1995 (9) TMI 226 - SC - Companies Law

Whether no distinction can be made between transfer of share of a limited company limited by shares and transfer of other interest of a member in a company limited by guarantee? Held that - The High Court should have examined all these relevant aspects and ought not to have disposed of the matter by merely observing that no distinction can be made in the matter of transfer of share or other interest between a company limited by shares and a company limited by guarantee. We, therefore, set aside the judgment and order passed by the High Court in Company Appeal No. 1 of 1991 and in Civil Review No. 55 of 1992 and remit the matter back to the High Court for deciding the appeal afresh after hearing both the sides and considering all the relevant aspects. It is clarified that it will also be open to the parties to raise their contentions regarding fulfilment of the requirements of section 108 of the Act.

Summary

Issues:
1. Interpretation of provisions regarding transfer of membership in a company limited by guarantee.
2. Applicability of regulations in Tables A and C of Schedule I of the Companies Act, 1956.
3. Consideration of qualifications for membership in a company limited by guarantee.

Analysis:
The judgment pertains to two appeals against the Patna High Court's decision regarding the transfer of membership in a company limited by guarantee, Maghadh Stock Exchange Association ('MSEA'). The appellant had attempted to transfer membership to a nominee, which was initially refused by MSEA due to the absence of a provision for nomination in its articles of association. The Company Law Board upheld MSEA's decision, emphasizing the necessity of a specific provision for transfer by nomination in the articles of association. The High Court, however, allowed the appeal, citing a Supreme Court decision and holding that the absence of a specific bar in the articles justified the transfer. The High Court directed MSEA to effect the transfer, noting that the application was made before the incorporation of the relevant article. The appellant argued that the High Court failed to consider all relevant aspects and restrictions on transfer present in the articles of association.

The judgment delves into the provisions of the Companies Act, 1956, particularly Sections 28 and 29, which govern the adoption of regulations from Tables A, C, D, and E in Schedule I. It highlights the differences between Tables A and C and emphasizes the importance of considering these distinctions in determining the applicability of regulations to the company in question. The court notes that the High Court did not adequately analyze these differences or consider the qualifications required for membership in a company limited by guarantee like MSEA, which could impact the transfer of membership. The judgment underscores the need for a comprehensive examination of all relevant aspects before directing the registration of the transfer, especially in cases involving unique company structures and membership qualifications.

Ultimately, the Supreme Court sets aside the High Court's decision and remits the matter back for fresh consideration. The Court emphasizes the importance of a thorough analysis of all relevant aspects, including the requirements of Section 108 of the Companies Act, before making a determination. The parties are granted the opportunity to present their arguments afresh before the High Court, ensuring a comprehensive review of the transfer application in light of the specific provisions and qualifications applicable to a company limited by guarantee like MSEA.