9911796707
TMI Blog2003 (11) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... t subsequently, the 1st and appellants have transferred 34,500 shares and 6,000 shares respectively to the 2nd respondent. The 1st respondent-company at the instance of the 2nd respondent-company rectified the register of shareholding as if the 2nd respondent transferred all the shares from the appellants to respondents 3 to 6. So the appellants filed Company Petition No. 23/1993, originally praying the Company Law Board to declare that the transfer of 40,500 equity shares bearing distinctive numbers 021 to 34520 and 44021 to 59920 in favour of respondents 3 to 6 by the 2nd respondent-company and the registration of such transfer in the Register of Members by the 1st respondent-company is illegal and contrary to the Articles of Association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, and further restraining the respondents 3 to 6 from exercising right as members in relation to 40500 equity shares with reference to aforesaid distinctive numbers and pass such further order or orders, directing the respondents 3 to 6 to pay costs of the proceedings of the petitioners and pass such further order or orders, as this Hon ble Board deems fit and proper in the circumstances of the case." 3. The Company Law Board, appreciating Article 7 of the Articles of Association of the Company came to the conclusion that the transfer of the impugned shares, which was not in accordance with the provisions of Article 7 on the ground that the shares which were not offered to existing members before transferring to outsiders, has to be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares is set aside, no such notice was issued to the appellants so as to enable the appellants to claim such pre-emptive right. Learned counsel also relied on section 111(5)( b ) of the Companies Act in support of his submission that the Company Law Board can only direct rectification of the register and also direct the Company to pay the loss if any sustained by any party and the Board is not having power to direct the parties to transfer the shares to other members. According to him, since the Company Law Board has no power to give direction to transfer the shares in favour of a particular party, a portion of the impugned order in this Appeal need not be interfered with. 6. Learned counsel for the 2nd respondent-company also adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer the same to the existing members in pro rata and if any member is not willing to buy his shares it shall be offered to the other member or members. If no response is received from the board within 60 days from the date of receipt of notice of intention the transferor can transfer to anyone of his choice. ( d )Shares shall be transferred under the foregoing clause upon the value fixed by the Board of Directors or by the auditor or the auditors of the Company if the Board so desires. ( e )The Directors may refuse to register any transfer of a share; ( i )Where the company has lien on a share, or ( ii )In the case of shares not fully paid up where it is not proved to their satisfaction that the proposed transferee is responsible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such notice will offer the same to the existing members in pro rata . Since the said procedure was not followed by the 1st and 2nd respondents, the Company Law Board has rightly set aside the transfer and directed to rectify the register of members. 11. Now we have to decide, on the basis of the above said portion of the order of the Company Law Board, whether the appellants got their right to compel the 2nd respondent to sell the shares to them. 12. As rightly found by the Board, the appellants cannot have any vested right to purchase the shares of the 2nd respondent until the notice is issued by the Board offering such transfer. Merely because the 2nd respondent violated the procedure contemplated under Article 7 of the Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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