2007 (2) TMI 326 - SC - Companies Law

Whether for registration of transfer of shares effected under a scheme of arrangement or compromise or amalgamation sanctioned by a competent court under sections 391 and 394 of the Companies Act, it is necessary to execute a further instrument of transfer as contemplated by section 108 of the said Act? Held that - Appeal dismissed. The questions raised in the appeal have been rendered academic having regard of the fact that the appellant-company has since registered the shares in question in the name of the respondent No. 1-company.

Summary

Issues:
1. Refusal by the appellant-company to register shares transferred under a scheme of arrangement.
2. Interpretation of Companies Act, 1956 regarding registration of shares.
3. Validity of the decision of the Company Law Board and Calcutta High Court.
4. Rights of subsequent transferee in case of registration of shares in favor of original transferee.

Issue 1: Refusal to Register Shares
The appellant-company refused to register shares transferred under a scheme of arrangement, leading to a legal dispute. The shares were initially sold by Poddar Projects Limited to Vijaya Finance Corporation Limited, but the appellant-company declined to register them on two separate occasions. This refusal prompted the respondents to file an application under section 111A of the Companies Act, 1956.

Issue 2: Interpretation of Companies Act, 1956
The appellant argued that the transfer was defective as no transfer deed was delivered as required by section 108(1A) of the Companies Act. They contended that without registration in favor of the original transferee, subsequent registration to another party was not permissible. Additional objections were raised concerning stamp cancellation and the suitability of the transferee.

Issue 3: Validity of Decisions
The Company Law Board directed the appellant to register the shares in favor of the original transferee but denied relief to the subsequent transferee. The Calcutta High Court upheld the Board's decision, rejecting the appellant's contentions. The High Court affirmed the Board's order, leading to the appeal before the Supreme Court.

Issue 4: Rights of Subsequent Transferee
During the appeal, it was revealed that the appellant had registered the shares in the name of the original transferee, rendering the appeal moot. As the subsequent transferee did not appeal the Board's decision, it became final for them. The Court held that the Board's direction for the original transferee did not automatically apply to the subsequent transferee, as their rights were distinct.

In conclusion, the Supreme Court disposed of the appeal as infructuous since the shares were registered in the name of the original transferee. The Court left the legal questions open for future cases and did not award any costs in the matter.