9911796707
TMI Blog1995 (9) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer have not been submitted as called for by the Company earlier and hence the requirements under the law relating to registration had not been complied with. According to the appellants these grounds of refusal are not correct and, therefore, they have filed these Appeals on 27-2-1991. 3. The Company in its reply has taken the stand that the refusal of registration was proper and the Board was correct in refusing to register the shares in the name of the Appellants. According to the Company, the shares were originally in the name of the Deccan Enterprises Private Limited ('Deccan') and there was no valid authorisation of the transferor-company for the transfer of these shares and the Appellants do not hold proper instrument of transfers duly executed by the transferor-company. It has also been averred by the Company that the transfer of shares by the transferor-company was in violation of an undertaking given by the transferor-company to the Andhra Pradesh High Court in another pro-ceedings, that it would not dispose any of its assets. 4. During the hearing, Shri C. Harikrishnan, Senior Advocate, appearing on behalf of the Appellants, submitted that originally th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed that the undertaking given in the Andhra Pradesh High Court was in the year 1988 while the impugned shares were sold as early as in September 1986 and as such, there is no violation of the undertaking given to the Andhra Pradesh High Court by the transferor-company However, the Company again returned the instruments along with share certificates vide its letter dated 8-9-1990 not only disputing the explanation given by the Appellants but also on the ground that the transfer deeds had become invalid in terms of section 108(1A) of the Act as being beyond one year period from the date of endorsement by the Registrar of Companies. Counsel for the Appellants also stated that the Administrator appointed by the Andhra Pradesh High Court went into the validity of the transfer of the impugned shares and vide its decision dated 17-10-1990, he held that these shares had in fact been sold by the transferor-company to the Appellants and valuable consideration had been received by the transferor-company. This fact was informed, Shri Harikrishnan stated, to the Company vide letter dated 20-10-1990. He also further stated that the Appellants once again sent back the shares along with the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge and Shri O.P. Jalan could not have signed the transfer instruments as Managing Director of the company on 15-3-1990. He further stated that if the transfers had been effected, as alleged by the Appellant on 15-9-1986, even as per the Interim Administrator's Report, the consideration was received only on 6-1 -1987. This being a listed Company delivery could be effected only through brokers as per the SCR Act. Therefore, this transac-tion violates provisions of law. He further stated that the decision of the Interim Administrator in regard to sale of the impugned transfer is already under dispute before the High Court of Andhra Pradesh and an Applica- tion has already been made to that Court by one of the shareholders of the transferor company to declare the transferor-company as the true owners of the impugned shares and the Company has also been impleaded as a party. Moreover, the Company has been put on notice about the Injunction Order by the Andhra Pradesh High Court regarding disposal of property by the transferor-company and if the Appellants were to contend before the Company Law Board that the restraint order does not cover the impugned shares, the proper course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Bonus Shares. Therefore, there is no substance in the argument of Shri Raghavan in this regard, he stated. He also refuted the arguments of Shri Raghavan that the Company was put on notice regarding the case relating to these Shares in Andhra Pradesh High Court as the Company refused registration on 26-12-1990 while the Company was impleaded as a party in these proceedings only in February 1991. As regards the restraint order relating to Bonus Shares, Shri Harikrishnan stated that when these shares were transferred in 1986 to the Appellants, they became automatically entitled to all the Bonus Shares issued thereafter and the Bonus Shares could never become the assets of the transferor-company and as such, they were to the assets of the transferor-company on the date of undertaking. Regarding the genu-ineness of the transfers, Shri Harikrishnan stated that the report of the Interim Administrator, a Retired High Court Judge, was an Officer of the High Court and his report should be taken as correct and binding and this should not be questioned. The Interim Administrator has confirmed the sale of the shares and receipt of consideration and the Interim Adminis-trator also wrote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following requirements of law relating to registration of transfers had not been complied with : (a) Consideration must be properly stated; (b) Names of Transferees must be properly stated; and (c) The date of transfers must be properly stated. In addition to the above, the notice also has sought certain other informa-tion. 12. From the above, it is clear that the refusal for registration of transfer as communicated to the appellant contained only three grounds for refusal and no other ground. The Board of the respondent company had not considered any other factor, as is obvious from the notice. 