TMI Blog2006 (5) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... aggregate sum of ₹ 6,06,54,000) and the seventh respondent (18,39,500 shares for a total sum of ₹ 6,07,03,500), whereby the respondent Nos. 6 7 agreed to pay the consideration on or before 20.08.2000, which was never paid in terms of the MOU. In the meanwhile, the petitioner handed over the share transfer deeds (unstamped) duly signed together with the share certificates to the respondent Nos. 6 7, which were lodged by them for transfer with the Company, without affixing transfer stamps. Despite the deficiency, the Company effected the transfer in respect of the impugned shares in favour of the respondent Nos. 6 7 in contravention of Section 108. The apex court in Mannalal Khetan v. Kedar Nath Khetan (1977) 47CC 185, while considering Section 108, categorically held that the provisions of this section are mandatory in regard to transfer of shares and that without production of the share certificate along with the share transfer deed, the transfer cannot be registered and if registered, such registration would be void. In view of this legal position, the registration of transfer of the shares, on the strength of the instruments of transfers, being unstamped, held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the provisions of the Securities and Exchange Board of India, 1992 or regulations made thereunder or the Sick Industries Companies (Special Provisions) Act, 1985 or any other law for the time being in force, within two months from the date of transfer of any shares held by a depository or from the date on which the instrument of transfer or the intimation of the transmission was delivered to the company, as the case may be. In view of the non-fulfillment of one of the mandatory requirements of Section 108 of the Act, viz., the instrument of transfer being duly stamped , in the case before the CLB, the registration of the transfers of the shares in the name of the respondent Nos. 6 7 is hit by Section 111A(3). This violation is still continuing and, therefore, the question of limitation as put forth by the respondent Nos. 2 to 5 does not apply. Further, the Company and the respondent Nos. 6 7 have no objection for allowing the prayer of the petitioner. The CLB may, therefore, pass appropriate orders, as prayed for by the petitioner. The Company Secretary representing the petitioner reiterated that the respondent Nos. 6 7 have not paid the purchase consideration in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), which does not apply to public companies. The belated attempt of the petitioner to cover the prayer under Section 111A(3) is not maintainable. The plea of contravention of Section 108 by the petitioner is made with a view to defeat the huge claim running into several crores of rupees, of the various financial institutions. The petitioner, the respondent Nos. 1, 6, 7 and Fidelity Industries Limited are group companies. The very fact that the Company and the respondent Nos. 6 7 are supporting the petitioner would indicate the collusive course of conduct adopted by the parties. The petitioner failed to make available a copy of the MOU dated 21.02.2000 either to this respondent or for perusal by the Bench. Similarly, the purported unstamped transfer deeds have not been produced by the Company to test the veracity of the stand taken by it. The parties in the present case, viz the petitioner and the Company being aware of the purported defect cannot take advantage of such defect seeking rectification of the register of members of the Company. If an instrument of transfer is not stamped, it will not invalidate the transaction between the parties, to the instrument. The Stamp Act is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f whether the transfer of shares is registered or not by the Company as held in Commissioner of Income Tax v. M. Ramaswamy (1985) 1 Comp LJ 397. A transferee gets title to shares once he has the certificates and blank transfers signed by the registered holder(s), as held by the Supreme Court in Vasudev Ramachandra Shelat v. Pranlal Jayanand Thakar (1975) Vol. 45 CC 43. The transferor cannot claim to be owner of the shares. The Madras High Court in Kothari Industrial Corporation Limited v. Lazor Detergents (supra) while considering the issue whether the transferors are necessary parties to the application for rectification concluded that the transferors are not necessary parties to such application. Whereas, the present petition has been filed by the transferor seeking to rectify the register of members of the Company. The Company failed to establish that the transfer deeds remained unstamped. The plea of the violation of Section 108 does not merit any consideration. Hence, the petitioner has no authority to file the present petition, reversing the registration of transfer of the impugned shares. 7. Shri Elambharathi, learned Counsel appearing for the respondent Nos. 6 7 conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer is not duly stamped, the instrument and consequently, the registration of the transfer are invalid. This is the effect of the language used in Sub-section (1) of Section 108 and the ratio of the apex court decision in Mannalal Khetan v. Kedar Nath Khetan (supra), wherein it has been held that the provisions contained in Section 108(1) are mandatory in character and any registration of transfer of shares contrary to the mandatory provisions of this section would be illegal. It has to be borne in mind that once a transfer form has been executed, the transfer is complete as between the transferor and transferee and the transferee acquires title to shares, as held in Commissioner of Income Tax v. M. Ramaswamy Vasudev Ramachandra Shelat v. Pranlal Jayanand Thakar (supra) According to the petitioner, the respondent Nos. 6 7, failed to pay the consideration for the impugned shares as stipulated in the MOU, pursuant to which a written request was made on 01.08.2000 to the Company not to transfer the shares in favour of the respondent Nos. 6 7. This Bench is not concerned with the grievance of the petitioner regarding purported non-payment of the consideration for the share ..... 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