2019 (2) TMI 1117 - AT - Companies Law

NCLT jurisdiction to entertain or try the disputes pertaining to transfer of equity shares - It is contended that, State Bank of India is not a Company registered under the provisions of Companies Act and it is a body corporate constituted and incorporated under SBI Act, 1955 which was enacted before the enactment of Companies Act, 1956 therefore, NCLT would have no jurisdiction to entertain or try the disputes pertaining to transfer of equity shares - HELD THAT - Imperial Bank was taken over and named as State Bank of India and the Central Government together with other persons entitled to become shareholder of State Bank of India. It is not in dispute that the Imperial Bank was a company under the erstwhile Companies Act and it continued to be company on take over as State Bank of India which is the reason that the Central Government become one of the shareholders. Later on the SBI also came out with an Initial Public Offer (IPO) and allotted its shares to various shareholders including individuals. As perused the Share Transfer Form submitted by the 1st respondent to 2nd appellant for transfer of shares. The said Share Transfer Form is prescribed under Section 108(1A) of the Companies Act, 1956. The said transfer from is being accepted by the 1st appellant. 1st appellant has not submitted any such form which have been prescribed by it for the purpose of transfer. 1st appellant is using the said form which have been prescribed under the Companies Act. As such the argument of the 1st appellant that the Companies Act is not applicable to them is not convincing. On the contrary State Bank of India being a body created by an Act of Parliament it has higher responsibility than the ordinary company to take care of its all stake holders. Thus State Bank of India is a company within the meaning of Companies Act for the purpose of transfer of securities. Therefore, NCLT has the jurisdiction to entertain or try the disputes pertaining to transfer of equity shares. Since we have held that the NCLT has the jurisdiction to entertain or try the disputes pertaining to transfer of equity shares, therefore, Section 430 of Companies Act, 2013 would be applicable. The civil suit filed by the 1st respondent is already withdrawn. When the 1st appellant filed the appeal before this Appellate Tribunal, 1st appellant have also made them parties respondent to the appeal. They have not come forward to agitate the Appeal inspite of service of Notice. It goes to prove that the transferor is not cooperating with the transferee or showing his inability to provide the information to the transferee. Therefore, it is established on the record that the 1st respondent was rightly contesting and claim that he is the rightful owner of these shares by filing Civil Suit and Company Petition before the appropriate Court/Tribunal. It is noted that the combined reading of Section 24 of Companies Act and Regulation 40 of SEBI will show that the principles and compliances to be made under the Companies Act or under the SEBI are complementary in nature and both provisions have to be complied with for a better outcome. The matter under consideration has been hanging over for the last several years. NCLT vide Impugned Order partly disallowed the claim of Respondent No.1, original petitioner, and he has not filed appeal. Appeal needs to be disposed giving directions regarding compliance on the lines of SEBI Circular. In view of the aforegoing observations and discussions the following directions are issued i) Impugned Order is maintained. However, the shares may be transferred subject to compliance with SEBI Circular No. No.SEBI/HO/ MIRSD/DOS3/CIR/P/2018/139 dated 6th November, 2018. ii) Appellants and Respondent to take prompt action by following the prescribed procedure under the circular noted above. iii) The expenses, if any, incurred by the appellants in following the above procedure will be borne by the 1st respondent.

Summary

Issues Involved:
1. Jurisdiction of NCLT over disputes involving State Bank of India (SBI) shares.
2. Applicability of Companies Act, 2013 to SBI.
3. Validity of transfer of shares with mismatched signatures.
4. Compliance with SEBI regulations regarding transfer of shares.

Issue-Wise Detailed Analysis:

1. Jurisdiction of NCLT over disputes involving State Bank of India (SBI) shares:

The appellants contended that the National Company Law Tribunal (NCLT) lacked jurisdiction to entertain disputes pertaining to the transfer of equity shares issued by SBI, as SBI is not a company registered under the Companies Act but a body corporate constituted under the State Bank of India Act, 1955. This argument was supported by a previous Company Law Board (CLB) decision in the case of Tirupati Trade Communication Vs SBI. However, the NCLT held that it had jurisdiction, citing Section 1(4) of the Companies Act, 2013, which states that the provisions of the Act apply to banking companies except where inconsistent with the Banking Regulation Act, 1949. The NCLT also referenced the fact that SBI, being listed on stock exchanges, follows procedures prescribed under the Companies Act for share transfers. The Appellate Tribunal upheld this view, affirming that NCLT has jurisdiction over such disputes.

2. Applicability of Companies Act, 2013 to SBI:

The appellants argued that the Companies Act, 2013 does not apply to SBI due to its incorporation under the State Bank of India Act, 1955. The respondent countered that the Companies Act provisions apply to SBI to the extent they are not inconsistent with the SBI Act. The NCLT found that SBI, being a listed entity, follows the Companies Act for share transfers and is thus subject to its provisions. The Tribunal noted that SBI uses share transfer forms prescribed under the Companies Act and has a higher responsibility to its stakeholders. The Appellate Tribunal agreed, stating that SBI is a company within the meaning of the Companies Act for the purpose of transferring securities.

3. Validity of transfer of shares with mismatched signatures:

The appellants argued that shares could only be transferred with valid execution and proper signatures of the registered holder, and the NCLT cannot decide on issues of signature mismatch. The respondent maintained that they were the bona fide purchaser of the shares, which were lodged for transfer but rejected due to signature mismatch. The NCLT noted that the transferor did not contest the transfer, and the respondent had followed due process. The Tribunal referenced SEBI guidelines and circulars addressing the issue of signature mismatches, which allow for the transfer of shares if the transferor cannot be traced or does not cooperate. The Appellate Tribunal directed that the shares be transferred following SEBI Circular No. SEBI/HO/MIRSD/DOS3/CIR/P/2018/139 dated 6th November 2018, which outlines procedures for dealing with signature mismatches.

4. Compliance with SEBI regulations regarding transfer of shares:

The Tribunal emphasized the importance of complying with SEBI regulations, particularly the circular addressing the transfer of securities in cases of signature mismatch. The circular mandates procedures such as obtaining indemnity bonds, verifying documents, and publishing advertisements to notify potential objections. The Appellate Tribunal directed the parties to follow these procedures, with any expenses incurred to be borne by the respondent.

Conclusion:

The Appellate Tribunal upheld the NCLT's jurisdiction over the dispute, affirmed the applicability of the Companies Act to SBI for share transfers, and directed compliance with SEBI regulations for transferring shares with mismatched signatures. The appeal was disposed of with specific directions to ensure the proper transfer of shares, maintaining the impugned order and emphasizing adherence to regulatory guidelines.