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2016 (8) TMI 240 - CALCUTTA HIGH COURT

2016 (8) TMI 240 - CALCUTTA HIGH COURT - TMI - Rectification of the Register of Members - transfer of shares - Held that:- The transfer of shares in the instant case occurs automatically by operation of law. The respondent Company acquired an interest in the shares by operation of law without any voluntary act on its part. The question of law is answered with the observation that the transfer of shares in a third company pursuant an order sanctioning a scheme of amalgamation does not require com .....

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second round of litigation. In the first round, the appellant was unsuccessful in resisting the rectification of the Register of Members of M/s. Metro Infrastructure Development Limited. One M/s. GNB Credit Private Limited (hereinafter referred to as GNB ) filed a petition under Section 111A of the Companies Act, 1956 against the appellant company seeking reliefs of rectification of Register of Members regarding share certificates covering 90 shares in the name of the petitioner by setting aside .....

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submitted to the company within two months from the date of presentation as envisaged under Section 108(1A)(b)(ii). A dispute was raised with regard to the character of the company, that is to say, the public limited company or the private company and depending on an answer to such questions the determination of the applicable Section. The Company Law Board held that the Company being a public limited company, as to rectification of register of shareholders, Section 111-A of the Act is applicabl .....

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. The objection with regard the transfer forms having lodged beyond two months after presentation of the forms to the Registrar of Companies was considered and it was held by the Company Law Board that the lodgment of shares for effect of transfer is defective. However, it was held that the appellant Company being a public limited company, the shares are freely transferable under Section 111A of the Act and in view thereof, the respondent cannot refuse effecting of transfer by invoking Article 5 .....

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A of the articles of association was subject to the right of appeal of the wouldbe shareholder under Section 111 of the Act. Since, upon the appellant becoming a public limited company, Section 111 does not apply to it, the article appears to be a dead wood in the articles of association of the company. In effect, it decides that Section 111A would apply for rectification and for all intents and purposes, Article 5A becomes otiose upon the company becoming a public company. In view of the failur .....

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spondent company and all rights, title and interest of the said GNB including the right to continue with any proceeding has been transferred to the respondent company. On the basis of the aforesaid, the respondent company as successor-in-interest of the said GNB filed an application for enforcement of the order dated 10th August, 2010 before the Company Law Board (hereinafter referred to as CLB ). The GNB purchased 90 ordinary shares of and in the appellant Company and sent the original share ce .....

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lodgment of the share transfer forms upon due compliance of the provisions of Section 108 of the Act. In terms of the directions of the CLB vide order dated 10th August, 2010, the said GNB, vide letter dated 10th September, 2010, made over the original share certificates along with duly stamped transfer deeds for transfer of 90 shares to the appellant company, but the appellant company has refused to accept and ultimately, the same were submitted on 22nd September, 2010. Subsequently, vide lett .....

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, 2012. Thereafter, the respondent company, by a letter dated 18th June, 2012, called upon the appellant company to effect the transfer of the said shares in terms of the order dated 10th August, 2010 of this CLB, as confirmed by the order dated 19th April, 2012 of Hon ble High Court at Calcutta, but the appellant company, by a letter dated 12th July, 2012, asked the respondent company to provide documentary evidence for transfer of assets of GNB to the respondent Company. The respondent Company .....

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ransfer deeds for complying with the order dated 10th August, 2010 of this CLB. The respondent Company contended that the appellant company is under the obligation to effect the transfer of 110 equity shares in the name of the respondent company, in terms of the said orders, as the respondent company is the successor-in-interest of the said GNB and is entitled to all right, title and interest of GNB in respect of the said 110 equity shares, but the respondent company has failed to do so. The res .....

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nted date, i.e., 1st April, 2010. Further, the said GNB had no locus to contest the appeal being A.C.O. NO.157 of 2010 preferred by the appellant company against the order dated 10th August, 2010 passed by this CLB in C.P. No.304 (111A)/ERB/2006. The order dated 19th April, 2012 has been obtained by the said GNB by perpetrating fraud on the Hon ble High Court at Calcutta and the appellant company. The appellant company refused to effect the transfer of 90 ordinary shares lodged by the said GNB a .....

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fer of any share in the name of the petitioner. Further, the time prescribed for compliance of the said provisions of the Act has lapsed and the company is not obliged to entertain any further application by the respondent company. Mr. Ratnanko Banerjee, the learned Senior Counsel appearing on behalf of the company has submitted that the respondent company being successor-in-interest of GNB by the reason of the Scheme of Amalgamation sanctioned by the Hon ble High Court, is entitled to all right .....

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non-compliance of Section 108 or that the promoters and persons in control of GNB were hostile to the management of the appellant company or were acting against the interest of the company, are barred by principles of res judicata. Further, the original share certificates and the original transfer deeds are lying in the possession of the respondent company and it is under a duty and obligation of the appellant company to transfer the said shares in the name of the respondent company and return .....

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0 and 19th April, 2012 are in respect of 90 shares, whereas the respondent Company has sought relief in respect of 110 shares. The fact of merger of GNB with the respondent company has neither been disclosed to the appellant company nor was it brought to the notice of the Hon ble High Court during the pendency of the appeal being APO No.391 of 2010. It was the duty of GNB and the respondent Company to inform the Hon ble High Court in seisin of APO No.391 of 2010 about the order dated 19th April, .....

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the impugned judgment allowed rectification on the ground that by operation of law the company is entitled to claim rectification. The company losses corporate personality or is deemed to be destroyed on amalgamation from a date declared by the Competent Authority under the Companies Act. When two companies merge into one, the transferor company ceases to exist. In that event, the transferor company is to apply to the company for their registration on the Company s Register of Members. The amal .....

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any become substantially the shareholders in the company which is to carry on the blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company. The transferor company under the order of amalgamation ceased to be in existence in the eye of law and it effaced itself for all practical purposes. After the amalgamation of the two companies, the transferor company ceased to hav .....

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rom the moment of death onwards. This position is recognized by the enactment of the second proviso to Section 108(1). (Mrs. Margaret T. Desor & Ors. Vs. Worldwide Agencies (P.) Ltd. & Ors. reported at (1989) 66 Comp Cas 5; Hemendra Prasad Barooah & Anr. Vs. Bahadur Tea Co. P. Ltd. reported at (1991) 70 Comp Cas 792 (Gau) and Maheshwari Khetan Sugar Mills (P.) Ltd. & Ors. VS. Ishwari Khetan Sugar Mills & Ors. reported at AIR 1965 Allahabad 135 @140). The decision of a co-ordi .....

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ped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating tot he shares …, or if no such certificate is in existence, along with the letter of allotment of the shares … The first proviso to such sub-section deals with the loss of an instrument of transfer and permits the company to register the transfer by s .....

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ing from one to another. Ideally, the shares should be freely transferable, as the company cannot have any interest as to who would its shareholders or who sells the shares in the company to whom, subject to the requirement in the company s articles of association. But in as much as the transfer of shares from one to another involves the passing of property or title, the company can have complete indemnity in a dispute qua title if it registers a transfer in accordance with the mandate of the pr .....

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unless it is registered. The passing of the property from a transferor company to a transferee company under a scheme of amalgamation or arrangement is complete upon the order sanctioning the scheme and takes effect after the order is filed with the registrar of companies. By virtue of the extraordinary transfer recognized in Section 394(2) of the Act of 1956, the compliance with Section 108(1) thereof becomes redundant. In any event, the negative mandate in Section 108(1) of the Act of 1956 ope .....

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