TMI Blog1999 (10) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... her companies is produced as Annexure-A. 3. The respondent-company has been incorporated under the Companies Act with its office at Bangalore. 4. It is submitted by the petitioner-company that in its meeting of the Board of Directors held on 20-7-1988 (annexure-B) decided to carry on the business of investment in shares and securities of other companies as provided in the memorandum of association of the petitioner-company. During the year 1988 Mrs. Sarvani K. Alva on behalf of herself and her children who were the owners of 52,000 fully paid equity shares of Rs. 10 each in the respondent-company approached the petitioner-company with an offer to sell the shares in favour of the petitioner. The said Smt. Sarvani K. Alva initially quoted a price of Rs. 14 per share and offered to sell the same in favour of the petitioner-company. Consequent upon this offer the Board of Directors of the petitioner-company met on 10-7-1989 and resolved to purchase the aforementioned shares from Mrs. Sarvani K. Alva and her family members at a price not exceeding Rs. 12 per share. Copy of the extract of the Minutes of the Board of Directors of the petitioner-company dated 10-7-1989 has been pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer deed pertaining to three folio numbers specified in the letter, the over-written has not been duly initialled by the parties." It was also stated in the said letter that the respondent-company was unable to proceed further with the transfer in view of the aforementioned objections raised by them. Shares pertaining to 18 transfer deeds which were defective were returned along with the letter. 7 transfer deeds and the share certificates which were in order were retained by the respon-dent-company. Subsequent to the receipt of transfer deeds, the petitioner rectified all the material defects pointed out by the respondent as per the aforementioned letter and returned the 18 transfer deeds after duly rectifying the defects under cover of their letter dated 18-10-1989 (Annexure-H). 6. In response thereto, the respondent-company wrote a letter dated 24-10-1989 (Annexure-J) to the petitioner-company stating that they are unable to process the papers as the resolutions dated 10-7-1989 and 21-8-1989 do not fully comply with the provisions of the Act. The petitioner company vide annexure-J1 4-11-1989 sought clarification from the respondent-company as to what it meant by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot at all relate to the transfer of shares and there is no bar under section 292 to transfer the shares in question. That section 292 is for the internal management of the company and the respondent could not refuse to transfer shares in the name of the petitioner-company on the ground that the petitioner-company had not complied with the provisions of section 292. That the respondent-company could refuse to register the share certificates only on one or more of the grounds set out in sub-section (3) of section 22A of the Securities Contracts (Regulation) Act, 1956, ( The Securities Regulation Act ). Such being not the case, the respondent-company was bound in law to transfer the share certificate in the name of the petitioner-company along with the dividends accrued thereon. The respondent-company had refused to pay the dividend in spite of the letter annexure-M written by the transferor asking the respondent-company to pay the dividend to the petitioner company. The petitioner-company demanded from the respondent-company to pay the dividend pertaining to these shares which was mandatory. The prayer has been made for the grant of petition as prayed for and for grant of such other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said company. By various devices T.K. Alva aggrandised unto himself and cornered shares of both the respondent- company and its associated company. The shares were standing in the joint names of T.K. Alva along with either his wife or one of his children. Some shares were held by his wife and children. Just before the death of T.K. Alva, the acts of misconduct came to light and negotiations were held to reach a settlement. Unfortunately, no settlement was reached and T.K. Alva passed away. The respondent-company and its associated company filed company petitions 83/89 and 84/89 seeking winding up of Vijaya Management Services (P.) Ltd. The associate of the respondent-company has also filed suit against respondent-company for the recovery of money which Shri T.K. Alva had clandestinely drawn from the company. After the demise of T.K. Alva and in order to take advantage of the situation arising and to prevent the company from realising its dues from heirs of T.K. Alva, Shri Ashok Kumar Shetty purchased the shares from the family of Shri T.K. Alva. This has been done to create instability in the affairs of the company and the conduct of the petitioner-company, therefore, disentitles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quoted at the stock exchange are freely transferable. A shareholder has a right to transfer his shares. Correspondingly, in the absence of any impediment in this behalf the transferee of a share in order to enable him to exercise the rights of a shareholder as against the company and third parties, is entitled to have the shares transferred in his name. In case a company refuses to transfer the shares, it is entitled to have rectification of the register by registering therein as a registered shareholder of the shares transferred to him. The company whose shares have been purchased cannot refuse to register the shares arbitrarily or for any collateral purpose. It can be refused only for a bona fide reason in the interest of the company and the general interest of the shareholders. It is seen from the correspondence between the petitioner-company and the respondent- company that the respondent-company has very evasively resisted admitting and effecting the necessary changes in the register of members on the ground that the application for registration of the transfer was in violation of the Act. Despite specific query on the aspect of the violation of the provisions of the Act, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if existence of an inherent power such as claimed by the company in the instant case is assumed, for the simple reason that the amplitude of the so-called undeclared inherent power would itself take care of every refusal to register the transfer of share. Assumption of such a power would result in leaving the matter of transfer of share and its registration at the mercy and sweet will of the company or its Directors, as the case may be. In the absence of any valid and compelling reason it is difficult to comprehend such a proposition." Similarly in Shailesh Prabhudas Mehta v. Calico Dyeing Printing Mills Ltd. [1992] 2 Com. L.J. 58 again the Supreme Court held that the transferee has a right to have the rectification of the register of shares of the company. The company can refuse to register the shares only on specified grounds in exercise of its bona fide reason and not arbitrary or for collateral purposes. Case set up by the respondent that it has refused to register the shares as the petitioner-company did not comply with the provisions of section 292 is wholly untenable and clearly an afterthought. The respondent in its objections regarding the transfer of shares as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other requirement under the law relating to registration of such transfer has not been complied with : ( b )that the transfer of the security is in contravention of any law : ( c )that the transfer of the security is likely to result in such change in the composition of the Board of Directors as would be prejudicial to the interests of the company or to the public interest : ( d )that the transfer of the security is prohibited by any order or any court, Tribunal, or other authority under any law, for the time being in force." 16. It is the case of the petitioner-company that there is no violation of any of the conditions stipulated in sub-section (3) of section 22A. It is not the case of the respondent-company nor it has been pointed out during the course of arguments that the petitioner-company is guilty of violating any of the conditions stipulated in sub-section (3) of section 22A. Consequently, the respondent-company is not entitled to refuse the transfer of shares in question in favour of the petitioner herein. Defects, if any, pointed out by the respondent-company in its letter Annexure G regarding the 18 transfer deeds stood rectified by the subsequent resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner-company. The petitioner-company would be entitled to get the shares transferred in its name from the date of the purchase of the shares. The petitioner-company has, apart from claiming the rectification of the register of members to include the name of the petitioner-company in the shareholders of the respondent-company has also prayed for grant of such other and further relief as was just. In justness of the cause we feel that the petitioner-company is entitled to the dividend which may have accrued on the shares in question from year to year. It would be incidental and consequential to the transfer of the shares in favour of the petitioner-company. Offer made by the respondent-company that it is prepared to transfer the shares in the name of the company in future and that it is entitled to adjust the dividends due on the shares towards any sums payable by Shri T.K. Alva to the respondent- company, cannot be accepted. The Respondent-company failed to pay the dividend pertaining to the shares in question even though a letter (annexure- M ) was written by the transferor of the shares to the respondent- company to pay the dividend to the petitioner-company. Despite this th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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