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TMI Blog2018 (11) TMI 1779X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of shares by a member to his family, there can neither be any objection nor any ground to withhold registration of the transfer. A transfer from a member to member therefore does not require prior approval of the Board, nor gives the option of purchase to all existing members first. The object of article 7 is only to ensure that the shareholding is restricted to the existing shareholders. Article 8 is an exception to the above provision and is applicable when the transfer takes place within the existing members. In such a situation articles of association are not violated as the only logic behind these articles is to prevent an outsider from purchasing shares without giving opportunity to existing members to exercise their rights. Non-grant of an opportunity to object to the said transfer on grounds of undesirability and raising objections - HELD THAT:- The Board had approved the transfer which even otherwise it was legally bound to do. The petitioners being only shareholders have no discretion in this matter and have no right to object. Learned senior counsel for the respondents have submitted that it is only by way of abundant precaution that the resolution passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business decisions of respondent No. 1-company with respect to certain financial transactions, viz., investment of ₹ 26,45,663 in M/s. Amitysoft Tech and an interest free security deposit of ₹ 72 lakhs accepted in a leave and licence agreement executed by them in respect of the property of the respondent-company. Such decisions are stated to be against the interest of the respondent-company. 4. As per averments, the authorised, issued and paid-up capital of respondent No. 1-company is ₹ 1,00,000 divided into 10,000 shares of ₹ 10 each, the details of the holding of current members is set out as under : Sl. No. Name of shareholder No. of shares % of shares held 1. Finhelp Investment and Consultants P. Ltd. 4,900 49.00 2. Jyotindra S. Patel, Sanjay S. Patel and Nita S. Patel 1 0.01 3. Apoorva Patel and Sonal Apoorva Patel 1,100 11.00 4. Ajay M. Patel and M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer the shares of respondent No. 7, M/s. Multidimensional Holdings and Consultants P. Ltd. to respondents Nos. 5 and 6, viz., Finhelp Investment and Consultants (Mumbai) P. Ltd. and Mr. Jyotindra Shantilal Patel was duly ratified. This is the main grievance of the petitioners, which according to them was in complete violation of the articles of association. Reliance has been placed on article 7 of the articles of association which provides for transfer and transmission of shares. The same is being reproduced as under : Article 7.-Any member desiring to sell any of his shares must notify in writing to the board of directors of the number of shares, the fair value and the name of the proposed transferee and the board of directors must offer to the other shareholders, the shares offered at the fair value and if the offer is accepted, the shares shall be transferred to the acceptor and if the shares or any of them are not so accepted within one month from the date of notice to the Board, the member proposing transfer shall, at any time within three month afterwards, be at liberty, subject to articles 8 and 9 thereof, to sell and transfer the shares to any person at the same or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 7 of the articles of association is misplaced, as the relevant applicable clause in this case would be article 8(1) which permits transfer of shares from member to member or to spouse or other family members of a member without prior approval of the Board. It is also argued that the ratification (as per the old Act as well as the new one), falls within the domain of the board of directors and is not open to the various shareholders to object. 9. Mr. Darpan Wadhwa, learned senior counsel appearing for respondents Nos. 5 to 7, i. e., the transferor and transferees of the impugned transaction, supports the arguments addressed on behalf of respondents Nos. 1-3. In addition to adopting the arguments addressed by Dr. U. K. Chaudhary, he has also pointed out that intimation of the transfer can be inferred from the notice of the annual general meeting admittedly received by the petitioner on September 17, 2015. The present petition has been filed on July 13, 2017. There is no explanation for the delay and laches of almost two years. It is also pointed out that the petitioners themselves acquired equity in a similar manner and therefore it does not lie in their mouth to raise such an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not find favour with the petitioners' arguments that the transferor must notify the board of directors and offer it to all other shareholders, giving details of the price expected. The object of article 7 is only to ensure that the shareholding is restricted to the existing shareholders. Article 8 is an exception to the above provision and is applicable when the transfer takes place within the existing members. In such a situation articles of association are not violated as the only logic behind these articles is to prevent an outsider from purchasing shares without giving opportunity to existing members to exercise their rights. 11. With respect to the second objection of not being granted an opportunity to object to the said transfer on grounds of undesirability and raising objections, we agree with the arguments addressed by learned senior counsels for the respondents that approval of transfer of shares falls within the domain of the board of directors. The Board had approved the transfer which even otherwise it was legally bound to do. The petitioners being only shareholders have no discretion in this matter and have no right to object. Learned senior counsel for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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