[aaykarbhavan] Re: {Amresh's CA's} Case Number 1. without any comments. Go through minutely

Please this is not a complete. Some part is in India , computer. I will send after some time.

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From: Dipak Shah <djshah1944@yahoo.com>
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Sent: Monday, 10 September 2012 4:26 PM
Subject: {Amresh's CA's} Case Number 1. without any comments. Go through minutely

 

Company Law Board

Dipakkumar Jayantilal Shah vs Atul Products Ltd. on 18 September, 1992

Bench: S Upasani, C Mehta

ORDER

1. This is an appeal filed under Section 111 of the Companies Act, 1956, by Dipakkumar Jayantilal Shah (hereinafter referred to as "the appellant") against the decision of Atul Products Ltd. (hereinafter referred to as "the respondent") for refusal of transfer of one equity share of Rs. 12 each in favour of four groups of transferees. The appellant had lodged with the company four transfer deeds along with one share certificate of five shares with a request to register the transfer of one share each in the name of four groups of joint holders. In the memo of appeal, the appellant has stated that the company has wrongly rejected the registration of transfer of shares on the ground that as per Article 24 of the articles of association, the company cannot split share certificates for less than market lots, i.e., 50 in one certificate. It is the case of the appellant that such refusal to register the transfer of shares on the ground that it will result in creating share certificates of less than marketable lots is directly in contravention of the provisions of free transferability of shares as contemplated under Section 22A of the Securities (Contracts) Regulation Act. It has been also pointed out by the appellant that such an exercise of authority by the company is against the interest of small shareholders.

2. In the reply filed by the company, it is stated that Smt. P. S. Naik jointly with Shri S. G. Naik was holding one share certificate for five shares and has requested for transfer of one share each to four different transferees retaining the remaining one share in the name of the original shareholders. The company has stated that the existing member was originally holding 50 shares of Rs. 10 each in Gujarat Aromatics Ltd. prior to its amalgamation with the company. The value of the shares was reduced to Re. 1 each and subsequently, consolidated into five shares of Rs. 10 each in terms of the scheme of amalgamation approved by the Gujarat High Court. Further, it is pointed out that as per Article 24 of the articles of association of the company, the company cannot split the share certificate for less than the market lot, i.e., 50 in their case. The company, vide its letter dated December 5, 1990, has clarified to the appellant that the share certificate in question could not be split into five certificates of one share each and hence the appellants' request for splitting up could not be entertained. The company has further submitted in its reply that by refusing to split the share certificate of five shares into five share certificates of one share each, the company has not contravened either any of the provisions of the listing agreement or any provisions of its articles of association or Section 22A of the Securities Contracts (Regulation) Act, 1956. According to the respondent-company, the company's shares are freely transferable within the meaning of Section 22A of the Securities Contracts (Regulation) Act, 1956. It was also submitted that Section 22A of the said Act has no application in the instant case, as this is a case for splitting of shares and not for transfer of shares.

3. We have carefully considered the documents filed before us as well as the arguments advanced by the company. The appellant has submitted four transfer deeds duly executed and stamped along with one share certificate of five shares for the purpose of effecting registration of transfer in their favour. It is an admitted position that the appellant has complied with all the mandatory requirements of Section 108 of the Companies Act. There is nothing on the record to indicate that these transfer deeds were filed for splitting the shares which is, no doubt, a consequence arising out of the. transfer of shares, The company has treated this request for registration of transfer of shares as a request for split and dealt under Article 24 of the articles of association and not as per Section 22A of the Securities Contracts (Regulation) Act. Therefore, the company erred in returning the four transfer deeds along with share certificate without effecting registration of transfer in favour of the appellants and this action tantamounts to refusal on the part of the company to effect registration of transfer of shares without following the procedure laid down under the provisions of the Securities Contracts (Regulation) Act, 1956. As per the provisions of Section 22A(3)(b) of the Securities Contracts (Regulation) Act, the company may refuse to register the transfer of any of its securities, if the certificate relating to the security is not delivered to the company, Every transfer form should be accompanied by a share certificate. In this case, instead of sending four certificates along with four transfer forms, only one certificate of five shares was enclosed. In this connection, the attention of the company was also drawn to the decision of the Allahabad High Court in Kumar Exporters (P.) Ltd. v. Naini Oxygen Acetylene, and Gas Ltd. [1985] 58 Comp Cas 97 in which it was held (at page 101) "the intention of holding Section 108 to be mandatory is only to the extent that the company must have before it the share transfer form duly executed and stamped along with the share transfer certificate, but it cannot be interpreted to mean that even when a share certificate is there, though for a larger amount, there is non-compliance with Section 108. The larger share certificate includes the shares sought to be transferred and, as such, there would be full compliance with Section 108 if an application for transfer of a smaller number of shares is accompanied by a share certificate relating to a larger number of shares. Further, Section 112 lays down the procedure for certification of transfers. Certification, in effect, means a statement by the company that certain documents have been delivered to the company for the purpose of transfer of shares. It is a kind of receipt. It is a representation by the company to any person acting on the faith of such certificate that the documents show a prima facie title to the shares in the transferor's name in the instrument of transfer. This provision has been made to facilitate the sale of smaller number of shares in case the share certificate is for a larger number of shares. If Parliament contemplated that no transfer could be made unless the share certificate was split up, it was not necessary to make any such provision as has been made in Section 112. Thus, there is no prohibition laid down in any section of the Companies Act that a party cannot apply for transfer along with a certificate for larger shares unless sub-division is made earlier. The mere fact that the certificate was not sub-divided earlier, did not take away the power of the company to record the transfers sought by the petitioner". It was pointed out that as per the provisions of Section 108, every transfer form is required to be accompanied by a share certificate. In this case, the appellants have lodged four transfer forms along with one share certificate. In the context of the decision of the Allahabad High Court mentioned above, the company ought to have registered the first transfer form considered by the board of directors, as it had fulfilled all the mandatory provisions of Section 108 and registered that transfer and for the remaining transfer deeds as there was no share certificate along with the transfer forms and returned the transfer forms to the appellants for complying with the provisions of Section

108. It is quite clear that there is no prohibition under the Companies Act or any other Act for holding share certificates below market lot. The provisions of the law will override the provisions of the articles of association or of the listing agreement. In the circumstances, the plea taken by the company is contrary to the provisions of Section 23A of the Securities Contracts (Regulation) Act and as such, the same cannot be accepted.

4. In view of the foregoing, we direct that pursuant to the provisions of Section 111 of the Companies Act, 1956, the company ought to have registered the transfer effected in one of the four transfer deeds which was first considered by the company and we direct that the company will register the transfer of shares in the transfer form first considered by the board of directors within 10 days from the date of receipt of this order.

