Mr. Giasuddin Ahmed filed a complaint against Green Delta Insurance Company and its director Mr. Sargum Ali regarding the company's refusal to register 22,000 shares purchased from Mr. Ali. The High Court rejected Mr. Ahmed's application. On appeal, the Appellate Division allowed Mr. Ahmed's appeal, finding that the company directors acted in bad faith by refusing to register the shares, which prevented free trading of shares in the capital market. The Appellate Division concluded Mr. Ahmed was not barred from registering the shares purchased from Mr. Ali.
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Mr. Giasuddin Ahmed filed a complaint against Green Delta Insurance Company and its director Mr. Sargum Ali regarding the company's refusal to register 22,000 shares purchased from Mr. Ali. The High Court rejected Mr. Ahmed's application. On appeal, the Appellate Division allowed Mr. Ahmed's appeal, finding that the company directors acted in bad faith by refusing to register the shares, which prevented free trading of shares in the capital market. The Appellate Division concluded Mr. Ahmed was not barred from registering the shares purchased from Mr. Ali.
Mr. Giasuddin Ahmed filed a complaint against Green Delta Insurance Company and its director Mr. Sargum Ali regarding the company's refusal to register 22,000 shares purchased from Mr. Ali. The High Court rejected Mr. Ahmed's application. On appeal, the Appellate Division allowed Mr. Ahmed's appeal, finding that the company directors acted in bad faith by refusing to register the shares, which prevented free trading of shares in the capital market. The Appellate Division concluded Mr. Ahmed was not barred from registering the shares purchased from Mr. Ali.
Copyright:
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Download as DOCX, PDF, TXT or read online from Scribd
Mr. Giasuddin Ahmed filed a complaint against Green Delta Insurance Company and its director Mr. Sargum Ali regarding the company's refusal to register 22,000 shares purchased from Mr. Ali. The High Court rejected Mr. Ahmed's application. On appeal, the Appellate Division allowed Mr. Ahmed's appeal, finding that the company directors acted in bad faith by refusing to register the shares, which prevented free trading of shares in the capital market. The Appellate Division concluded Mr. Ahmed was not barred from registering the shares purchased from Mr. Ali.
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Mr.
Giasuddin Ahmed vs Green Delta Insurance
Complainant Mr. Giasuddin Ahmed
Defendant Green Delta Insurance Company Limited and another Mr. Sargum Ali
Complaint Complaint, in brief, is that on 31/10/1993 he purchased from the respondent No. 2, Mr. Sargum Ali, 22,000 shares of Tk. 100 each of Green Delta Insurance Company Limited (respondent No. 1) hereinafter referred to as the Company of which the respondent No. 2 was a member of the Board of Directors. The Company is a public company limited and duly listed with the Dhaka Stock Exchange, with an authorized share capital of Tk. 10,00,00,000 of which Tk. 6,00,00,000 is issued, subscribed and paid up capital. The pre-tax profits of the company, as appeared from the audited accounts for the two years ending on 31/11/1993 and 31/12/1992 are Tk. 3,05,00,000 and Tk. 2,69,00,000 respectively. The respondent No. 2 has pledged the said 22,000 shares to IFIC Bank Limited, Motijil Branch, Dhaka, as part of the security for a bank guarantee provided by IFIC Bank Limited for Tk. 25, 00,000 favoring Biman Bangladesh Airlines. Respondent No. 2 wrote on 31/12/1993 to IFIC Bank Limited informing it of the agreement to sell the kind shares to the appellant and instructed it to deliver the shares to the appellant, on receipt of a bankers pay order for Tk. 44, 00,000 in the presence of the bank officials and respondent No. 2 gave a receipt dated 31/10/1993 for the said pay order. The appellant having made the requisite payment as aforesaid, the Bank delivered the share certificates to the appellant on 02/11/1993. On 02/11/1993 the appellant lodged with the company the instrument of transfer signed by himself (as transferee) and respondent No. 2 (as transferor) along with the share certificate in respect of the said shares. The respondent No. 2 also wrote on 31/10/1993 a letter to the Managing Director of the Company, informing the letter of the transfer and stating that the share certificates had been delivered to the appellant and that the transfer was irrevocable.
