2010 (8) TMI 771 - Board - Companies Law

Issues Involved:
1. Is the respondent a public limited company or a private company?
2. Is section 111 or 111A of the Companies Act, 1956 applicable in the present case?
3. Can article 5A of the memorandum and articles of association empower the board to refuse registering transfer in the name of the petitioner?
4. Whether the share forms are sufficiently stamped or not?
5. What is the effect if the provisions of section 108 of the Act were not complied with at the time of lodgment of the share transfer forms?
6. Is the petitioner entitled to the reliefs sought?

Detailed Analysis:

1. Public Limited Company or Private Company:
It is undisputed that the respondent is a public limited company. Thus, the Company Law Board construed the respondent-company as a public limited company. Consequently, section 111A of the Companies Act, 1956, is applicable for the rectification of the register of shareholders, not section 111.

2. Applicability of Section 111 or 111A:
The power of refusal of registration under the terms of the articles of association is given to private companies and companies converted into public companies under section 43A of the Act, covered under section 111. However, such power is absent under section 111A. Therefore, the power of refusal cannot be extended to transfers in companies covered under section 111A. The legislative intent removes this power, and it cannot be invoked using the articles of association.

3. Empowerment under Article 5A:
The respondent argued that the petitioner's transfer forms were not duly stamped and were submitted beyond the stipulated two months. However, the petitioner's counsel contended that only 25 paisa per Rs. 100 was required as per the amended Indian Stamp Act, 1899. The Board found that the transfer forms were sufficiently stamped, invalidating the respondent's contention regarding deficit stamps.

4. Sufficiency of Stamps:
The petitioner's counsel argued that the delay in lodging the transfer forms should not preclude the transfer, citing Dove Investments (P.) Ltd. v. Gujarat Industrial Inv. Corpn., where the Supreme Court held that statutory requirements should be substantially complied with. However, the Board noted that the Apex Court did not state that section 108 provisions could be ignored. The mandatory nature of section 108 was reaffirmed in Mannalal Khetan v. Kedar Nath Khetan and Smt. Claude-Lila Parulekar v. Sakal Papers (P.) Ltd., emphasizing that non-compliance with section 108 is not a mere technicality.

5. Compliance with Section 108:
The petitioner's failure to lodge the transfer forms within two months was deemed non-compliant with section 108. The Board held that the lodgment beyond the prescribed period made the transfer defective.

6. Entitlement to Reliefs:
The respondent, being a public limited company, cannot refuse the transfer under article 5 of the articles of association. However, the petitioner must comply with section 108 for the transfer to be effected. The Board directed the petitioner to comply with section 108 and lodge the share transfer forms within the prescribed time.

Conclusion:
The petition was disposed of with the direction that the petitioner must comply with section 108 of the Act. Upon compliance, the respondent company is obligated to effect the registration of the transfer in the petitioner's name. The petitioner's claim that the company was carrying out illegal activities was not substantiated sufficiently to impact the decision. The petition was not dismissed on the grounds of the petitioner's alleged harassment of the respondent company.

Order:
The petition is disposed of with the directive for the petitioner to comply with section 108 and for the company to effect the registration of the transfer upon such compliance.

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