Transfer of shares and debentures
108. TRANSFER NOT TO BE REGISTERED EXCEPT ON PRODUCTION OF INSTRU-MENT OF TRANSFER
(1) A company shall not register a transfer of shares in, or debentures of, the company, 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 and
specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with
Page 68 of 332
the certificate relating to the shares or debentures, or if no such certificate is in existence, along with the letter of
allotment of the shares or debentures :
Provided that where, on an application in writing made to the company by the transferee and bearing the stamp
required for an instrument of transfer, it is proved to the satisfaction of the Board of directors that the instrument of
transfer signed by or on behalf of the transferor and by or on behalf of the transferee has been lost, the company may
register the transfer on such terms as to indemnity as the Board may think fit :
Provided further that nothing in this section shall prejudice any power of the company to register as shareholder or
debenture holder any person to whom the right to any shares in, or debentures of, the company has been transmitted
by operation of law.
(1A) Every instrument of transfer of shares shall be in such form as may be prescribed, and -
(a) every such form shall, before it is signed by or on behalf of the transferor and before any entry is made therein, be
presented to the prescribed authority, being a person already in the service of the Government, who shall stamp or
otherwise endorse thereon the date on which it is so presented, and
(b) every instrument of transfer in the prescribed form with the date of such presentation stamped or otherwise
endorsed thereon shall, after it is executed by or on behalf of the transferor and the transferee and completed in all
other respects, be delivered to the company, -
(i) in the case of shares dealt in or quoted on a recognised stock exchange, at any time before the date on which the
register of members is closed, in accordance with law, for the first time after the date of the presentation of the
prescribed form to the prescribed authority under clause (a) or within 1[twelve] months from the date of such
presentation, whichever is later ;
(ii) in any other case, presentation within two months from the date of such presentation.
(1B) Notwithstanding anything contained in sub-section (1A), an instrument of transfer of shares, executed before the
commencement of section 13 of the Companies (Amendment) Act, 1965 (31 of 1965), or executed after such
commencement in a form other than the prescribed form, shall be accepted by a company, -
(a) in the case of shares dealt in or quoted on a recognised stock exchange, at any time not later than the expiry of six
months from such commencement or the date on which the register of members is closed, in accordance with law, for
the first time after such commencement whichever is later ;
(b) in any other case, at any time not later than the expiry of six months from such commencement.
(1C) Nothing contained in sub-sections (1A) and (1B) shall apply to -
(A) any share -
(i) which is held by a company in any other body corporate in the name of a director or nominee in pursuance of subsection
(2), or as the case may be, sub-section (3), of section 49, or
(ii) which is held by a corporation, owned or controlled by the Central Government or a State Government, in any other
body corporate in the name of a director or nominee, or
(iii) in respect of which a declaration has been made to the Public Trustee under section 153B,
if-
(1) the company or corporation, as the case may be, stamps or otherwise endorses, on the form of transfer in respect
of such share, the date on which it decides that such share shall not be held in the name of the said director or
nominee or, as the case may be, in the case of any share in respect of which any such declaration has been made to
the Public Trustee, the Public Trustee stamps or otherwise endorses, on the form of transfer in respect of such share
under his seal, the date on which the form is presented to him, and
(2) the instrument of transfer in such form duly completed in all respects, is delivered to the -
(a) body corporate in whose share such company or corporation has made investment in the name of its director or
nominee, or
(b) company in which such share is held in trust, within two months of the date so stamped or otherwise endorsed ; or
(B) any share deposited by any person with -
(i) the State Bank of India, or
(ii) any scheduled bank, or
(iii) any banking company (other than a scheduled bank) or financial institution approved by the Central Government
by notification in the Official Gazette (and any such approval may be accorded so as to be retrospective to any date
not earlier than the 1st day of April, 1966), or
(iv) the Central Government or a State Government or any corporation owned or controlled by the Central
Government or a State Government,
by way of security for the repayment of any loan or advance to, or for the performance of any obligation undertaken
by, such person, if -
(1) the bank, institution, Government or corporation, as the case may be, stamps or otherwise endorses on the form of
transfer of such share -
(a) the date on which such share is returned by it to the depositor, or
(b) in the case of failure on the part of the depositor to repay the loan or advance or to perform the obligation, the date
on which such share is released for sale by such bank, institution, Government or corporation, as the case may be, or
(c) where the bank, institution, Government or corporation, as the case may be, intends to get such share registered in
its own name, the date on which the instrument of transfer relating to such share is executed by it ; and
(2) the instrument of transfer in such form, duly completed in all respects, is delivered to the company within two
months from the date so stamped or endorsed.
Explanation. - Where any investment by a company or a corporation in the name of its director or nominee referred to
in clause (A)(i) or clause (A)(ii), or any declaration referred to in clause (A)(iii), or any deposit referred to in clause (B)
Page 69 of 332
of this sub- section is made after the expiry of the period or date mentioned in clause (a) of sub-section (1B) or after
the expiry of the period mentioned in clause (b) of that sub-section, as the case may be, the form of transfer, in
respect of the share which is the subject of such investment, declaration or deposit, means the prescribed form ; or
(C) any share which is held in any company by the Central Government or a State Government in the name of its
nominee, except that every instrument of transfer which is executed on or after the 1st day of October, 1966, in
respect of any such share shall be in the prescribed form.
(1D) Notwithstanding anything in sub-section (1A) or sub-section (1B) or sub-section (1C), where in the opinion of the
Central Government it is necessary so to do to avoid hardship in any case, that Government may on an application
made to it in that behalf, extend the periods mentioned in those sub-sections by such further time as it may deem fit
whether such application is made before or after the expiry of the periods aforesaid ; and the number of extensions
granted hereunder and the period of each such extension shall be shown in the annual report laid before the Houses
of Parliament under section 638.
(2) In the case of a company having no share capital, sub-section (1) shall apply as if the references therein to shares
were references instead to the interest of the member in the company.
1[(3) Nothing contained in this section shall apply to transfer of a security effected by the transferor and the transferee
both of whom are entered as beneficial owners in the records of a depository.]
1. Substituted for "two" by the Companies (Amendment) Act, 1988 w.e.f. 15-6-1988.
2. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
1[108A. RESTRICTION ON ACQUISITION OF CERTAIN SHARES
(1) Except with the previous approval of the Central Government, no individual, firm, group, constituent of a group,
body corporate or bodies corporate under the same management, shall jointly or severally acquire or agree to acquire,
whether in his or its own name or in the name of any other person, any equity shares in a public company, or a private
company which is a subsidiary of a public company, if the total nominal value of the equity shares intended to be so
acquired exceeds, or would, together with the total nominal value of any equity shares already held in the company by
such individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management,
exceed twenty-five per cent of the paid-up equity share capital of such company.
(2) Where any individual, firm, group, constituent of a group, body corporate or bodies corporate under the same
management (hereafter in this Act referred to as the acquirer), is prohibited by sub-section (1), from acquiring or
agreeing to acquire except with the previous approval of the Central Government, any share of a public company or a
private company which is a subsidiary of a public company, no -
(a) company in which not less than fifty-one per cent of the share capital is held by the Central Government ; or
(b) corporation (not being a company) established by or under any Central Act ; or
(c) financial institution,
shall transfer or agree to transfer any share to such acquirer unless such acquirer has obtained the previous approval
