest a 18% per annum on the amount outstanding from the last date appointed for payment of allotment/call money to the date of actual payment....."[Clause III(d)]. In view of this specific stipulation to pay interest at the rate of 18% per annum, the grievance of the petitioner that the interest as claimed in the final notice of forfeiture dated 13.11.2004 is arbitrary, unfair and illegal is ill -conceived . The claim that the impugned shares are not lawfully forfeited has to be considered in the light of the provisions contained in the relevant articles of association of the Company. Articles 16(2), 23 and 24 provide as follows: