1995 (9) TMI 393 - Board - Companies Law

Issues Involved:
1. Refusal of registration of shares by Hyderabad Industries Limited.
2. Validity of instruments of transfer.
3. Compliance with legal requirements for registration.
4. Consideration and details of transferees.
5. Undertaking given by the transferor-company to the Andhra Pradesh High Court.
6. Pending proceedings in the Andhra Pradesh High Court.
7. Company's obligation under Section 22A of the Securities Contracts (Regulation) Act, 1956.

Detailed Analysis:

1. Refusal of Registration of Shares:
The appellants lodged shares with Hyderabad Industries Limited, which refused registration on grounds that the instruments of transfer were improper, incomplete, and did not comply with legal requirements. The appellants contested these grounds and filed appeals.

2. Validity of Instruments of Transfer:
The company argued that the instruments of transfer were defective due to incorrect consideration and improper naming of transferees. The appellants countered that the stamp duty was paid based on the market price, and the joint names included at least one approved by the transferor-company. The judgment found the company's objections too technical and not valid grounds for refusal.

3. Compliance with Legal Requirements for Registration:
The company claimed incomplete documents and information, but the judgment highlighted that the company cannot make roving inquiries for each transfer, especially for listed securities. The Administrator's report confirmed the transfer's genuineness, making the company's stand unjustified.

4. Consideration and Details of Transferees:
The company objected to the consideration amounts and the joint names of transferees. The judgment referenced previous cases and concluded that the company should not concern itself with the consideration amounts if the stamp duty is correctly paid. The objection to joint names was deemed too technical.

5. Undertaking to Andhra Pradesh High Court:
The company argued that the transfer violated an undertaking given by Deccan Enterprises Private Limited to the Andhra Pradesh High Court not to dispose of assets. The judgment found that the original shares were transferred before the undertaking, and bonus shares, issued later, should follow the original shares.

6. Pending Proceedings in Andhra Pradesh High Court:
The company cited ongoing proceedings questioning the transfer's validity. The judgment stated that mere pendency of proceedings does not justify refusal unless there is an injunction or specific direction from the court.

7. Company's Obligation under Section 22A of the SCR Act:
The company, being listed, should have referred the refusal to the Company Law Board (CLB) as mandated by Section 22A of the SCR Act. The company's failure to do so was noted, and the judgment emphasized that listed shares should be freely transferable, with refusals only on valid grounds under Section 22A.

Conclusion:
The judgment concluded that the company's refusal to register the shares was not based on valid grounds. The Board was ordered to register the shares within three months but restrained the appellants from further transferring the shares until other pending proceedings were finalized. The company was also directed to inform the concerned stock exchanges.

The appeals were thus allowed, directing Hyderabad Industries Limited to register the impugned shares in favor of the appellants while ensuring compliance with ongoing legal proceedings.

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