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2019 (8) TMI 221 - AT - Companies LawOppression and mismanagement - Section 241-242 of the Companies Act, 2013 - preemptive right of having notice of proposed transfer of shares incorporated in Article 7 of the ‘Articles of Association’ - HELD THAT:- These provisions are intended to block an outsider from purchasing the shares of a private company through the mode of sale or transfer by any other mode and for achieving this objective these Articles envisage that a stranger/ third party may be allowed to purchase the shares of the company only after the existing shareholders have been given the option to purchase the shares intended to be sold and the existing shareholders/ members have declined to purchase the shares offered for sale. This is the general principle - However, an exception is carved out under Article 8 by providing that previous sanction from Board of Directors would not be required if the sale of shares is made in favour of an existing member/ members, their spouses, children or legal heirs. Admittedly, this case falls within the aforesaid exception. Further, that the alteration of balance of power as a sequel to the transfer of shareholding by a member in favour of an existing member would be a concept alien to the true scope and ambit of these Articles. This is apart from the fact that on facts the Tribunal has not found any material alteration on the aspect of balance of power and such finding is not shown to be erroneous, much less perverse. The impugned order does not suffer from any legal infirmity or factual frailty. The interpretation placed on the language of Article 7 and 8 of the ‘Articles of Association’ of Respondent No. 1 Company by the Tribunal is perfectly in consonance with the settled position of law - Appeal dismissed.
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