2018 (3) TMI 1392 - SC - Companies Law

Refusal of registration of shares and appeal against refusal - High court dismissed the appeal - question of law - Held that - In the instant case, there is no resolution passed by the company refusing to register the transfer of shares. Since the Company Law Board has gone into the contentions by the appellant for refusing to register transfer for all purposes, it has to be taken that those contentions are the grounds taken by the appellant for refusing to transfer the shares. The appellant has taken several grounds in the memorandum of appeal and raised questions of law as well on these aspects. No doubt, one of the main questions of law stressed in the appeal pertains to the limitation. But on going through the several grounds taken in the Memorandum of Appeal and the questions of law raised specifically in the appeal and the grounds, it is apparent that the appellant had raised questions of law other than the question of law on limitation. As per order 15.09.2017, the High Court, however, declined to consider the review holding that the same was beyond the scope of review and that the same can be corrected only by a superior forum. We are afraid that the stand taken by the High Court cannot be justified in the factual background we have explained and the legal position analysed above. The appellant having taken specific grounds in the appeal and having raised questions of law regarding its right to refuse registration of transfer on sufficient ground, being a statutory appeal under Section 10F of the Companies Act, 1956, the High Court should have considered the same among other questions of law.

Issues Involved:
1. Delay in registration of share transfer.
2. Refusal of share transfer registration by the appellant.
3. Jurisdiction and authority of the Company Law Board.
4. Applicability of SEBI Act and Takeover Regulations.
5. Limitation period for filing an appeal under Section 58 of the Companies Act, 2013.
6. Conflict of interest due to competition.
7. Legal validity of the Company Law Board's order.
8. High Court's dismissal of the appeal.
9. Review petition and its dismissal.
10. Remittance to the National Company Law Tribunal (NCLT).

Issue-wise Detailed Analysis:

1. Delay in Registration of Share Transfer:
The respondent, holding 28.54% shares, sought registration of an additional 100 shares, increasing its holding to 39.77%. The appellant did not pass orders on the registration, leading the respondent to approach the Company Law Board (CLB). The CLB directed the registration of shares, noting that the respondent had followed due process by submitting the original share certificates and transfer deeds multiple times.

2. Refusal of Share Transfer Registration by the Appellant:
The appellant argued that the respondent company is controlled by a competitor, which would not be in the interest of the government-owned company. The CLB rejected this contention, stating that the acquisition of 100 shares would not change the control of the company, which would remain a government entity.

3. Jurisdiction and Authority of the Company Law Board:
The appellant challenged the CLB's order before the High Court under Section 10F of the Companies Act, 1956, raising questions about the CLB's jurisdiction to entertain the appeal beyond the prescribed time limit. The High Court dismissed the appeal, stating that the CLB had the authority to consider the appeal even beyond the limitation period.

4. Applicability of SEBI Act and Takeover Regulations:
The appellant contended that the respondent's acquisition violated the SEBI Act and Takeover Regulations. The CLB found this argument irrelevant as the respondent company's shares were not listed, and the acquisition did not change the company's control.

5. Limitation Period for Filing an Appeal under Section 58 of the Companies Act, 2013:
The appellant argued that the appeal was barred by limitation as it was filed beyond the prescribed period. The High Court held that the CLB could admit and consider the appeal beyond the limitation period, dismissing the appellant's contention.

6. Conflict of Interest Due to Competition:
The appellant raised concerns about the conflict of interest, as the respondent was controlled by a competitor. The CLB dismissed this concern, stating that the acquisition of 100 shares would not enable the competitor to take over the company.

7. Legal Validity of the Company Law Board's Order:
The CLB's order directing the registration of shares was challenged on the grounds that it was arbitrary and lacked sufficient cause. The Supreme Court noted that the refusal to register shares could be based on sufficient cause, including conflict of interest, and remitted the matter to the NCLT for fresh consideration.

8. High Court's Dismissal of the Appeal:
The High Court dismissed the appellant's appeal, focusing solely on the limitation issue and not addressing other questions of law raised by the appellant. The Supreme Court found this approach incorrect and held that the High Court should have considered all questions of law.

9. Review Petition and Its Dismissal:
The appellant's review petition was dismissed by the High Court, which held that the grounds cited for review were beyond the scope of correction in review and could only be addressed by a superior forum. The Supreme Court disagreed, stating that the High Court should have considered the grounds raised in the appeal.

10. Remittance to the National Company Law Tribunal (NCLT):
The Supreme Court set aside the orders of the CLB and the High Court, remitting the matter to the NCLT for fresh consideration. The NCLT was directed to pass orders uninfluenced by previous observations and findings, and to do so expeditiously.

Conclusion:
The Supreme Court emphasized the need for the NCLT to consider the matter afresh, taking into account all relevant legal and factual aspects, including the appellant's right to refuse registration of share transfer on sufficient grounds. The appeals were disposed of with no order as to costs.

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