2015 (7) TMI 93 - Board - Companies Law

Allegedly transfer of shares - Right to transfer the shares - Non compliance with section 108 of the Companies Act, 1956 - Held that - The Hon ble High Court categorically held that issuance of such succession certificate cannot ipso facto put Smt Thankam Paul directly in the place of the original holder and she cannot be a Member unless the shares are got registered in her name on submitting necessary application to the Board with requisite proof. The company has made it clear that they have not received any application seeking transmission of shares held by Smt (late) Rubina Paul. In absence of the same the company cannot transmit the shares. Thus it is well established that Smt Thankam Paul is not a registered shareholder of the company in respect of 74 shares. Therefore she has no legal right to transfer the shares in favour of the petitioner or any other person. The so called transfer form is invalid in the eye of law and void abinitio. Accordingly, the petitioner is not entitled to seek the relief No. 1 and the petitioner has no locus standi to maintain petition under section 111 and 111A of the Companies Act, 1956 before this Bench. It is established that the petitioner has not complied with section 108 of the Companies Act, 1956 and the company is not bound to lodge the share certificate along with the share transfer deed within a reasonable time to the company. A person seeking transfer of shares has to mandatorily comply with the provisions of the Companies Act, by submitting a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee along with the certificate relating to the shares and there can be no exception to this mandate prescribed under the Act. In my view the company cannot be faulted for non transfer/non registering of shares in the petitioner s name as the petitioner himself has to be blamed for his failure to comply with the relevant provision laid down under the Act for transfer and registration of shares. - Decided against the assessee.

Issues Involved:
1. Transfer of 74 equity shares from Smt. Thankam Paul to the petitioner.
2. Transfer of 25 preferential shares from Dr. Susheel Cleetus to the petitioner.

Detailed Analysis:

Issue 1: Transfer of 74 Equity Shares

The petitioner sought the transfer of 74 equity shares in his name, which were allegedly transferred by his sister, Smt. Thankam Paul. The petitioner claimed that Smt. Thankam Paul had acquired the shares from their late mother, Smt. Rubina Paul, based on a share transfer form dated 19.04.1996. However, the following questions needed to be addressed:

1. Whether Smt. (late) Rubina Paul was the original shareholder of the 74 equity shares:

The High Court of Kerala confirmed that Smt. (late) Rubina Paul was indeed the original shareholder holding 94 shares.

2. Whether the shares were transmitted in the name of Smt. Thankam Paul:

Smt. (late) Rubina Paul passed away on 08.01.1994, and although a succession certificate was obtained by Smt. Thankam Paul, the shares were never transmitted in her name. Thus, Smt. Thankam Paul was not a shareholder of the company.

3. Whether Smt. Thankam Paul's name was entered in the register of members of the R1 Company:

Smt. Thankam Paul's name was not entered in the register of members of the R1 Company, and she had no locus standi to transfer the shares.

4. Whether Smt. Thankam Paul had any right to transfer the shares:

Since she was not a registered shareholder, she had no right to transfer the shares.

Based on the above findings, it was concluded that the transfer of shares from Smt. Thankam Paul to the petitioner was void ab initio. The company acted in accordance with the law by refusing the transfer, and the petitioner was not entitled to seek the relief of transferring the 74 equity shares.

Issue 2: Transfer of 25 Preferential Shares

The petitioner claimed to have purchased 25 preferential shares from Dr. Susheel Cleetus on 05.08.1993. However, the petitioner failed to lodge the share certificate and the duly executed share transfer form with the company. The following points were considered:

1. Non-submission of documents:

The petitioner did not submit the original share certificate and share transfer form to the company, which is a mandatory requirement under Section 108 of the Companies Act, 1956.

2. Delay in submission:

The petitioner addressed a letter through his advocate on 06.06.2011, nearly 18 years after the alleged purchase. The company rightfully rejected the request for non-compliance with Section 108 and procedural formalities prescribed under the Articles of Association.

The petitioner's failure to comply with the provisions of the Companies Act, 1956, and the delayed submission of necessary documents led to the conclusion that the company was not at fault for refusing the transfer. The petitioner was not entitled to seek the relief of transferring the 25 preferential shares.

Conclusion:

The petition was dismissed on both counts. The petitioner failed to establish the right to transfer the 74 equity shares and the 25 preferential shares due to non-compliance with statutory requirements and procedural formalities. The petition under Sections 111 and 111A of the Companies Act, 1956, was not maintainable, and the petitioner had no locus standi to seek the reliefs prayed for.

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