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2015 (7) TMI 93 - COMPANY LAW BOARD CHENNAI

2015 (7) TMI 93 - COMPANY LAW BOARD CHENNAI - TMI - Allegedly transfer of shares - Right to transfer the shares - Non compliance with section 108 of the Companies Act, 1956 - Held that:- The Hon'ble High Court categorically held that issuance of such succession certificate cannot ipso facto put Smt Thankam Paul directly in the place of the original holder and she cannot be a Member unless the shares are got registered in her name on submitting necessary application to the Board with requisite pr .....

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and void abinitio. Accordingly, the petitioner is not entitled to seek the relief No. 1 and the petitioner has no locus standi to maintain petition under section 111 and 111A of the Companies Act, 1956 before this Bench.

It is established that the petitioner has not complied with section 108 of the Companies Act, 1956 and the company is not bound to lodge the share certificate along with the share transfer deed within a reasonable time to the company. A person seeking transfer of sha .....

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ilure to comply with the relevant provision laid down under the Act for transfer and registration of shares. - Decided against the assessee. - CP. No. 9/2012 - Dated:- 13-4-2015 - SHRI KANTHI NARAHARI, J. For The Petitioner : Shri. T.K. Shajahan, Advocate, Shri. K. Manoj Menon, Advocate and Shri. P. Neelakantan, Advocate For The Respondents Shri. R. Venkataraman, Advocate ORDER The present petition is filed under section 111 and 111A of the Companies Act. 1950 praying this Bench to direct the 1s .....

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s on 08.05,1989 by Dr Puthenmatiam K Balachandran which was entered in ledger folio 2 of the share transfer register and acknowledged by the then managing director. The petitioner's Dither Dr T.M Paul is one of the founder directors of the company who holds 158 equity shares. Petitioner's mother late Mrs Rubina Paul also holds 74 numbers of equity shares in the R1 Company. All shares of the company have been allotted to the shareholders during the years 1971 to 1974. It is submitted that .....

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sors of late one T.K Pylunni. 74 numbers of equity shares was transferred in the name of the petitioner by the petitioner's sister Thankam Paul who is one of the legal heirs of their mother late Rubina Paul. Similarly the receipt for 25 preferential shares issued to Dr Susheel cleetus by the 1st respondent is produced herewith as Annexure A6 page 39. the true copy of share transfer instrument showing the execution of transfer form by Dr Susheel Cleetus in favour of the petitioner is produced .....

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before the Board of directors in order to get the shares transferred in the register in the name of the petitioner as the above said series of litigations between two groups of directors are going on and in effect there was no board and the hospital was under receivership as per the order of Hon'ble High Court of Kerala for a long period. Petitioner's father was in one group and Prof. V.D Sebastian, earlier Chairman and Managing Director headed the other group. From 02.08.2002 onwards th .....

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nsfer forms requesting the Chairman of R1 Company to convene an urgent meeting of Board of directors to transfer the shares in the name of the petitioner on a hope that the petitioner also can sell his shares to any prospective purchasers for a reasonable value agreed by other shareholders also. The then managing director Mr. Mathew Varghese, 6th respondent herein send a reply dated 15.03.2011 mistakenly printed as 14.01.2011 stating that Mrs. Thankam Paul is not a shareholder in the company and .....

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Cherthala in Succession O.P No.13/1994. Smt Thankum Paul was the shareholder of the shares held by her late mother Rubina Paul as per the Succession certificate issued by the Hon'ble Sub Coat, Cherthala in Succession O.P No.I3,1994. Thereafter Thankani Paul executed the share transfer form before the notary to transfer the shares from her name in favour of her brother Mr Mohan Paul who is the petitioner herein. The then Managing Director Mr. Mathew Varghese sent again a reply dated 09.05.20 .....

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the said receipt issued to him by the then Board. Thereafter he executed the share transfer form before the notary to transfer the shares from his name in favour or the petitioner on purchase of the said share by the petitioner on 05.08.1993. To the said letter, the then Chairman of the company. Mr V.D Sebastian sent a reply stating that the petitioner has not complied section 108 of the Companies Act. The petitioner caused to send a NO. dated 26.07.2011 to the Chairman stating that he is ready .....

