TMI Blog2010 (7) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... TION NO. 1189 OF 2009 - - - Dated:- 7-7-2010 - S.J. VAZIFDAR, J. Ms. Rajani Iyyer, Venkatesh Dhond, Ibrahim Merchant, J.P. Sen, Vishwanath Patil, Raji Subramanian, Gajanan, M. Savagave and Ms. Dhanashree M. Shende for the Appearing Parties. JUDGMENT 1. This is an appeal under section 10(F) of the Companies Act, 1956 against an order and judgment of the Company Law Board dated 22-6-2009. The appeal is admitted. With the consent of the parties, the appeal is heard finally. 2. The five appellants were respondent Nos. 2, 5, 6, 7 and 8 respectively in the Company Petition filed before the Company Law Board. Respondent No. 1 herein was respondent No. 1 in the Company Petition. Respondent Nos. 2 to 10 in this appeal were the petitioners in the Company Petition. Respondent Nos. 11 and 12 were respondent Nos. 3 and 4 in the Company Petition. 3. The petition was filed for an order directing the respondents to cancel the registration of the transfer of shares belonging to respondent Nos. 2 to 10 in the names of the appellants, to declare the same as void ab initio and to rectify the registration of members by removing the names of the concerned respondents a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to 1-4-2003, a joint family business was started by the members of the five groups, which continued for nearly 35 years. The family owns several movable and immovable properties purchased within the joint family and held in the names of different members of the family. The five brothers decided to partition and separate the joint family business with the intention that each group would have its exclusive ownership of the properties. Pursuant thereto, the brothers took charge of the respective companies allotted to them and started managing the same exclusively, i.e., to the exclusion of the other brothers and the members of their group. Accordingly, each company was thereafter managed and controlled by the respective brothers and the members of their group. The first respondent company was allotted to the appellants, i.e., Dineshchandra N. Shah (appellant No. l) and the members of his group. Three companies remained as a part of the group but were managed by Harakchand N. Shah, i.e., (Respondent No. 2 herein). According to the appellants, the five brothers started managing the companies coming to them/their group and also dealt with the properties standing in the names of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares in the company along with duly executed share transfer forms to the Appellants. The same were transfered by respondent No. 1 to the names of the appellants in the Register of Members. (B) Respondent Nos. 2 to 10 i.e., the Petitioners in the Company Petition held shares in respondent No. 1 as under: Respondent No. Name of the Shareholder(s)/ Applicants No. of Shares 2. Harakchand N. Shah 28234 3. Gunvanti H. Shah 18609 4. Jayesh H. Shah 58234 5. Kamini J. Shah 15934 6. Hitesh H. Shah 13234 7. Shilpa H. Shah 12278 8. Hiren H. Shah 13535 9. Shital H. Shah 12185 10. Volition Trading (P.) Ltd. 1,50,000 The Board of Directors of respondent No. 1 transferred inter alia these shares to the members of the Appellants group. This action has been challenged in the Company Petition. 12. On 25-7-2006, the petitioners requested the company to provide them a list of the latest shareholding along with the members thereof. Respondent No. 2/Appellant No. 1 by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the Dineshchandra N. Shah group, 19 company petitions were filed before the Company Law Board by various members of the other groups for the same relief namely rectification of the register of members of the company. By the impugned order and judgment dated 22-6-2009, the Company Law Board allowed the petitions by directing the Company to reverse all the transfers holding the same to be illegal and void. The members of the Dineshchandra N. Shah group and the Company filed 19 appeals each under section 10(F). 15. The reasoning in the impugned order is limited to the following observations: "Both the family settlement as well as the arbitration efforts have failed and there are lot of disputes among the brothers to be resolved. I agree with the respondents of this petition that this Bench has no jurisdiction to pass any adjudication on the disputes arising out of the family settlement or out of arbitration. The authority to adjudicate upon these disputes is a Civil Court. However, the petition before this Bench is under section 111 of the Companies Act with regard to wrongful entries made in the register of members by wrong transfers. I consider the prayers in the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. The words transfer and transmission have been used in section 108. The Legislature must, therefore, be deemed to have ascribed to each of the terms a different meaning. In any event, the ambit of each of the terms transfer and transmission could not have been intended to be the same. 20. (A) The term transmission can also indicate a transfer of interest. Blacks Law Dictionary, 8th Edition defines the terms as under : " Transfer . (1) To convey or remove from one place or one person to another; to pass or hand over from one to another, esp. to change over the possession or control of. (2) To sell or give. Transmission - The passing of an inheritance to an heir. Transmit - (1) To send or transfer (a thing) from one person or place to another. (2) To communicate." (B) The Concise Oxford English Dictionary defines the word transmit to also mean "cause to pass on from place or person to another". 21. The terms are used interchangeably. I will therefore, presume that the terms transmit ; or transmission can also imply a transfer between persons. However, the Legislature having used both the terms in the same section as well as in the other provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal) may, in lieu of an order under sub-section (5) pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid within such time as may be allowed for the purpose by the order, on payment to the purchaser of the price paid by him thereof or such other sum as the [Tribunal] may determine to be a reasonable compensation for the right in all the circumstances of the case." [Emphasis supplied] The use of the terms "transmitted" and "transmission" used in the context of a sale held by a court or other public authority indicates the intention of the Legislature to accord to it a different meaning from the term "transfer". It indicates the terms to apply to involuntary transfers. 26. The award of an arbitrator under the Arbitration and Conciliation Act, 1996 would fall within the ambit of "transmission by operation of law". The transfer is, in such cases, not based upon the volition of the parties but by operation of law. 27. I hasten to add that the question as to whether even in such cases the restrictions in Articles of Association of a Company would apply or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : "19. Exceptions. Articles 15 to 18 hereof shall not apply to transfer to a person who is already a Member of the Company nor to a transfer merely for the purpose of effectuating the appointment of new trustees nor to a transfer by executors or administrators legates under the will of or the heirs or legal representatives of deceased member nor to a transfer to the husband, wife, brother, child, grand-child or next of kin of a Member nor to a transfer by a trustee to a beneficiary nor to a transfer by a shareholder which is a body corporate to its holding subsidiary or associated only corporate provided that it is provided to the satisfaction of the Board that the transfer falls within one of these exceptions." The transferees are members of the company. Thus Article 19 is a complete answer to this submission. 33. Further, it is also important to note Article 23 of the Articles of Association of the Company which reads as under : "Registration of persons entitled to share otherwise then by transfer (The Transmission Articles) 23. Subject to the provisions of these Articles any person becoming entitled to shares in consequence of the death, lunacy, bankruptc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