of the Central Government for the acquisition, or agreement for the acquisition, of such share.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
1[108B. RESTRICTION ON TRANSFER OF SHARES
(1) Every body corporate or bodies corporate under the same management holding whether singly or in the
aggregate, ten per cent or more of the nominal value of the subscribed equity share capital of any other company
shall, before transferring one or more of such shares, give to the Central Government an intimation of its or their
proposal to transfer such share, and every such intimation shall include a statement to the particulars of the share
proposed to be transferred, the name and address of the person to whom the share is proposed to be transferred, and
shareholding, if any, of the proposed transferee in the concerned company and such other particulars as may be
prescribed.
(2) Where, on receipt of an intimation given under sub-section (1) or otherwise, the Central Government is satisfied
that as a result of such transfer, a change in the composition of the Board of directors of the company is likely to take
place and that such change would be prejudicial to the interests of the company or to the public interest, it may, by
order, direct that -
(a) no such share shall be transferred to the proposed transferee :
Provided that no such order shall preclude the body corporate or bodies corporate from intimating, in accordance with
the provisions of sub-section (1), to the Central Government its or their proposal to transfer the share to any other
person, or
(b) where such share is held in a company engaged in any industry specified in Schedule XV, such share shall be
transferred to the Central Government or to such corporation owned or controlled by that Government as may be
specified in the direction.
(3) Where a direction is made by the Central Government under clause (b) of sub-section (2), the share referred to in
such direction shall stand transferred to the Central Government or to the corporation specified therein, and the
Central Government or the specified corporation, as the case may be, shall pay, in cash, to the body corporate or
bodies corporate from which such share stands transferred, an amount equal to the market value of such share within
the time specified in sub-section (4).
Explanation. - In this sub-section, "market value" means, in the case of a share which is quoted on any recognised
stock exchange, the value quoted at such stock exchange on the date immediately preceding the date on which the
direction is made, and, in any other case, such value as may be mutually agreed upon between the holder of the
Page 70 of 332
share and the Central Government or the specified corporation, as the case may be, or in the absence of such
agreement, as may be determined by the Court.
(4) The market value referred to in sub-section (3) shall be given forthwith, where there is no dispute as to such value
or where such value has been mutually agreed upon, but where there is a dispute as to the market value, such value
as is estimated by the Central Government or the corporation, as the case may be, shall be given forthwith and the
balance, if any, shall be given within thirty days from the date when the market value is determined by the court.
(5) If the Central Government does not make any direction under sub-section (2) within sixty days from the date of
receipt by it of the intimation given under sub-section (1), the provisions contained in sub-section (2) with regard to the
transfer of such share shall not apply.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
1[108C. RESTRICTION ON THE TRANSFER OF SHARES OF FOREIGN COMPANIES
No body corporate or bodies corporate under the same management, which holds, or hold in the aggregate, ten per
cent or more of the nominal value of the equity share capital of a foreign company, having an established place of
business in India, shall transfer any share in such foreign company to any citizen of India or any body corporate
incorporated in India except with the previous approval of the Central Government and such previous approval shall
not be refused unless the Central Government is of opinion that such transfer would be prejudicial to the public
interest].
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
1[108D. POWER OF CENTRAL GOVERNMENT TO DIRECT COMPANIES NOT TO GIVE EFFECT TO THE
TRANSFER
(1) Where the Central Government is satisfied that as a result of the transfer of any share or block of shares of a
company, a change in the controlling interest of the company is likely to take place and that such change would be
prejudicial to the interests of the company or to the public interest, that Government may direct the company not to
give effect to the transfer of any such share or block of shares, and -
(a) where the transfer of such share or block of shares has already been registered, not to permit the transferee or any
nominee or proxy of the transferee, to exercise any voting or other rights attaching to such share or block of shares ;
and
(b) where the transfer of such share or block of shares has not been registered, not to permit any nominee or proxy of
the transferor to exercise any voting or other rights attaching to such share or block of shares.
(2) Where any direction is given by the Central Government under sub-section (1) the share or the block of shares
referred to therein shall stand re-transferred to the person from whom it was acquired, and thereupon the amount paid
by the transferee for the acquisition of such share or block of shares shall be refunded to him by the person to whom
such share or block of shares stands or stand re-transferred.
(3) If the refund referred to in sub-section (2) is not made within the period of thirty days from the date of the direction
referred to in sub-section (1), the Central Government shall, on the application of the person entitled to get the refund,
direct, by order, the refund of such amount and such order may be enforced as if it were a decree made by a civil
court.
(4) The person to whom any share or block of shares stands or stand retransferred under sub-section (2) shall, on
making refund under sub-section (2) or sub-section (3), be eligible to exercise voting or rights attaching to such share
or block of shares.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
1[108E. TIME WITHIN WHICH REFUSAL TO BE COMMUNICATED
Every request made to the Central Government for according its approval to the proposal for the acquisition of any
share referred to in section 108A or the transfer of any share referred to in section 108C shall be presumed to have
been granted unless, within a period of sixty days from the date of receipt of such request, the Central Government
communicates to the person by whom the request was made, that the approval prayed for cannot be granted.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
1[108F. NOTHING IN SECTIONS 108A TO 108D TO APPLY TO GOVERNMENT COMPANIES, ETC
Nothing contained in section 108A [except sub-section (2) thereof] shall apply to the transfer of any share to, and
nothing in section 108B or section 108C or section 108D shall apply to the transfer of any share by -
(a) any company in which not less than fifty-one per cent of the share capital is held by the Central Government ;
(b) any corporation (not being a company) established by or under any Central Act ;
(c) any financial institution.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
1[108G. APPLICABILITY OF THE PROVISIONS OF SECTIONS 108A TO 108F
The provisions of sections 108A to 108F (both inclusive) shall apply to the acquisition or transfer of shares or share
capital by, or to, an individual, firm, group, constituent of a group, body corporate or bodies corporate under the same
management, who or which -
(a) is, in case of acquisition of shares or share capital, the owner in relation to a dominant undertaking and there
would be, as a result of such acquisition, any increase -
Page 71 of 332
(i) in the production, supply, distribution or control of any goods that are produced, supplied, distributed or controlled in
India or any substantial part thereof by that dominant undertaking, or
(ii) in the provision or control of any services that are rendered in India or any substantial part thereof by that dominant
undertaking ; or
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
1[108H. CONSTRUCTION OF CERTAIN EXPRESSIONS USED IN SECTIONS 108A TO 108G
The expressions "group", "same management", "financial institution", "dominant undertaking" and "owner" used in
sections 108A to 108G (both inclusive), shall have the meanings respectively assigned to them in the Monopolies and
Restrictive Trade Practices Act, 1969 (54 of 1969)].
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
1[108I. PENALTY FOR ACQUISITION OR TRANSFER OF SHARE IN CONTRAVENTION OF SECTIONS 108A TO
108D
(1) Any person who acquires any share in contravention of the provisions of section 108A shall be punishable with
imprisonment for a term which may extend to three years, or with fine which may extend to 2[fifty] thousand rupees, or
with both.
(2) (a) Every body corporate which makes any transfer of shares without giving any intimation as required by section
108B, shall be punishable with fine which may extend to 2[fifty] thousand rupees.
(b) Where any contravention of the provisions of section 108B, has been made by a company, every officer of the
company who is in default shall be punishable with imprisonment for a term which may extend to three years, or with