13. Even though the company did not make any reference to the CLB under section 22A of the SCR Act, yet it chose to send a notice to the Transferor/transferee in Form No. 1 which has been prescribed under SCR (Reference to CLB) Rules, 1986. The idea of giving a notice with reasons for refusal is to enable the transferor/transferee to represent against the grounds of the decision. As we have already mentioned, the only three grounds for refusal are, instruments were not proper, they did not comply with provisions of law and certain information and had not been furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic individuals, these instruments had been executed in favour of joint holders which also, according to the company, makes the instrument defective. 17. The question whether a company should be concerned about consi-deration was considered in Deepak Associated Paper Mills (CLB decision, p. 169) wherein a similar case arose and the CLB held that the grounds for refusal on this ground was not proper. In this case, admittedly, the stamp duty has been paid on the basis of ₹ 115 per share which was the market price and since adequate stamp has been paid on this basis there is no violation of Indian Stamp Act relating to payment of duty. Therefore, one of the grounds adduced for refusal is not proper. In regard to second defect that the transfer instruments contained joint names as against a single name authorised by the BoD of the transferor-company, we are of the view that this is too technical an objection which does not merit any consideration inasmuch as one of the joint name is the name approved by transferor-company for transfer. Even otherwise as pointed out by the learned counsel for the appellants, once a shareholder decides to transfer the shares and has received val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is obtained whether before or after the purchase of shares the company cannot thereafter refuse to register the transfer of shares. Nor is it open to the company or any authority or individual to take upon itself or himself, the task of deciding whether the permission was rightly granted by RBI. The above is the observation made by the Supreme Court in [1986] 50 CC 548. These observations of the Supreme Court is very relevant for considering the second objection raised by the company. Admittedly, there was some doubt in the minds of the company about the transfer by Deccan. But with the report of the Administrator appointed by the Andhra Pradesh High Court wherein he had categorically stated, after going through all records of the company, that transfer of shares had in fact been effected by Deccan to the appellants with the specific assertion that Deccan stood by the transfer, we are of the view that the company was no longer justified in taking up a stand regarding the genuineness of the transfer of shares by Deccan. It is also necessary to point out that if a listed company were to make such roving enquiry in respect of each and every transfer before registration, the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned shares, we feel that a listed company, just because a suit has been instituted in a Court, cannot refuse transfer of shares unless there has been either an injunction against the transfer or there is any direction to that effect. Mere pendency of proceedings does not fall within the provisions of section 22A. Therefore, even this additional ground that the company had relied for refusal of transfer does not hold good. 23. Therefore, taking all the above aspects into consideration, we are of the view that the BoD of the company had erred in not registering the impugned shares in favour of the appellants and as such, the Board has to register the transfer of these shares. Accordingly, we hereby order that the respondent-company will, within a period of three months from the date of receipt of this order, register the impugned shares in favour of the appellants. However, in view of the various proceedings relating to these shares pending in other forawie also feel it necessary that the appellants should be restrained from transferring these shares further to anyone else till the other pending proceedings are finalised. We order so. The company is also directed to advise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Two thousand 5102929-5104928 Total : 4,000 Appeal No. 2/11 l/SRB/92 Mrs. Sudha Jalan; O.P. Jalan and Vikas Jalan ..................................... Appellants 1 2 3 4 5 331-334 400 Four hundred Equity Shares 280423 - 280822 327-329 300 Three hundred 280043 - 280342 1376 33 Thirty three 1295053- 1295085 1649 24 Twenty four 1236781 - 1236804 2512 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1296853- 1297152 1645 50 Fifty 1090397 - 1090446 1668 50 Fifty 293691 - 293740 1672 50 Fifty 762143-762192 2317 20 Twenty 51499-51518 2419 200 Two hundred 474797 .474996 45738-45787 2,500 Two thousand five hundred 5099929-5102428 45789-45798 500 Five hundred 5102429-5102928 Total : 6,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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