2015 (4) TMI 640 - Board - Companies Law

Rejection to Registration / Transfer of Preference shares - Rectification in member's shares register - Period of limitation - Not sufficient cause for rejection - Held that - It is a settled law that, if no limitation period is prescribed, in that case Article 137 of the Limitation Act shall be applicable. Therefore, in terms of Article 137 of the Limitation Act, 3 years period with effect from the date of cause of action would be available for an aggrieved party to approach the CLB for relief under Section 111/111A of the Act. In light of the above law, I have examined the pleadings as contained in the petition. On perusal of the pleadings, it is noted that the cause of action to file the instant Company Petition had arisen lastly on 3/10/2012 and the petition came to be filed in the year 2013 which is within the prescribed period of 3 years. I, therefore, hold that this petition is not barred by law of limitation and the preliminary objection is devoid of substance. It is rejected accordingly. I have considered the rival submissions. In my opinion, the aforesaid ground taken by the Answering Respondents for rejection of transfer of shares-in-question is hardly acceptable. There is no challenge that the Respondent No.2 Bank has transferred the shares in favour of the Petitioner for a monetary consideration in accordance with the law. Therefore, the Petitioner as a Transferee has stepped in the shoes of the Transferor i.e. ICICI Bank, As is seen from the scheme of amalgamation sanctioned by the Hon'ble High Court, no restriction was imposed with respect to the transfer of shares in question. In such a situation, there was no need to seek any approval from the Hon'ble High Court, who sanctioned the scheme of Amalgamation. It is a fundamental law that the transferability of shares is subject to the provisions of the Companies Act and no restriction, save and except as provided in law, can be imposed, I do not find any restriction in the transfer of shares, as sought to be contended by the Answering Respondents. Therefore, the ground taken by the Answering Respondents is frivolous, malafide, arbitrary and against the basic principles of law and, hence, liable to be rejected. On a careful perusal of the Board Resolution authorizing to sign the Transfer Deeds with respect to transfer of the shares, I do not find any illegality therein. The transfer of the shares are absolutely valid. There is no forgery, fraud, manipulation and misrepresentation. The Respondent Company cannot challenge the transfer on behalf of the Transferor ICICI Bank. No restrictions can be imposed regarding the marketability of the shares, save and except provided in law. I do not find force in the contention of the Answering Respondents' Counsel that the Bank was not entitled to transfer the shares. The alleged inadequacy of monetary consideration with respect to the transfer of shares, as alleged by the Respondents, cannot be taken as a ground for rejection for registration/transfer of shares by the Company, if, the Transferor has no objection in this regard. I therefore, reject this contention too. Based on the above discussion I have come to the conclusion that the grounds stated by the Ld. Sr. Counsel for the Answering Respondents for rejection of registration/transfer of shares-in-question are unsustainable. It has been established that the Company has rejected the prayer for transfer of shares without any sufficient cause. - Decided in favour of appellant.

Summary

Issues Involved:
1. Limitation and preliminary objections.
2. Complicated question of title of shares.
3. Validity of share transfer and compliance with RBI guidelines.
4. Authority to sign transfer deeds.
5. Alleged violation of the scheme of arrangement.
6. Payment of stamp duty on share transfer.

Detailed Analysis:

1. Limitation and Preliminary Objections:
The respondents argued that the petition was time-barred and should be dismissed on the grounds of limitation. They also contended that the dispute involved complicated questions of title, unsuitable for summary proceedings. The court held that the petition was filed within the three-year limitation period prescribed under Article 137 of the Limitation Act, as the cause of action arose on 3/10/2012 and the petition was filed in 2013. Therefore, the preliminary objection on limitation was rejected. The court also found no complicated question of title that could not be decided summarily, thus rejecting this preliminary objection as well.

2. Complicated Question of Title of Shares:
The respondents claimed that the transfer of shares was unlawful due to the shares being part of a scheme under Sections 391/394 of the Companies Act, approved by the High Court of Bombay. They argued that the transfer violated RBI guidelines and lacked proper authorization from the seller's Board of Directors. The court found no complicated question of fact or law and held that the petition could be decided summarily.

3. Validity of Share Transfer and Compliance with RBI Guidelines:
The respondents argued that the transfer of shares was unauthorized and violated RBI guidelines. The court noted that the transfer was done for monetary consideration and was in accordance with the law. It found no restriction in the scheme of amalgamation that prevented the transfer of shares. The court held that the transferability of shares is subject to the Companies Act, and no additional restrictions could be imposed. Therefore, the respondents' objections were deemed frivolous and against the basic principles of law.

4. Authority to Sign Transfer Deeds:
The respondents contended that the individuals who signed the transfer deeds lacked the authority to do so. They argued that the delegation of power was ultra vires as it was done by individuals who had resigned by the time of the transfer. The court found that the transfer deeds were signed by duly authorized signatories and that the transfer was valid. It rejected the respondents' claims of forgery, fraud, and manipulation, stating that the company could not challenge the transfer on behalf of the transferor, ICICI Bank.

5. Alleged Violation of the Scheme of Arrangement:
The respondents argued that the transfer violated the scheme of arrangement sanctioned by the High Court of Bombay. They claimed that the shares were converted into a debt and could not be transferred without court approval. The court found no restrictive conditions in the scheme that prevented the transfer of shares. It held that the respondents' interpretation of the scheme was erroneous and that the transfer was valid.

6. Payment of Stamp Duty on Share Transfer:
The respondents challenged the transfer on the grounds of inadequate stamp duty payment. The court found that the requisite stamp duty had been paid and rejected this objection.

Conclusion:
The court concluded that the respondents' grounds for rejecting the transfer of shares were unsustainable. It directed the respondent company to transfer the 5,00,000 Cumulative Redeemable Preference Shares to the petitioner and rectify its Register of Members accordingly. The petition was allowed, with no order as to costs.