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TMI Blog2020 (11) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the impugned order dated 16.10.2018 after bearing in mind the facts and circumstances of the case and also by taking into consideration of Law came to the conclusion that the action of Appellants / Respondent in refusing to effect impugned shares in favour of the Respondent/ Petitioner was arbitrary and unjustifiable one and consequently allowed the Company Petition by issuing the following directions:- "1) We hereby set aside letter dated 30.10.2015 directing the respondents to register the transfer of 20,000 equity shares of Mr. T.Shahul Hameed (Registered Folio No. 14) in the name of the Petitioner with effect from lodgement of share transfer request on 13.08.2015; 2) Directed the respondents to rectify the register of shareholders by incorporating the name of the Petitioner in place of Mr. T. Shahul Hameed in respect of 20,000 equity shares (Registered Folio No. 14); 3) Directed the respondents to register the transfer of 12,500 equity shares of Mr. P.A. Ibrahim Haji (Registered Folio No. 06) in the name of the Petitioner with effect from lodgement of share transfer request on 13.08.2015); 4) Directed the respondents to rectify the register of shareholders by inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to consider the Rule 6 of the Companies (Share Capital and Debentures) Rules, 2014 which speaks of 'issue of renewed or duplicate share certificate'. 7. In the absence of share certificate enclosed to the share transfer deed and the share transfer deed duly filled up which is a mandatory requirement under Section 56 of the Companies Act, 2013, the Company could by no stretch of imagination assume that any shares were transferred. In the present case, the share transfer form submitted is blank and does not disclose the description of the shares (distinctive nos., number of shares, folio no., name of the transferee and his address). 8. The Learned Counsel for the Appellants comes out with an argument that the Tribunal had failed to appreciate the law laid down in 'Muniyamma' V. 'Arathi Cine Enterprises Pvt. Ltd.', ILR, 1992, Karnataka page 1262 wherein it was observed that unless share transfer form duly stamped and executed by the transferor was submitted along with original share certificate, the transfer cannot be registered by the Company. 9. The Learned Counsel for the Appellants points out that in the decision of Hon'ble Supreme Court in 'Bajaj Auto Ltd.' V. 'N.K. Firodia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the "Transferor" had not earlier applied for issuance of duplicate share certificate with the Company nor informed the loss of the share certificate with the Company and indeed, he had entered into 'Share Purchase Agreement' without the 'Original Share Certificate' or 'Letter of Allotment of Shares' with the Respondent. 15. The Learned Counsel for the Appellants contends that a 'Transferor' had not lodged any police complaint regarding the loss of share certificate and even the paper publication was with respect to the alleged purchase made by the Respondent. The Appellants Decisions 16. In the decision of Hon'ble Supreme Court in 'Manna Lal Khetan and Others' V. 'Kedar Nath Khetan and Others' reported in 1977 2 Supreme Court cases at page 424 at special page 429 wherein in paragraph 16 it is observed as under: - "16. The provision contained in Section 108 of the Act states that a company shall not register a transfer of shares.............unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee........has been delivered to the company along with the certificate relating to the shares or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferring shares by signature of a majority. Whatever the agreement between the executors was inter se, the agreement could not override the provisions of the Companies Act; and under Section 108 the Company is bound to recognise only those transfers for the purpose of registration which are executed in terms of that section. It is true that they were in fact executors, and that, with regard to the beneficiaries mentioned in the Will, they would be trustees of the stock, but the Company does not take notice of any trust, and must act in accordance with the Act of Parliament, under which it is constituted, with regard to placing persons upon the register. (See Barton v. London and North Western Rly. Co.) 16(1889)24QBD 77: 62 LT 164(CA)." 19. In the decision of Hon'ble Supreme Court in 'John Tinson & Co. Pvt. Ltd. & Ors.' V. 'Surjeet Malhan (Mrs) and Another' (1997) 9 Supreme Court Cases at page 651 at special page 654 wherein at paragraph 7 it is observed as under:- "7. The next question is whether the transfer of the shares held by Mr B.K. Malhan is valid in law. In that behalf clause (8) of the Articles of Association is relevant. It is now a wellsettled legal position that A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies (Share Capital and Debentures) Rules, 2014 inspite of the requests made by the transferors. 22. According to the Respondent on 30.10.2015, the Board after considering the request of the Respondent mischievously rejected the request for transfer of shares by providing frivolous and vague reasons viz. that the Respondent had not attended certain Board Meetings, and that he had alleged allegations of criminal nature against the Directors of the Board and finally, Share Certificates were not enclosed with the 'Share Transfer Form' as required under Article 6 of the 'Articles of Association' dated 31.12.1991. In fact, the Board with a mischievous design had ignored the requests of the transferors made on 10.04.2015 and 30.06.2015 and rejected the request for transfer. The Board, has approached this Tribunal with an uncleaned hand. 23. The Learned Counsel for the Respondent brings to the notice of this Tribunal that the 'Articles of Association' was radically and materially altered and that a search report was directed by this Tribunal on 27.03.2019 and 16.05.2019 to be filed along with a copy of the 'Articles of Association'. From the search report, it came to light that the 'Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred like any other movable property subject to the provisions contained in the 'Articles of Association' and the Companies Act. The word 'Transfer' employed in Section 108 of the Companies Act, 1956 Act refers to a transfer between persons pursuant to a voluntary act. Only when the 'transferee's' name is registered in Company's register, right to property is perfected. 