Initially, the Company took no action to comply with the appellants request to register the transfer and, in fact deliberately kept the matter in abeyance at the instance of certain interested quarters. The question of registration of the appellants said shares was ultimately discussed at the 88th, 89th and 90th Board Meetings held on 08/11/1993, 28/11/1993 and 29/12/1993 respectively. In the 88th meeting certain questions were raised by the Managing Director of the company, such as the shares were transferred on the basis of an understanding between the appellant and the respondent No. 2to look into the matter, a three member committee was set up. It appears from the minutes of the 89th Board Meeting, one of the Directors of the Company, Mr. Faruk A. Chowdhury, proposed that instead of registering the shares in the name of the appellant, the said shares should be equally divided amongst all the Board Members. All the attending Board members, except Mr. Monzurur Rahman and Syed Moazzem Hossain, supported this proposal. Because of their refusal the committee set up earlier was requested to discuss the matter further with Mr. Monzurur Rahman and request him to accept the views of the majority of the members of the Board. The committee submitted its report dated 04/12/1993 stating that it had been unable to convince Mr. Monzurur Rahman to accept the views of the majority of the Board at the next 90th Board Meeting held on 22/12/1993. The appellant wrote again on 04/11/1994, 22/02/1994 and 14/05/1994 to the Board to reconsider its decision, but the Company refused to do so. With respect to the dividends of 18 percent declared in the 8th AGM, the appellant claims to be entitled to receive dividends on the said 22,000 shares. The Company by its letter dated 11/06/1994 however, refused to accede to the request of the appellant. The appellant thereafter wrote to the Securities and Exchange Commission on 07/01/1994 and 22/01/1994, praying for appropriate directions to the Company, so as to preserve investors confidence and prevent irreparable loss and injury to the appellant. The Securities and Exchange Commission, in turn, wrote to the Company but to no avail. The appellant caused to serve a legal notice on the Board calling upon it to register the said shares in his name. but the Board by its letter dated 29/12/1993 refused to register the transfer without assigning any reason. Being aggrieved the appellant moved the Company Bench of the High Court Division by an application for rectification of shares register under section 38 of the Companies Act, 1936 but the Company Bench by its judgment dated 20/08/1995 rejected the application.
Verdict: High Court Division Company Bench
Being aggrieved Mr. Giasuddin Ahmed moved the Company Bench of the High Court Division by an application for rectification of shares register under section 38 of the Companies Act, 1936 but the Company Bench by its judgment dated 20/08/1995 rejected the application.
Findings: Verdict of High Court Division Company Bench
Company bench of the high court division rejected the application by its judgment dated 20/08/1995. In our view the given judgment is respectable. Because sheres were transferred on the basis of an understanding between Mr. Giasuddin Ahmed and Mr. Shargum Ali. The court has to see whether there is a conflict of interest and in this case there is a conflict of interest as Mr. Giasuddin Ahmed is the director of rival company. Therefore Mr. Giasuddin Ahmed who has purchased shares of the company is bound and the company has absolute and uncontrolled discretion to refuse registration of the shares.
Verdict: Appellate Division
The notification was used in recognition of the nature of the capital market, which cannot function in the absence of free trading in shares. Therefore in consideration of the action of the directors was manifestly mala fide and the effect of undertaking given by the Mr. Giasuddin Ahmed and the notification of the controller of capital issues both seen and taken together would not bar the respondent to register the Mr. Giasuddin Ahmeds share. In view of the above the appeal is allowed without any order as to costs.
Findings: Appellate Division
Mr. Giasuddin Ahmed has already disqualified himself to become a director of the Delta Insurance Company Limited that is why he cannot be a director the company, rather than he has no need qualifying shares of the company. It appears that he purchased the shares were becoming valuable and dividend declare was very high, and this is the main reason is the company did not want to register the transfer of shares in favor of Mr. Giasuddin Ahmed. For it is the appellate division was allowed Mr. Giasuddins appeal without any order as to costs.
Conclusion Legal Environment of Business is a brain storming subject to deal with. It is more difficult to understand the legal issues which comprise the Statue, the Rules, and procedures and the judicial precedents set by the courts of law. To coherent all these is a challenging job. Our attempt is to just analysis of a specific legal judgment which verdict are different in the High Court Division Company Bench and Appellate Division. For this purpose we tried hard to do our level best.
Appendices 56 DLR (AD) (2004) sheets are enclosed.
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