fine which may extend to 2[fifty] thousand rupees, or with both.
(3)(a) Every body corporate which makes any transfer of shares in
contravention of the provisions of section 108C, shall be punishable with fine which may extend to 2[fifty] thousand
rupees.
(b) Where any contravention of the provisions of section 108C has been made by a company, every officer of the
company who is in default shall be punishable with imprisonment for a term which may extend to three years, or with
fine which may extend to 2[fifty] thousand rupees, or with both.
(4)(a) Every person who transfers any share in contravention of any order made by the Central Government under
section 108B, or gives effect to any transfer of shares made in contravention of any direction made by the Central
Government under section 108D, or who exercises any voting right in respect of any share in contravention of any
direction made by the Central Government under section 108D, shall be punishable with imprisonment for a term
which may extend to five years, and shall also be liable to fine.
(b) If any company gives effect to any voting or other right exercised in relation to any share acquired in contravention
of the provisions of section 108B, or which gives effect to any voting right in contravention of any direction made by
the Central Government under section 108D, the company shall be punishable with fine which may extend to 2[fifty]
thousand rupees, and every officer of the company who is in default shall be punishable with imprisonment for a term
which may extend to three years, or with fine which may extend to 2[fifty] thousand rupees, or with both.]
1. Inserted by the MRTP (Amendment) Act, 1991 w.r.e.f. 27-9-1991.
2. Substituted for "five" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
** Vide MCA Circular No. 30/2011 dated 23.05.2011 Secs. 108A to 108I have become redundant and will have
no legal force.
109. TRANSFER BY LEGAL REPRESENTATIVE
A transfer of the share or other interest in a company of a deceased member thereof made by his legal representative
shall, although the legal representative is not himself a member, be as valid as if he had been a member at the time of
the execution of the instrument of transfer.
1[109A NOMINATION OF SHARES
(1) Every holder of shares in, or holder of debentures of, a company may, at any time, nominate, in the prescribed
manner, a person to whom his shares in, or debentures of, the company shall vest in the event of his death.
(2) Where the shares in, or debentures of, a company are held by more than one person jointly, the joint holders may
together nominate, in the prescribed manner, a person to whom all the rights in the shares or debentures of the
company shall vest in the event of death of all the joint holders.
(3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether
testamentary or otherwise, in respect of such shares in, or debentures of, the company, where a nomination made in
the prescribed manner purports to confer on any person the right to vest the shares in, or debentures of, the company,
the nominee shall, on the death of the shareholder or holder of debentures of, the company or, as the case may be,
on the death of the joint holders becomes entitled to all the rights in the shares or debentures of the company or, as
the case may be, all the joint holders, in relation to such shares in, or debentures of, the company to the exclusion of
all other persons, unless the nomination is varied or cancelled in the prescribed manner.
(4) Where the nominee is a minor, it shall be lawful for the holder of the shares, or holder of debentures, to make the
nomination to appoint, in the prescribed manner, any person to become entitled to shares in, or debentures of, the
company, in the event of his death, during the minority.]
1. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
Page 72 of 332
1[109B. TRANSMISSION OF SHARES
(1) Any person who becomes a nominee by virtue of the provisions of section 109A, upon the production of such
evidence as may be required by the Board and subject as hereinafter provided, elect, either -
(a) to be registered himself as holder of the share or debenture, as the case may be ; or
(b) to make such transfer of the share or debenture, as the case may be, as the deceased shareholder or debenture
holder, as the case may be, could have made.
(2) If the person being a nominee, so becoming entitled, elects to be registered as holder of the share or debenture,
himself, as the case may be, he shall deliver or send to the company a notice in writing signed by him stating that he
so elects and such notice shall be accompanied with the death certificate of the deceased shareholder or debenture
holder, as the case may be.
(3) All the limitations, restrictions and provisions of this Act relating to the right to transfer and the registration of
transfers of shares or debentures shall be applicable to any such notice or transfer as aforesaid as if the death of the
member had not occurred and the notice or transfer were a transfer signed by that shareholder or debenture holder,
as the case may be.
(4) A person, being a nominee, becoming entitled to a share or debenture by reason of the death of the holder shall be
entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of
the share or debenture except that he shall not, before being registered a member in respect of his share or
debenture, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the
company :
Provided that the Board may, at any time, give notice requiring any such person to elect either to be registered
himself or to transfer the share or debenture, and if the notice is not complied with within ninety days, the Board may
thereafter withhold payment of all dividends, bonuses or other moneys payable in respect of the share or debenture,
until the requirements of the notice have been complied with.]
1. Inserted by the Companies (Amendment) Act, 1999 w.r.e.f. 31-10-1998.
110. APPLICATION FOR TRANSFER
(1) An application for the registration of a transfer of the shares or other interest of a member in a company may be
made either by the transferor or by the transferee.
(2) Where the application is made by the transferor and relates to partly paid shares, the transfer shall not be
registered, unless the company gives notice of the application to the transferee and the transferee makes no objection
to the transfer within two weeks from the receipt of the notice.
(3) For the purposes of sub-section (2), notice to the transferee shall be deemed to have been duly given if it is
despatched by prepaid registered post to the transferee at the address given in the instrument of transfer, and shall be
deemed to have been duly delivered at the time at which it would have been delivered in the ordinary course of post.
1[111. POWER TO REFUSE REGISTRATION AND APPEAL AGAINST REFUSAL
(1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register
the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or
debentures of the company, it shall, within two months from the date on which the instrument of transfer, or the
intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the
transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving
reasons for such refusal.
(2) The transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case
may be, may appeal to the 2[Tribunal] against any refusal of the company to register the transfer or transmission, or
against any failure on its part within the period referred to in sub-section (1), either to register the transfer or
transmission or to send notice of its refusal to register the same.
(3) An appeal under sub-section (2) shall be made within two months of the receipt of the notice of such refusal or,
where no notice has been sent by the company, within four months from the date on which the instrument of transfer,
or the intimation of transmission, as the case may be, was delivered to the company.
(4) If -
(a) the name of any person -
(i) is, without sufficient cause, entered in the register of members of a company, or
(ii) after having been entered in the register, is without sufficient cause omitted therefrom ; or
(b) default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become
or ceased to be, a member [including a refusal under sub-section (1)],
the person aggrieved, or any member of the company, or the company, may apply to the 2[Tribunal] for rectification of
the register.
(5) The 2[Tribunal], while dealing with an appeal preferred under sub- section (2) or an application made under subsection
(4) may, after hearing the parties, either dismiss the appeal or reject the application, or by order -
(a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such
order within ten days of the receipt of the order ; or
(b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party
aggrieved.
(6) The 3[Tribunal], while acting under sub-section (5), may, at its discretion, make -
(a) such interim orders, including any orders as to injunction or stay, as it may deem fit and just ;
(b) such orders as to costs as it thinks fit ; and
Page 73 of 332
(c) incidental or consequential orders regarding payment of dividend or the allotment of bonus or rights shares.
(7) On any application under this section, the 3[Tribunal] -
(a) may decide any question relating to the title of any person who is a party to the application to have his name
entered in, or omitted from, the register ;
(b) generally, may decide any question which it is necessary or expedient to decide in connection with the application