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on for the reasons of non compliance of the provisions of the Companies Act, 1956 and procedural formalities prescribed in the Articles of Association of the company. The Board of director of the company does not exercise its powers of refusal to transfer of shares in the name of the petitioner in good faith or bonafide. The Board knows that the courts will not interfere with their decision if they act bonafide and in the interests of the company. Thus in the name of acting in the interests of t .....

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interests of genuine transferees and shareholders and might also affect the interests of the company adversely. In view of the reasons he requested the Bench to grant reliefs as prayed in the petition. 5. The respondents 1 & 3 filed counter statement to the petition. The counsel appeared for the respondents submitted that the petition has not complied with section 108 of the Companies Act. 1956 ("the Act"), in seeking for the purported transfer of the shares. The request for transf .....

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the mandatory, pre-requisite riling a petition under section 111 of the Acts has not been complied with. The petition is liable to be rejected. Section 111 of the Act provides for our appeal against the Board's decision to refuse to register the shares. Such appeal/petition shall be filed within two months from the date of receipt of the notice of such rejection. In the present case, the purported request for transfer of the 74 shares was made on 04.03.2011, by the petitioner's counsel a .....

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ice for transfer of 25 numbers of preference shares, purportedly registered in the name of Dr Susheel Cleetus, in favour of the petitioner. Neither the transfer form nor the share certificates were submitted to the Company. On 10.06.2011, the company rejected the request. for non-compliance with section 108 of the Act and the articles. This petition has been riled in November/December 2011. beyond the period prescribed under section 111(3) of the Act. Therefore the petition is liable to be rejec .....

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ted/ submitted to the company for transfer. the purported transfer forms are invalid and the company is barred by law from acting on such purported transfer forms. The notice issued by the Counsel did not comply with the requirements of Article 14 of the Articles. The transfer of shares shall be governed by Article 10 of the Articles of Association which reads as follows: 10. An' person desiring to transfer his share or shares shall notify the Board of directors the number or shares, he desi .....

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f 2014. The respondents state that Ms Thankam Paul has never applied for transmission of shares held by her mother Ms Rubina Paul. Thankam Paul. is not a shareholder of the company. These respondents understand that in the OP (succession) No.I3/1994, the petitioner, his sister, Ms Thankani Paul and their father. Dr. T.M Paul, were Hint petitioners and the Succession Certificate to collect the effects was issued jointly in favour of all the three petitioners therein. Therefore, even the contentio .....

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not become a member of the company and issuance of Succession Certificate cannot ipso facto put her in the place of the original holder and she cannot be member. unless the shares got registered in her name on submitting requisite application. These respondents therefore state that the said Ms Thankam Paul had not become a member of the company. Therefore, the purported transfer of shares by her in favour of the petitioner is invalid and contrary to the Act and the Articles. In the light of the .....

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8.02.2012. It is stated that he has sold his shares in the City Hospital Company and resigned from the position as Chairman of the Board in June. 2011, Since he has no connection with the City Hospital now in any capacity and no relief has been claimed against him. It is stated that he has been arrayed as 5th respondent only to harass him and his name is liable to be struck off the array or respondents. It is stated that 94 shares formerly held by Rubina Paul, allegedly transferred by her daught .....

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he High Court found, inter alia, that Thankam Paul had not become a member of the company, who could file a winding up petition. The company merely pointed out the above hurdles. The excuse that there was litigation which prevented them from submitting the transfer form to the company does not seem to be acceptable. The litigation was thrust upon some members, including myself, who had to vindicate the rights against the fraud and misdoings of Dr T.M Paul, the petitioner's father. When he lo .....

