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2016 (5) TMI 1036 - BOMBAY HIGH COURTTransmission of shares - rectification of register of members - validity of the refusal of the company to transmit 726 and 128 shares jointly held by Mehboob and Yasmin, respectively, with Ayub upon the latter's death - Held that:- In the present case, the resolution of the Board of Directors dated 12 September 2011 does not stand the scrutiny of these tests. During the brief period, i.e. between 4 April 2011 and 23 November 2011, when the Appellants were on the Board of the Company, they appear to have passed this resolution acting in their own interest. Their suit, challenging the will of Ayub, was pending before this Court. So also, was their petition challenging the joint holdership of Mehboob and Yasmin pending before the CLB, Principal Bench. They were clearly aware that the entries of joint holdership of the two had to be rectified by seeking an appropriate order from the Court or the CLB. And yet, when they got an opportunity to be on the Board, they unilaterally proceeded to cancel the entries, acting in their own interests and on a wrong principle. The conclusion of the CLB, in the premises, of the resolution of 12 September 2011 being vitiated by mala fides is, thus, clearly sustainable. There is no error of law in it. There were two contests on merits :(i) the locus of the Petitioners, Mehboob and Yasmin, to present the petition in the face of the subsequent Board resolution of 12 September 2011 omitting their names; and (ii) whether the board had sufficient cause to refuse the transmission. On the first question, the CLB found, and rightly so, that once the resolution of 12 September 2011 was held to be contrary to the provisions of law and set aside, the earlier resolution of 9 May 1992 stood restored and therefore, there is no question of the locus of the Petitioners to apply for transmission by survivorship. (I have already held the decision of the CLB to set aside the resolution of 12 September 2011 to be valid.) On sufficient cause so far as the refusal to transmit is concerned, the CLB rightly relied on Article 25 of the Articles of Association of the Company, under which, in case of death of one or more joint holders, the survivor/s is/are the only person/s recognized as having title to or interest in the shares. In the case of a will, Article 28(f) of the Articles came into play. The CLB held that the company was bound to follow its Articles and could not have denied transmission / registration of the shares in the sole names of Mehboob and Yasmin. The CLB further noted that by a further resolution passed on 23 November 2011, the Company had decided to annual the resolution of 12 September 2011 and this position was not contested by the company before the CLB. On the other hand, the Company had categorically expressed its willingness to comply with the order to be passed by the CLB on the application of the Petitioners. The CLB, in the premises, held that the Petitioners were entitled to the relief of rectification of register, by entering their names as sole shareholders in respect of 726 and 128 shares. The conclusion is clearly in order. No error of law can be said to vitiate it.
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