for rectification.
(8) The provisions of sub-sections (4) to (7) shall apply in relation to the rectification of the register of debenture
holders as they apply in relation to the rectification of the register of members.
(9) If default is made in giving effect to the orders of the 3[Tribunal] under this section, the company and every officer
of the company who is in default shall be punishable with fine which may extend to 4[ten] thousand rupees, and with a
further fine which may extend to 5[one thousand] rupees for every day after the first day after which the default
continues.
(10) Every appeal or application to the 3[Tribunal] under sub-section (2) or sub-section (4) shall be made by a petition
in writing and shall be accompanied by such fee as may be prescribed.
(11) In the case of a private company which is not a subsidiary of a public company, where the right to any shares or
interest of a member in, or debentures of, the company is transmitted by a sale thereof held by a Court or other public
authority, the provisions of sub-sections (4) to (7) shall apply as if the company were a public company :
Provided that the 6[Tribunal] 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 therefor or such other sum as the 6[Tribunal] may determine to be a reasonable compensation
for the right in all the circumstances of the case.
(12) If default is made in complying with any of the provisions of this section, the company, and every officer of the
company who is in default, shall be punishable with fine which may extend to 7[five hundred] rupees for every day
during which the default continues.
(13) Nothing in this section and section 108, 109 or 110 shall prejudice any power of a private company under its
articles to enforce the restrictions contained therein against the right to transfer the shares of such company].
8[(14) In this section "company" means a private company and includes a private company which had become a public
company by virtue of section 43A of this Act.]
1. Substituted by the Companies (Amendment) Act, 1988 w.e.f. 31-5-1991.
2. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet
to be notified).
3. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet
to be notified).
4. Substituted for "one" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
5. Substituted for "one hundred" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
6. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet
to be notified).
7. Substituted for "fifty" by the Companies (Amendment) Act, 2000 w.e.f. 13-12-2000.
8. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
1[111A. RECTIFICATION OF REGISTER ON TRANSFER
(1) In this section, unless the context otherwise requires, "company" means a company other than a company referred
to in sub-section (14) of section 111 of this Act.
(2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be
freely transferable :
2[Provided that if a company without sufficient cause refuses to register transfer of shares within two months from the
date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to the company,
the transferee may appeal to the 3[Tribunal] and it shall direct such company to register the transfer of shares].
4[(3) The 3[Tribunal] may, on an application made by a depository, company, participant or investor or the Securities
and Exchange Board of India, if the transfer of shares or debentures is in contravention of any of the provisions of the
Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial
Companies (Special Provisions) Act, 1985 (1 of 1986), or any other law for the time being in force, within two months
from the date of transfer of any shares or debentures 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, after such inquiry as
it thinks fit, direct any depository or company to rectify its register or records].
(4) The 5[Tribunal] while acting under sub-section (3), may at its discretion make such interim order as to suspend the
voting rights before making or completing such enquiry.
(5) The provisions of this section shall not restrict the right of a holder of shares or debentures, to transfer such shares
or debentures and any person acquiring such shares or debentures shall be entitled to voting rights unless the voting
rights have been suspended by an order of the 5[Tribunal].
(6) Notwithstanding anything contained in this section, any further transfer, during the pendency of the application with
the 5[Tribunal], of shares or debentures shall entitle the transferee to voting rights unless the voting rights in respect of
such transferee have also been suspended.
(7) The provisions of sub-sections (5), (7), (9), (10) and (12) of section 111 shall, so far as may be, apply to the
proceedings before the 1[Tribunal] under this section as they apply to the proceedings under that section].
Page 74 of 332
1. Inserted by the Depositories Act, 1996 w.r.e.f. 20-9-1995.
2. Inserted by the Depositories Related Laws (Amendment) Act, 1997 w.e.f. 15-1-1997.
3. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet
to be notified).
4. Substituted by the Depositories Related Laws (Amendment) Act, 1997 w.e.f. 15-1-1997. Prior to substitution,
sub-section (3) read as under :
"(3) The company Law Board may on an application made by a depository, company, participant or investor or
the Securities and Exchange Board of India within two months from the date of transfer of any shares or
debentures held by a depository or from the date on which the instrument of transfer or the intimation of
transmission was delivered to the company, as the case may be, after such enquiry as it thinks fit, direct any
company or depository to rectify register or records if the transfer of the shares or debentures is in
contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or
regulations made thereunder or the sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)."
5. Substituted for "Company Law Board" by the Companies (Second Amendment) Act, 2002 (w.e.f. a date yet
to be notified).
112. CERTIFICATION OF TRANSFERS
(1) The certification by a company of any instrument of transfer of shares in, or debentures of, the company, shall be
taken as a representation by the company to any person acting on the faith of the certification that there have been
produced to the company such documents as on the face of them show a prima facie title to the shares or debentures
in the transferor named in the instrument of transfer, but not as a representation that the transferor has any title to the
shares or debentures.
(2) Where any person acts on the faith of an erroneous certification made by a company negligently, the company
shall be under the same liability to him as if the certification had been made fraudulently.
(3) For the purposes of this section -
(a) an instrument of transfer shall be deemed to be certificated if it bears the words "certificate lodged" or words to the
like effect ;
(b) the certification of an instrument of transfer shall be deemed to be made by a company, if -
(i) the person issuing the certificated instrument is a person authorised to issue such instruments of transfer on the
company's behalf ; and
(ii) the certification signed by any officer or servant of the company or any other person, authorised to certificate
transfers on the company's behalf, or if a body corporate has been so authorised, by any officer or servant of that
body corporate ;
(c) a certification shall be deemed to be signed by any person, if it purports to be authenticated by his signature unless
it is shown that the signature was placed there neither by himself nor by any person authorised to use the signature
for the purpose of certificating transfers on the company's behalf.
113. LIMITATION OF TIME FOR ISSUE OF CERTIFICATES
(1) 1[Every company, unless prohibited by any provision of law or of any order of any court, tribunal or other authority,
shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within two
months after the application for the registration of the transfer of any such shares, debentures or debenture stock,
deliver, in accordance with the procedure laid down in section 53, the certificates of all shares, debentures and
certificates of debenture stocks allotted or transferred :
Provided that the 2[Central Government] may, on an application being made to it in this behalf by the company,
extend any of the periods within which the certificates of all debentures and debenture stocks allotted or transferred
shall be delivered under this sub-section, to a further period not exceeding nine months, if it is satisfied that it is not
possible for the company to deliver such certificates within the said periods].
The expression "transfer", for the purposes of this sub-section, means a transfer duly stamped and otherwise valid,
and does not include any transfer which the company is for any reason entitled to refuse to register and does not
register.
(2) If default is made in complying with sub-section (1), the company, and every officer of the company who is in
default, shall be punishable with fine which may extend to 3[five thousand] rupees for every day during which the
default continues.
(3) If any company on which a notice has been served requiring it to make good any default in complying with the
provisions of sub-section (1), fails to make good the default within ten days after the service of the notice, the 2[Central
Government] may, on the application of the person entitled to have the certificates or the

