THERE WOULD BE NO HURDLE TO TRANSFER THE SHARES IN FAVOUR OF BONA FIDE OWNERS IF THERE IS NO OBJECTION FROM ANY CORNER

[Mr. M. GOVINDARAJAN]

            Subject to the provisions of Sec. 111A of the Companies Act, 1956 the shares or debentures and any interest therein of a company shall be freely transferable. If a company without sufficient cause refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to company, the transferee may appeal to the Company Law Board and it shall direct such company to register the transfer of shares and direct to rectify the register of members. In 'Oriental Insurance Company Ltd., V. MRF Ltd., (2007) 137 Comp. case 144 the bench held that there would not be any hurdle if there is no objection from any corner in transferring the shares in favour of the bona fide owners and directed the company to transfer the shares in favour of the petitioner. The said decision has been followed in the case 'Prema Kabra & Co., V. Mangalore Refinery & Petrochemicals Limited and others' - (2009) 89 CLA 535 (CLB).

            The factual matrix of the case is that the petitioner is a share and stock broker and member of UP Stock Exchange.   The petitioner had purchased 4500 shares of the respondent company on 24.4.1992 from Sagar Investments for a consideration for which a credit note was issued by the petitioner for which a receipt for payment was issued. The petitioner handed over the envelop containing share certificates and transfer deed duly executed by the respective transferors for delivering to the company. The same could not be delivered and the shares seem to have been lost in transit. Immediately on noticing the loss he filed a complaint and also a letter to the respondent company. The petitioner obtained an injunction order restraining the respondent company in transferring the shares in the name of any other person. The petitioner sent the injunction order to the share transfer agent of respondent company bringing out the factual position of loss of share certificates with a request to issue duplicate shares.

            The grievance of the petitioner is that there was no response from the respondent company with regard to issuance of duplicate share certificates and transfer of shares in the name of the petitioner. The petitioner appointed an adviser to pursue the case further. On the pursuit of this matter the share transfer agent requested to petitioner to furnish the documents in order to restrain the transfer of shares as below:

Proof of purchase, details of payment made to broker/seller;

Photocopy of the certificate and transfer deeds (both sides);

Details of shares, such as share certificate/folio Nos. etc.,

All documents were forwarded to the share transfer agent. Even after hectic parleys coupled with unrelenting persuasion the duplicate share certificates have not been issued. The advisor also addressed the Company Secretary of the company to furnish at least the names and addresses of the transferors to enable the petitioner to file a petition before the Company Law Board for seeking redressal, for which no response is there from the Company Secretary. As a last recourse the petitioner filed this petition before the Company Law Board seeking directions to the respondent company to declare that the petitioner is entitled to have his name inserted in the register of members of the respondent company in respect of 4500 original shares and further declaration that the petitioner is entitled for all accrued dividend and other benefits like rights, bonus etc.,

            On behalf of the respondent company it was submitted that the respondent has intimated the procedures for the issue of duplicate share certificates to the petitioners in respect of the impugned 4500 shares.  It is admitted that the petitioner had fulfilled the formalities and after verification of the indemnity affidavit executed and submitted by the petitioner, the share transfer agent sent intimation to the registered holder for lodgment of objections, if any, against issuance of duplicate share certificates to the petitioner. Out of 45 registered envelopes sent to the respective transferors 42 envelops were returned undelivered with remark 'Left'

            The petitioner also filed an additional affidavit before the board in which it was stated that the issuance of duplicate shares certificates in accordance with the provisions of the Act on submission of affidavit and indemnity bond. The petitioner further states that the respondent company will issue duplicate certificates provided they receive 'no objection' from the transferors and require an order from the Board for the issuance of duplicate certificates. In this regard the petitioner submits that the respondent company who appears to have sent letters to the transferors seeking their no objection for issuance of duplicate share certificates in the name of the petitioner have returned undelivered. The adviser of the petitioner was regularly discussing the case with the respondent company and appraised the case position. However the Company Secretary reiterates the order of the Board in issuance of duplicate shares.

            The Board found that the petitioner is a bona fide purchaser of shares from Sagar Investments vide credit note after payment of due consideration which was acknowledged by Sagar Investments. The Courier Company established the loss of consignment and lodged complaint to the police and also the Secretary, shares department of the respondent company. The petitioner also filed suit and obtained injunction restraining the respondent company in transferring the lost share certificates.

            The Board held that the respondents never denied bona fide of the petitioner to get the impugned shares registered in his name at any point of time during the period of exchange of communication. Moreover the respondent company advised the petitioner for completion of due procedure in issuance of duplicate share certificates. The same was complied with by the petitioner. The letters addressed to the transferors were returned undelivered. Admittedly the purchase of shares was way back in the year 1992 and thereafter no claim or adverse claim was made so far till date. Even after lapse of 16 years there is no claim by the transferors of the impugned shares.  In view of the above fact the Board held that the petitioner acquired beneficial ownership in the impugned shares and is, therefore, entitled to get duplicate share certificates and further directed that-

The respondent company to issue duplicate share certificates in respect of 4500 impugned shares and rectify the register of members by substituting the name of the petitioner in the name of the transferor;

After the issuance of duplicate share certificates, the respondent company is to pay the accrued dividend and bonus as applicable to the petitioner;

All these exercises shall be done within a period of three months from the date of this order; and

The petitioner shall co-operate with the respondent company for fulfillment of the requirements as per the provisions of the Act.