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ut above, it should have been presented to the company before 23.09.1993, but was presented only after a delay of eighteen years. The company only asked him to follow the law in this case also. There is no merit in the petition and it is liable to be dismissed with costs. 7. Heard the counsel appeared for the respective parties perused the pleadings and documents. After analysing the pleadings the only issue is whether the petitioner is entitled to seek the reliefs as prayed in the petition. The .....

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at the mother of the petitioner is the holder of 74 equity shares of the R1 Company. AS per the records the mother i.e. Smt Rubina Paul is the shareholder of the R1 Company. However the case of the petitioner is that he has got share transfer form form Smt Thankam Paul who is the sister of the petitioner duly executed share transfer form on 19.04.1996 for 74 number of equity shares. From perusal of photo copy of share transfer form dated 19.04.1996 is is seen that Smt Thankam Paul singned the sh .....

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4. Whether Smt Thankam Paul has any right to transfer the shares which she is not holder of the shares. 9. Now each question needs to be dealt with. In so far as the question No.1 is concerned. The Hon'ble High Court of Kerala in its judgment mentioned that Smt (late) Rubina Paul was the shareholder having 94 shares. Therefore it is an admitted fact that Smt (late) Rubina Paul was holding the said shares in the Company. In so far as the question No.2 is concerned. Smt (late) Rubina Paul died .....

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stion No.4 is concerned. As stated supra she has no right to transfer the shares. From the above answers it is clear that Smt Thankam Paul is not a shareholder and she cannot transfer the shares. The petitioner alleged to get transfer of shares from Smt thankam Paul is in my view void abinitio and he has no right to claim for transfer of shares and seeking rectification of register of members. The stand taken by the company is perfectly in accordance with law. 10. The petitioner through his Advo .....

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e Advocate's letter stated that the 74 shares cannot be transferred on the ground that Smt Thankam Paul is not a shareholder of the comapny for the shares mentioned in the letter. It is also stated that the company has not received any application for transmission of shares held by Smt (late) Rubina Paul to any person. Further the petitioner through this Advocate addressed another letter to the company. The company reiterated this stand taken by them. The version of the petitioner that Smt T .....

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.32/200 before the Hon'ble High Court of Kerala at Emakulam seeking winding up of the R1 Company. The Hon'ble High Court clearly held at para 17 "coming to the case in hand there is no case for the petitioner that the concerned shares originally held by the deceased mother of the petitioner have been got registered in her name. Her only case is that by virtue of the succession certificate obtained by her in O.P (succession) 13/1994 of the Sub Court. Cherthala, she is the only person .....

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equisite proof. By virtue of the mandate under clause (2) of Regulation 26 of the 1 Schedule to the Companies Act. the Board is having the same power, either to decline registration or to have it allowed, as if it were an application for transfer of the shares sought to be made by an original shareholder before his her death. This being the position, the alleged rights and liberties of the petitioner, to have sustained the company petition do not stand vindicated with reference to the legal prov .....

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of. As stated supra the company has made it clear that they have not received any application seeking transmission of shares held by Smt (late) Rubina Paul. In absence of the same the company cannot transmit the shares. Thus it is well established that Smt Thankam Paul is not a registered shareholder of the company in respect of 74 shares. Therefore she has no legal right to transfer the shares in favour of the petitioner or any other person. The so called transfer form is invalid in the eye of .....

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company for the reasons better known to the petitioner. The petitioner annexed a photo copy of share transfer form wherein the name of Dr Susheel Cleetus shown as transferor and the name of the petitioner shown as transferee. The petitioner through his Advocate issued a letter dated 06.06.2011 wherein it is stated that they are submitting a transfer form dated 05.08.1993 along with copy of receipt of preferential shares held by Dr Susheel Cleetus. It is also stated in the letter that the petitio .....

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8 of the Companies Act, has not been complied with by the petitioner. Further it is stated that the litigation between the directors cannot be a ground for preventing the petitioner from submitting the share transfer form along with share certificate for transfer with the company. The company further stated that the transfer of 25 preferential shares which was presented on 06.06.2011 cannot be entertained and considered for want of required documents and non compliance with the provisions contai .....

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