Section 111(9) in The Companies Act, 1956

(9) If default is made in giving effect to the orders of the Company Law Board under this section, the company and every officer of the company who is in default shall be punishable with fine which may extend to one thousand rupees, and with a further fine which may extend to one hundred rupees for every day after the first day after which the default continues.

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

ORDER  PASSED BY THE HIGH COURT IN THE CASE OF :-

ATUL PRODUCTS LIMITED
3rd floor , Asoka  Chambers,
Near Mithakhali Six Cross Roads,
Ellisbridge , Ahmedabad -6                   Applicant
                                                               appellant
                                                               respondent

V/s

Shah Dipakkumar Jayantilal Shah
Hindu, Adult ,residing at
Sagar Mansion, 3rd Floor, Above Sagar Transport Company,
Mirghawad,
Panchkuva, Ahmedabad 380001                                                               Opponent
                                                                                                                  respondent
                                                                                                                 appellant      

IN THE CIVIL APPLICATION NO 4751/92

IN

FIRST APPEAL NO 2272 /92

Mr. A . C . Gandhi  Advocate for Appellant

Mr. Dipakkumar Jayantilal Shah ( Party In Person)

COURT'S ORDER :-

" Having heard Mr. Gandhi , LA for the Appellant and Mr. Deepakkumar Shah , the respondent , Party - In Person , I think , the ad- interim relief granted earlier deserved to be continued as interim relief pending the hearing and disposal of the First Appeal . Rule is made absolute accordingly"

Dt. : 28.1/93                                                                                     Sd/-

                                                                                            ( K . G . Shah . J)

                                                                                               True Copy 

Gujarat High Court

V.M. Modi vs State Of Gujarat And Anr. on 22 February, 1995

Equivalent citations: 1997 88 CompCas 871 Guj

Author: J Panchal

Bench: J Panchal

JUDGMENT

J.M. Panchal, J.

1. By means of filing this application under section 482 of the Criminal Procedure Code, 1973, the petitioner who is the original accused has prayed to quash Criminal Case No. 760 of 1994 instituted in the court of the learned Additional Chief Metropolitan Magistrate, Ahmedabad, by respondent No. 2 regarding the alleged commission of offence punishable under section 621A of the Companies Act, 1956.

2. One Mrs. Pushpaben Sumantrai Nayak holds five equity shares of Rs. 10 each of Atul Products Ltd. jointly with her husband, Mr. Sumantrai Gopalji Nayak. On November 30, 1990. Mrs. Pushpaben executed four deeds for transferring one equity share each in favour of :

A. (1) Pushpaben Sumantrai Nayak herself, (2) Sumantrai Gopalji Nayak, (3) Dipak Jayantilal Shah,

B. (1) Pushpaben Sumantrai Nayak, (2) Dipak Jayantilal Shah, (3) Sumantrai Gopalji Nayak,

C. (1) Pushpaben Sumantrai Nayak, (2) Dipika Ramanlal Shah, (3) Sumantrai Gopalji Nayak, and

D. (1) Pushpaben Sumantrai Nayak, (2) Dipika Ramanlal Shah, (3) Sumantrai Gopalji Nayak.

Pushpaben Sumantrai Nayak retained one share with her. The transfer deeds were lodged with Atul Products Limited by respondent No. 2 on December 5, 1990, along with one share certificate No. 7407.

3. Atul Products Limited returned the said share certificate and four transfer deeds, vide letter dated December 5, 1990, to respondent No. 2, as the intended transfer amounted to splitting of the share certificate and it was not in consonance with article 24 of the articles of association of the company.

4. Feeling aggrieved by the action of the company, respondent No. 2 preferred Appeal No. 42(iii) CLB/WR/1990, before the Company Law Board (Western Region Bench), Bombay, under the provisions of section 111 of the Companies Act, 1956. The Company Law Board passed an order dated September 18, 1992 [See Dipakkumar Jayantilal Shah v. Atul Products Ltd. [1995] 82 Comp Cas 603 (CLB)], directing Atul Products Limited, to register the transfer. The said order dated September 18, 1992, was sent by the Company Law Board, vide its letter dated September 25, 1992, which was received by Atul Products Limited on September 30, 1992.

5. Being aggrieved by the order of the Company Law Board, Atul Products Limited, preferred First Appeal No. 2272 of 1992 on November 20, 1992, before the High Court under the provisions of section 10F read with section 10 of the Companies Act, 1956. The company also filed Civil Application No. 4751 of 1992 for stay. The court passed the following order on November 24, 1992 :

"Rule returnable on December 15, 1992. In the meantime, there shall be ad interim stay in terms of para 4(A) of the civil application".

Paragraph 4(A) of the civil application is as under :

"Pending the hearing admission and final disposal of the accompanying first appeal your Lordships may be pleased to stay the operation, execution and implementation of the order dated September 18, 1992 [See Dipakkumar Jayantilal Shah v. Atul Products Ltd. [1995] 82 Comp Cas 603 (CLB)], passed by the Company Law Board, Western Region, Bombay."

Thereafter, the following order was passed on December 28, 1992 :

"S.O. to January 20, 1993. Ad interim relief as granted earlier till further orders."

On January 28, 1993, the High Court, after hearing learned counsel for Atul Products Ltd. and respondent No. 2, passed the following order :

"Having heard Mr. Gandhi, learned advocate, for the appellant and Mr. Deepakkumar Shah, the respondent, party-in-person, I think, the ad interim relief granted earlier deserves to be continued as interim relief pending the hearing and disposal of the first appeal. Rule is made absolute accordingly."

Thereafter, respondent No. 2 filed a complaint on December 2, 1994, against the petitioner and others for the alleged commission of offence punishable under section 621A of the Companies Act, 1956, on the plea that the order dated September 18, 1992, passed by the Company Law Board, Western Region, Bombay, was not complied with.

6. The learned magistrate executed the evidence warrant against the petitioner and others giving rise to the present application.

7. I have heard learned counsel for the petitioner as well as respondent No. 2 who has appeared in person.

8. Section 621 of the Companies Act provides that no court shall take cognizance of any offence under this Act which is alleged to have been committed by any company or any officer thereof except on the complaint in writing of the Registrar or of a shareholder of the company or of a person authorised by the Central Government in that behalf. In the complaint, the respondent has nowhere averred that he is a shareholder of Atul Products Ltd. The complaint has not been filed by the Registrar nor by a person authorised by the Central Government in that behalf. In view of the bar created by section 621 of the Companies Act, 1956, the learned magistrate was not justified in taking cognizance of the offence alleged to have been committed by the petitioner in the complaint. Therefore, the relief prayed for in the petition deserved to be granted, as the complaint suffers from a fundamental legal defect, namely, absence of complaint by legally competent authority or person.

9. As noted earlier, the High Court has stayed the operation, execution and implementation of order dated September 18, 1992, passed by the Company Law Board, Western Region Bench, Bombay. The validity of the order passed by the Company Law Board is yet to be decided by the High Court in First Appeal No. 2272 of 1992 [See page 876 infra]. The operation, execution and implementation of the order dated September 18, 1992, passed by the Company Law Board, Western Region Bench, Bombay, was stayed by the High Court, vide order dated January 28, 1993, in Civil Application No. 4751 of 1992 after hearing respondent No. 2. The fact that the operation, execution and implementation of the order dated September 18, 1992, passed by the Company Law Board, Western Region, Bombay, is stayed was never brought to the notice of the learned magistrate by respondent No. 2.

10. Reading the complaint, it is evident that the fact that the order passed by the Company Law Board is stayed by the High Court is suppressed by respondent No. 2. Even in his statement which was recorded by the learned magistrate on oath, respondent No. 2 has not referred to the stay granted by the High Court. The respondent has thus abused the process of law and obtained orders from the learned magistrate without disclosing true facts. This indicates that the complaint filed by respondent No. 2 is vexatious and malicious and is filed with an oblique motive.

11. It is well settled that where a criminal proceeding is manifestly attended with mala files and/or where the proceeding is maliciously instituted with ulterior motive for wreaking vengeance on the accused and with a view to splitting, then the proceedings are liable to be quashed. There is no manner of doubt that respondent No. 2 has abused the process of law.

