'You Harass Shareholders': Supreme Court Directs Mediation In 34-Year-Old ITC Share Dispute
The Supreme Court on Thursday directed the parties to attempt mediation in a dispute concerning 85 ITC shares purchased by Prakash Chand Baid in 1989.
A bench comprising Justices Aravind Kumar and Vipul M. Pancholi issued limited notice for the purpose of exploring mediation and directed the matter to be listed after four weeks.
During the hearing, the bench questioned why the dispute concerning the shares had continued for so many years and urged the parties to make another attempt at resolving it.
“You are mighty ITC. For 34 years, you don't transfer the shares. You harass the shareholders like anything. We have not come across one case where the shareholders, the moment their parents die, their fathers die, the application is made, the shares are transferred.”, the Court said.
Appearing for ITC, counsel argued that the person pursuing the claim was not the registered shareholder but a stockbroker acting under a power of attorney. He therefore argued that the complainant lacked locus to assert a personal claim over the shares.
“He is not a shareholder. He is the broker.”
The dispute traces back to 1989, when Baid purchased 85 base shares from three original shareholders. The base shares were subsequently registered in Baid's name on September 28, 1989.
However, ITC had declared a one-to-one bonus issue that year. Since the original shareholders remained the registered holders on the September 19, 1989, record date, 85 bonus shares were issued in their names.
Baid later transferred the 85 base shares to N. Ramaswamy under a transfer deed dated March 20, 1990. The subsequent dispute concerned the bonus shares and the corporate benefits accruing from them.
The complainant, who claimed to have been Baid's stockbroker, began pursuing the issue in the 1990s.
In 2015, he produced a power of attorney allegedly executed by Baid in his favour, although ITC disputed having been furnished a copy of it.
Counsel submitted that Baid had purchased the 85 base shares in 1989 and that they were subsequently registered in his name. He said the dispute concerned the 85 bonus shares, which had been issued in the names of the original shareholders because they were the registered holders on the record date.
The dispute was subsequently pursued through SEBI's grievance mechanism and the Online Dispute Resolution process. In 2021, the complainant lodged a complaint against ITC on the SCORES Portal, which, according to ITC, was closed on August 16, 2021.
Thereafter, the complainant filed several complaints on the ODR Portal. These were allotted on a round-robin basis to various market infrastructure institutions, including the National Stock Exchange, Bombay Stock Exchange, National Securities Depository Limited, Central Depository Services (India) Limited and Metropolitan Stock Exchange.
The latest complaint was allotted to Metropolitan Stock Exchange on August 25, 2024. The conciliator's report dated October 16, 2024 recorded that the complaint was time-barred, following which the conciliation process ended without settlement.
ITC then challenged the continuation of the ODR proceedings before the Bombay High Court. The High Court dismissed the challenge, holding that ITC's objections on jurisdiction, limitation, locus and maintainability could be raised before the arbitral forum.
The High Court also directed ITC to comply with the applicable requirements, including payment of arbitration fees. It clarified that such compliance would be without prejudice to ITC's right to raise its objections before the arbitral forum.
Counsel also drew the Supreme Court's attention to the conciliator's report and the previous proceedings concerning the dispute. He urged the Court to consider the factual position and documents before deciding how the matter should proceed.
The Supreme Court, however, indicated that it wanted the parties to attempt a resolution rather than allow the dispute to continue indefinitely. It made clear that the question of entitlement would remain open.
The matter was accordingly posted after four weeks for further consideration following the mediation process.