28. A company can register the transfer on such terms as to the 'Indemnity' as the Board may consider fit. In case of undelivered instruments or lost instruments registration is possible if the 'Transferee' agrees to give 'Indemnity Bond' or security on such terms as the Board may decide. By getting his name registered in the 'Register of Members', the 'Transferee' only perfects his title to the shares and is entitled in his own right to claim all the privileges which were previously claimed by the 'Transferor' in his name as per decision 'Kellick Nixon Ltd.' V. 'Dhanraj Mills (P) Ltd.' (1983) 54 Comp cas 432 (Bom). 29. At this stage, this Tribunal worth recalls and recollects the decision 'Colonial Bank' V. 'Hepworth' (1887) 36 ChD 36 at p 54 wherein it is observed that till the transfer of shares is actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the First Appellant / Company holding 20,000 equity shares of Rs. 100/- each presently valued at Rs. 195.75/- per share and he desired to sell his aforementioned shares and that the intention of the parties was that upon the consummation of the sale and the purchase of the shares pursuant to the agreement, the purchaser shall own the extent of share purchased in the share capital of the Company together with all the rights, economic value and benefits pertaining thereto. In fact, the covenant of the share purchase agreement dated 10.04.2015 proceeded to mention that the seller had agreed to sell to the purchaser and the purchaser had agreed to purchase from the seller the shareholding in the company for the purchase consideration. The purchase consideration was Rs. 39,15,000/- which was paid through cheque bearing No. 212425 drawn on Federal Bank, Kasaragod branch. 35. More importantly, the aforesaid share agreement specifies that the seller had agreed to submit to the First Appellant / First Respondent the share transfer form duly executed and stamped after the expiry of seven days from the date of execution of the agreement. It was declared that 'original share certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Tribunal when the powers of the Board was improperly exercised, although there is absence of provision in the Companies Act for a 'Tribunal' to issue necessary directions to the Board of a Company to issue the 'Duplicate Shares' in question. 40. It cannot be forgotten that Section 46 of the Companies Act provides that the 'Register of Members' is the prima facie evidence of any matters that the Law directs or authorises to be entered in the Register. Further, the Companies Act treats the 'Register of Members' only as prima facie evidence and not the conclusive evidence of the entries therein as per decision 'Reese River Silver Mining Co. Ltd.' V. 'Smith' (1869) LR HL 64. 41. In the decision 'Ramdas Chakrabati' V. 'Official Liquidator, Cotton Ginning Company' reported in ILR 1887(9) All 366 it is held that a 'Register' may not be considered conclusive evidence, particularly if other papers filed by the plaintiff contradict the 'Register', even though the defendant does not let in any evidence. 42. In this connection, it is worth to point out that Section 88 of the Companies Act, 2013 enjoins that every Company shall keep and maintain register of members for each class of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter in the hands of Company or its Directors at will. To put it succinctly, the discretionary power to refuse 'Transfer of Shares' is not to be resorted to in a deliberate, arbitrary, fraudulent, ingenious or capricious fashion. As a matter of fact, the Directors are to exercise their discretion in good faith and to act in the interest of company. The Directors are to give due weightage to shareholder's right to transfer his share. 47. The 'Tribunal' has wide powers in dealing with an 'Appeal' to refuse to register the transfer of shares. Section 58(5) of the Companies Act, 2013 says that the Tribunal may, after hearing the parties, may dismiss or order directing the transfer or transmission shall be registered by the Company and the Company shall comply with such order within ten days. Further, the 'Tribunal' has power to direct rectification of the register or direct the Company to pay damages to any party 'aggrieved'. 48. The specific case of the Appellant is that in the 'Share Transfer Form' SH- 4 furnished by the Respondent, the distinctive number of the share was not mentioned, corresponding certificate numbers were not mentioned, witness signature and name was not fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants. The non-reporting of the loss of the share certificates by the 'Transferor' either with the First Appellant / Company or to the concerned police before the transfer of shares to the Respondent will not affect the case of the Respondent / Petitioner. 53. Be that as it may, in view of the foregoing discussions and taking into consideration of the facts and circumstances of the present case in a holistic fashion, especially in the teeth of rejection of transfer of shares through letter dated 30.10.2015 mentioning two reasons therein, this Tribunal without any simmering doubt holds that they are clearly unsustainable in the eye of Law and hence, the said letter dated 30.10.2015 was set aside in the impugned order, by the National Company Law Tribunal, Bengaluru Bench, Bengaluru. In short, the impugned order of the Tribunal dated 16.10.2018 whereby and whereunder the directions issued as mentioned in para 2 of this judgement is free from legal infirmities. Consequently, the Appeal fails. Result In fine, the Appeal is dismissed. No costs. I.A. No. 2017/2018 is closed. 54. The Respondent / Petitioner is directed to furnish all necessary / relevant documents required by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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