12. For the foregoing reasons, the application succeeds. Criminal Case No. 760 of 1994, filed in the court of the learned Additional Chief Metropolitan Magistrate, Ahmedabad, by respondent No. 2 for the alleged commission of offence punishable under section 621A of the Companies Act, 1956, is hereby quashed. Rule is made absolute as indicated hereinabove.

CR.MA/9684/2005 1/7 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION No. 9684 of 2005
In
CRIMINAL MISC.APPLICATION No. 5639 of 1994
With
CRIMINAL MISC.APPLICATION No. 9685 of 2005
In
CRIMINAL MISC.APPLICATION No. 5639 of 1994
==============================================================
DIPAKKUMAR JAYANTILAL SHAH - Applicant
Versus
STATE OF GUJARAT & 1 - Respondents
==============================================================
Appearance :
PARTY-IN-PERSON for Applicant.
MR ND GOHIL, A.P.P.for State- Respondent nO. 1,
None for Respondent(s) : 2,
==================================================================
CORAM : HONOURABLE MR.JUSTICE J.M.PANCHAL
Date : 31/08/2005
ORAL ORDER
By filing instant application under Section 5 of
the Limitation Act, 1963, the applicant i.e.Mr.Dipakkumar
Jayantilal Shah, has prayed to condone delay of ten years
and six months caused in filing Misc.Criminal Application
No.9685 of 2005, which is filed for review of judgment
dated February 22, 1995 rendered by this Court in case of
Mr.V.M.Modi v. State of Gujarat and another, by which
Criminal Case No. 760 of 1994 filed by the applicant in
the Court of learned Additional Chief Metropolitan
CRIMINAL MISC.APPLICATION/9684/2005 11/09/2012 02:36:23 AM
CR.MA/9684/2005 2/7 ORDER
Magistrate, Ahmedabad, against the respondent No.2 herein
i.e. Mr.V.M.Modi, for alleged commission of offence
punishable under Section 621A of the Companies Act, 1956
came to be quashed.
2. The applicant filed a complaint on December 2,
1994 against Mr.V.M.Modi and others for alleged
commission of offence punishable under Section 621A of
the Companies Act, 1956 on the plea that order dated
September 18, 1992 passed by the Company Law Board,
Western Region, Bombay was not complied with. The learned
Magistrate issued warrants against Mr.V.M.Modi and
others. Therefore, Mr.V.M.Modi filed Misc.Criminal
Application No.5639 of 1994 to quash the complaint filed
by the applicant. After hearing Mr.S.V.Raju, learned
counsel who appeared for Mr.V.M.Modi and Mr.Y.F.Mehta,
learned counsel who appeared on behalf of original
respondent No.1, the Court quashed the complaint by
judgment dated February 22, 1995. Following are the
observations made by the Court while quashing the
complaint :
"Section 621 of the Companies Act
provides that no Court shall take cognizance of
any offence under this Act, which is alleged to
have been committed by any Company or any
CRIMINAL MISC.APPLICATION/9684/2005 11/09/2012 02:36:23 AM
CR.MA/9684/2005 3/7 ORDER
officer thereof except on the complaint in
writing of the Registrar or of a shareholder of
the Company or of a person authorised by the
Central Government in that behalf. In the
complaint, the respondent has nowhere averred
that he is a shareholder of Atul Products Ltd.
The complaint has not been filed by the
Registrar nor by a person authorised by the
Central Government in that behalf. In view of
the bar created by section 621 of the Companies
Act, 1956, the learned Magistrate was not
justified in taking cognizance of the offence
alleged to have been committed by the petitioner
in the complaint. Therefore, the relief prayed
for in the petition deserved to be granted, as
the complaint suffers from a fundamental legal
defect, namely, absence of complaint by legally
competent authority or person.
As noted earlier, the High Court has stayed
the operation, execution and implementation of
order dated September 18, 1992, passed by the
Company Law Board, Western Region, Bombay. The
validity of the order passed by the Company Law
Board is yet to be decided by the High Court in
First Appeal No.2272 of 1992". The operation,
execution and implementation of the order dated
September 18, 1992, passed by the Company Law
Board, Western Region Bench, Bombay, was stayed
by the High Court vide order dated January 28,
1993, in Civil Application No.4751 of 1992 after
hearing respondent No.2. The fact that the
operation, execution and implementation of the
order dated September 18, 1992, passed by the
company Law Board, Western Region, Bombay, is
stayed, was never brought to the notice of the
learned Magistrate by respondent No.2.
Reading the complaint, it is evident that
the fact that the order passed by the company
Law Board is stayed by the High Court is
suppressed by respondent No.2. Even in his
statement which was recorded by the learned
Magistrate on oath, respondent No.2 has not
referred to the stay granted by the High Court.
The respondent has thus abused the process of
law and obtained orders from the learned
Magistrate without disclosing true facts. This
CRIMINAL MISC.APPLICATION/9684/2005 11/09/2012 02:36:23 AM
CR.MA/9684/2005 4/7 ORDER
indicates that the complaint filed by respondent
No.2 is vexatious and malicious and is filed
with an oblique motive.
It is well settled that where a criminal
proceeding is manifestly attended with mala
fides and/or where the proceeding is maliciously
instituted with ulterior motive for wreaking
vengeance on the accused and with a view to
splitting, then the proceedings are liable to be
quashed. There is no manner of doubt that
respondent No.2 has abused the process of law.
For the foregoing reasons, the application
succeeds. Criminal Case No.760 of 1994, filed in
the Court of the learned Additional Chief
Metropolitan Magistrate, Ahmedabad, by
respondent nO.2 for the alleged commission of
offence punishable under Section 621A of the
Companies Act, 1956, is hereby quashed. Rule is
made absolute as indicated hereinabove."
3. The applicant has moved Misc.Criminal
Application No. 9685 of 2005 for
modification/clarification in judgment rendered on
February 22, 1995 in Misc.Criminal Application No.5639 of
1994 on the ground that the Court was not justified in
passing strictures against the applicant by observing
that the fact that the operation, execution and
implementation of the order dated September 18, 1992
passed by the Company Law Board, Western Region, Bombay
was stayed, was never brought to the notice of the
learned Magistrate by the applicant, inasmuch as that
fact was stated in the complaint itself. The applicant
CRIMINAL MISC.APPLICATION/9684/2005 11/09/2012 02:36:23 AM
CR.MA/9684/2005 5/7 ORDER
has further stated that unwarranted strictures are likely
to cause prejudice to the applicant, who is Chartered
Accountant by profession. Therefore, the applicant has
moved Misc.Criminal Application No.9685 of 2005 for
review/clarification/modification of judgment dated
February 22, 1995 delivered in Criminal Misc.Application
No.5639 of 1994. It may be stated that the judgment was
delivered on February 22, 1995, but, the application for
clarification/modification is filed on August 18, 2005,
and as there is delay of ten years and six months in
filing application for clarification/ modification, the
applicant has filed instant application and prayed to
condone delay of ten years and six months caused in
filing the application.
4. This Court has heard Mr.Dipakkumar Jayantilal
Shah, who has appeared in person, as well as
Mr.N.D.Gohil, learned A.P.P. for the State.
5. From the averments made in the application,
there is no manner of doubt that the applicant was
knowing about the observations made in the judgment since
pronouncement of the same on February 22, 1995 in
Misc.Criminal Application No.5639 of 1995. Though an
CRIMINAL MISC.APPLICATION/9684/2005 11/09/2012 02:36:23 AM
CR.MA/9684/2005 6/7 ORDER
attempt is made to offer explanation as to why delay of
ten years and six months was caused in moving the
application, this Court is of the opinion that delay
caused in filing the application for
clarification/modification is not satisfactorily
explained at all. Further, what is prayed by filing
Misc.Criminal Application no.9685 of 2005 is to review
judgment rendered in a criminal matter. In (1) Hari Singh
Mann v. Harbhajan Singh Bajwa and others, (2001)1 SCC
169, (ii) State of Karala v. M.M.Manikantan Nair, (2001)4
SCC 752 , and several other reported judgment, the Supreme
Court has, time and again, held that High Court cannot
review its own judgment, except to correct a clerical or
arithmetical error. It is not the case of the applicant
that any clerical or arithmetical error had crept in
while delivering judgment dated February 22, 1995 in
Misc.Criminal Application No.5639 of 1994. Therefore,
application for review/clarification/modification, on
merits, is also not maintainable. As the applicant has
not explained satisfactorily delay caused in filing
review application, the same cannot be entertained and is
liable to be rejected.
For the foregoing reasons, Misc.Criminal
Application No.9684 of 2005 fails and is rejected.
CRIMINAL MISC.APPLICATION/9684/2005 11/09/2012 02:36:23 AM
CR.MA/9684/2005 7/7 ORDER
MISC.CRIMINAL APPLICATION No.9685 of 2005
As application for condonation of delay is
rejected, instant application does not survive and is
rejected.
[ J.M.PANCHAL, J.]
(patel)
CRIMINAL MISC.APPLICATION/9684/2005 11/09/2012 02:36:23 AM

