9911796707
TMI Blog2023 (11) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient cause for refusing the registration of transfer of shares. In the case at hand, Respondent No. 4 was associated with the Appellant company in the past. Respondent No. 1 is stated to be his wife while Respondent No. 5 is his daughter. On the other hand, Respondent Nos. 2 and 3 are alleged to be relatives of the Ex-statutory director of the Appellant company. The Respondents have filed multiple complaints against the Appellant company to various statutory authorities - the allegation of the Appellant company is that the Respondents seek to cause hurdles in the way of bona-fide corporate decisions taken by the Appellant Company. The Respondents have chosen not to appear before this Court to rebut the allegation of the Appellant. These facts constitute sufficient cause and the Appellant company has rightly refused to register the shares of the Respondents - Appeal allowed. - JUSTICE PRATHIBA M. SINGH For the Appellant Through: Mr. Naveen Chawla, Advocate (M9811468315) Mr. Devansh Shekhar, Advocate (M-9984072173) For the Respondents Through: Mr. M. Salim, Adv. for R -3 (M- 9811195036) JUDGMENT 1. The present appeal has been filed by the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out clearly that the Respondent No. 4 along with his other family members has started making baseless and frivolous complaints against the company to various authorities. In addition, when the company did not wish to continue his services, he sought to purchase shares of the Appellant from the market and sought registration of the said shares. 8. The allegation against the said Respondent is contained in paragraph 4 of the reply filed before the CLB which is relied upon by the ld. Counsel for the Appellant. He further submits that the CLB has also erred in law in holding that the request of the Respondents would have been covered under Section 111(A)(3) of the Act and not under Section 111(A)(2) of the Act. 9. He relies upon the judgment of the Supreme Court in Mackintosh Burn v. Sarkar and Chaudhary Enterprise Pvt. Ltd. (2018) 5 SCC 575, wherein, as per the ld. Counsel, the clear legal position has been laid down to the effect that the refusal can be on any ground which constitutes sufficient cause and need not be only in respect of violation of law as mentioned in 111A (3) of the Act. He submits that the Supreme Court has specifically held that conflict of interest coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statutory Auditor H.K. Chadha 5 Astha Gupta Daughter of Respondent No. l and Respondent No. 4. 15. It is further claimed by the Appellant that the Statutory Auditor gave a report concerning the accounts of the Company on 9th October, 2006 for the financial year ending 31st March, 2006. The same was delivered by Respondent No. 5 to Ministry of Corporate Affairs seeking information whether any action has been taken against the Company i.e., the Appellant, without giving the Appellant Company a chance to respond. 16. The Appellant s aver that on 24th November, 2006, Respondent No. 5 made a false claim that Appellant company had delivered her a copy of Balance Sheet for the year 31st March, 2004 along with Auditors report dated 9th October, 2006. 17. The share transfer deeds along with the share certificates were filed with the company in September, 2006. However, the Board of Directors of the Appellant company on 9th April, 2007, had refused to register the shares of the Respondents, stating that the sole object behind the proposed transfer lodged by the Respondents was to seek membership rights and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refusal on sufficient cause beyond the reasons mentioned in sub section (3) is valid, he has not placed any ratio in support of the submission made by him. The respondent counsel submits sub section (2) and its proviso is to, be invoked in preregistration cases whereas sub section (3) is to be invoked in post-registration cases. He also further submits since sufficiency clause was there even before 1995, since it has been brought back into the year 1997, whatever proposition of law as to sufficiency clause was in existence before 1995, is equally applicable soon after sufficiency clause has been inserted in the year 1997. 22. On seeing this proposition, though it appears to be plausible, the demarcation that came into existence in the year 1995 is delineating registration of shares in public limited companies from the private companies. If at all every ground is taken up into consideration under the sufficiency clause, then the very enactment of free transferability clause in sub section (2) will become redundant. If the present scenario in demat form is taken into consideration, a public limited company will not get an occasion to put the lodgement to scrutiny before registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of refusal of lodgement of Shares. 21. The CLB has concluded that though Basti Sugar Mills Co. Ltd. merged with Phenil Sugars Pvt. Ltd. on 20th February, 2013, the transferor company being a public company, the lis would be covered by Section 111A and not Section 111 of the Act. 22. Thus, the CLB has allowed the application of the Respondents on the ground that the sufficient cause in proviso to sub-section 2 of 111A of the Act is to be construed to include every ground, then the very enactment of the free transferability clause in sub-section 2 will become redundant. Further, if the company identifies violations mentioned in sub-section 3 before registration, the company is at liberty to invoke the violations under subsection 3, as sufficient cause as an objection even before the registration. The Company can rectify the register only on the basis of statutory violation, as proposition existing before 1995 has changed, enabling free transferability of shares in the Public Ltd. Company. Section 111A of the Companies Act, 1956 reads as under: 111A. Rectification of Register on Transfer (1) In this section, unless the context otherwise requires, company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The impugned judgment of CLB is of the year 2014. Subsequently, the Supreme Court has passed a judgment in the case of Mackintosh Burn (supra) in respect of section 58(4) of the Companies Act, 2013 which is the newer avatar of Section 111A of the 1956 Act. The said section reads as under: 58. Refusal of registration and appeal against refusal.- (1) If a private company limited by shares refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. (2) Without prejudice to Sub-section (1), the securities or other interest of any member in a public company shall be freely transferable: Provided that any contract or arrangement between two or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deceptive and mala fide in the background of the Respondent company, should have been considered. 25. The Supreme Court in Balwant Singh v. Jagdish Singh AIR 2010 SC 3043 has explained the meaning of the expression sufficient cause . It observed as under: The expression 'sufficient cause' implies the presence of legal and adequate reasons. The word 'sufficient' means adequate enough, as much as may be necessary to answer the purpose intended. It embraces no more than that which provides a plenitude which, when done, suffices to accomplish the purpose intended in the light of existing circumstances and when viewed from the reasonable standard of practical and cautious men. The sufficient cause should be such as it would persuade the Court, in exercise of its judicial discretion, to treat the delay as an excusable one. 26. Further, the Supreme Court while interpreting the said expression in the context of Section 5 of the Limitation Act, 1963 observed as under: 11. The words sufficient cause for not making the application within the period of limitation should be understood and applied in a reasonable, pragmatic, practical and liberal mann ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
