Companies Act | Under Sec. 59, Registered Society Can't Seek Rectification Of Share Register Of Company's Members: NCLT Hyderabad

“The phrase 'Person' for the purpose of section 59 of the Companies Act, is not defined in the Act. However, the phrases such as 'other person' and 'any other person' are referred to in some of the provisions of the Companies Act 2013, namely, Section 147(3) of the companies Act, which deals with liability of the Auditor for contravening the provisions of the Act, and Section 213(b)(i) of the Companies Act, which provides for investigation into the affairs of a company. The phrase 'any other person' used supra expressly denotes the nexus between the 'Person' refereed in the above sections with the affairs of a Company. Therefore, it can be said that a 'person' who is a stranger to the affairs of the Company cannot fit in the phrase 'any other person' for the purpose of section 59 of the Companies Act 2013. This is so, because of the Latin maxim, 'Ejusdem Generis', a rule normally followed to interpret, where a law lists specific classes of persons or things and then refers to them in general, the general statements only apply to the same kind of persons or things specifically listed.”

Background Facts

On 02.09.2006, Entrepreneur Associates (Chinta Mohana Rao and 98 others) and Hyderabad Hi-Tech Textile Park Pvt. Ltd. (“Company/Respondent No. 1”) entered into a Share Subscription Agreement (“SSA”). Accordingly, the Entrepreneur Associates were allotted the Shares. However, the share Certificates were not delivered to them nor their names have been entered in the Register of Members till date.

All the investors who became members of the Company by virtue of SSA, formed a welfare society named Hyderabad Hi-tech Textile Park Members Welfare Society (“Society”). The Society is registered under the Andhra Pradesh Societies Registration Act, 2001 (“AP Societies Act”).

The Society filed a company petition under Section 59 of the Companies Act, 2013 (“Companies Act”) before NCLT, seeking direction to the Registrar of Companies to rectify the register of members, by entering the names of allottees as per SSA and Detailed Project Report (DPR) certified by the IL&FS.

The Society contended that there has been an intentional delay in delivering the share certificates to the members who were allotted shares through SSA and whose names are mentioned in Detailed Project Report for the Year 2006. The Company opposed the petition and argued that there being no privity of contract between the Society and the Company, the Society has no locus standi to file the petition. Further, a Society registered under AP Societies Act, cannot maintain a petition for rectification of Share Register of the members of a Company registered under the Companies Act.

Issue

Whether a Society registered under AP Societies Act, can maintain a petition for rectification of the share register of the members of a Company?

Relevant Law

Section 59 of the Companies Act, 2013

“59. Rectification of register of members.—

(1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company, or the company may appeal in such form as may be prescribed, to the Tribunal, or to a competent court outside India, specified by the Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the register……XXXX”

NCLT Verdict

On a perusal of Section 59 of the Companies Act, the Bench noted that if the name of any person is, omitted from the Register or unnecessary delay takes place in entering in the register, then the 'person aggrieved', or any 'member' of the company, or the 'company', may appeal to the NCLT for rectification of the register.

It was observed that Section 2(20) and Section 2(55) of the Companies Act expressly exclude Society from category of 'Member' and 'Company' for the purpose of Section 59 of Companies Act. Further, a Society registered under the Societies Registration Act is not a juristic person by virtue of being a body corporate like a company registered under the Companies Act.

On the issue of whether the Society can be considered as 'the person aggrieved' in view of section 59 of the Companies Act, the Bench held that a 'person' who is a stranger to the affairs of the Company cannot fit in the phrase 'any other person'.

While holding that no nexus between the affairs of the Society and the Company has been established through pleadings, it was held that the Society cannot fall under the category of 'person' for the purpose of Section 59 of the Companies Act and hence cannot be an aggrieved person.

“Moreover, even assuming that, the petitioner society herein can be construed as 'the person aggrieved' for the purpose of Section 59 of the Companies Act, 2013, yet in terms of rule 19 of the AP Societies Act, any Society registered under the AP Societies Act 2001, is entitled to initiate legal proceeding touching or concerning any property or any right or claim of the society and not beyond.”

The Bench held that the company petition filed by the Society for rectification of the share register of members is not maintainable.

Case Title: Hyderabad Hi-Tech Textiles Park Members Welfare Society v Hyderabad Hi-Tech Textile Park Pvt Ltd & 7 others

Case No.: CP No. 17/59/HDB/2021

Counsel for Petitioner: Smt. A.Sandhya Rani, Counsel

Counsel for Respondents: Shri P. Sri Raghu Ram, Ld. Sr. Counsel for Shri. Anil Kumar & Shri M.Venkateswar Rao, Counsels; Shri P. Anil Mukherji, Counsel; Ms. Aishwarya Chevuturi; and Shri G S Rama Rao, Counsel.

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