Gujarat High Court

Atul Products Ltd. vs Dipakkumar Jayantilal Shah on 26 March, 1995

Equivalent citations: 1997 88 CompCas 876 Guj

Author: N Pandya

Bench: N Pandya

JUDGMENT

N.J. Pandya, J.

1. This appeal deserves to be allowed for the simple reason that the learned members of the Company Law Board, who dealt with the matter as Appeal No. 42(III)/CLB/WR/90 have, in my opinion, not appreciated the difference between free transferability and refusal to entertain the request for splitting the shares into different names.

2. The appellant before the Board, i.e., the respondent herein, had requested the appellant to entertain the application for transfer of one equity share each as detailed out in para. 6 of the memo of appeal as a lot of 5 shares was purchased from the market and here also there is a history.

3. The shares originally belonged to one Gujarat Aromatics Limited which merged with the present appellant company. It was a case of reverse merger, in the sense that a profit-making company bearing the name of the appellant company had merged with the said Gujarat Aromatics Ltd. and in the process, the merging company became the merged company, i.e., Gujarat Aromatics Limited, and the name continued to be that of the merged company, i.e., Atul Products Limited, by changing the name of the said Gujarat Aromatics Limited as part of the scheme of merger and amalgamation.

4. As the said Gujarat Aromatics Limited was a loss-making company, as a part of the scheme, the equity share capital came to be reduced in the ratio of 10 : 1 and, accordingly, if a shareholder holds 50 shares of that company, that would automatically be reduced to 5 shares of the merged company. This lot of shares of the Gujarat Aromatics Limited which was originally 50 shares of the Gujarat Aromatics Limited came to be dealt with by the respondent in the aforesaid manner with an added request for transferring one share each to 4 different names as set out in capital A, B, C and D of the said para B running pages 6 and 7 of the appeal memo. Once these 4 shares were dealt with in this manner, the remaining share was to be retained with the original owner, i.e., Pushpaben S. Naik.

5. In effect, what was sought was splitting of unit of 5 shares which originally would have been a unit of 50 shares, into 5 share certificates of 1 share in five different names. Had this request been allowed, there would not have been a case in respect of the said shares and there would have been five different share certificates in the name of five different holders each having one share in their name, as set out in para 6. Ordinarily, there may not be any objection and this might happen in the case of all or any of the companies.

6. However, in the instant case, when the request was made, the appellant company by letter dated December 5, 1990, addressed to the respondent had referred to article 24 of the articles of association of the company where it is provided that the company would not split the shares for shares less than a marketable lot, i.e., 50 shares.

7. In view of the aforesaid history, the lot of 50 shares of the merging company will have to be taken as 5 shares of the merged company as per the ratio agreed upon and if the request is for splitting those five shares under one share certificate to five different share certificates of one share each and transfer it to five different individual names, the company can refuse it under article 24 of the articles of association of the company unless the splitting sought is for making a marketable lot. However, so far as transferring the lot of five shares to the name suggested by the respondent is concerned, at the Bar, a statement is made on behalf of the appellant-company by learned advocate, Shri B.R. Shah, that it is left to the choice of the respondent and if such a request is made, the company shall entertain it.

8. So far as the refusal is concerned, it is for splitting the shares and not for transferring them to the names suggested by the respondent.

9. The learned members of the Company Law Board have referred to section 22A of the Securities Contracts (Regulation) Act, 1956. This section is definitely required to be considered for cases like this. However, this section would be attracted provided there was a question of there being any hindrance of free transferability. The refusal is for splitting of the shares and not for transferring the same and, in my opinion, there is no hindrance to free transferability at all. The company was ready to transfer those 5 shares and is still ready to transfer those five shares to a different name as suggested by the respondent as envisaged in respect of a public company under the company law, a compendious term which would include the Securities Contracts (Regulation) Act, 1956, also their requirements are taken care of. Assuming for the sake of argument that the said section 22A is required to be considered, the answer is to be found in clause (b) of sub-section (3) of section 22A, which reads as under :

"(b) that the transfer of the securities is in contravention of any law or rules made thereunder, or any administrative instructions or conditions of listing agreement laid down in pursuance of such laws or rules."

The respondent arguing the matter as party in person had taken me through section 9 of the Companies Act, section 111 of the Companies Act and also to the said section 22A of the said Regulation Act, as also the standard listing agreement. He has accepted the position as found from the standard listing agreement that there might be a restriction with regard to the marketable unit of shares. This refers to the said concept of marketable lot or minimum number of shares to be dealt with in the market for sale and purchase which is a vital transaction so far as the transferability of lot of shares is concerned.

10. The said clause (b) of section 22A(3) provides for grounds for refusal of transfer and at the same time, prohibits any other ground being raised for refusal to transfer and conditions of the listing agreement being one of them, the company can certainly invoke clause (b) of sub-section (3) of section 22A. Assuming for the sake of argument that at the time of refusal, which was conveyed on December 5, 1992, this amended provision was not there in section 22A of the said Regulation Act, even then, in view of the aforesaid distinction between "not a refusal to transfer" but "refusing only to split the shares", the section would not be attracted.

11. No doubt, learned advocate, Shri B.R. Shah, has drawn a distinction between the word "law" as used in clause (b) with reference to article 13 of the Constitution of India, but that being a larger question, in my opinion, when it is not required to be gone into, in the light of the aforesaid discussion, I simply refer to it, but do not deal with it.

12. The net result is that the appeal succeeds. The order of the Company Law Board is set aside. However, as stated above, it shall be open to the respondent herein to approach the company within one month from today with a request to the company to get the said lot of 5 shares transferred to the name or names as requested by the respondent. There shall be no order as to costs.

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