ORDER
1. The appellant/petitioner Mr. Kosha C. Parikh has filed an appeal under Section 111A of the Companies Act, 1956, praying, inter alia, to give directions to Krishna Mingranite Ltd., (hereinafter referred to as “the respondent-company”) for transfer of 3,50,000 equity shares duly transferred and enter the names of the applicants in the register of members and to direct the respondent-company to pay dividend if any.
2. There are other two petitions bearing Nos. 34 and 38/111A/CLB/WR/2000. The subject matter of these petitions being the same, we have dealt with the same together and disposed of them by this single common order.
3. The brief facts of the case are that the transferee advanced a sum of Rs. 20 lakhs by way of loan to Mrs. Harsha K. Doshi, wife of then chairman of Krishna Mingranite Ltd. before the company came in public issue. The transferor agreed and gave 3,50,000 equity shares of Rs. 10 each of his family to the transferees as a security for the above loan together with transfer deeds duly signed by the transferor, i. e., Mrs. Harsha K. Doshi. It was agreed by and between the parties to transfer the shares in favour of the transferees if the transferor fails to repay the amount of loan with interest. A memorandum of understanding (Moll) was entered into by and between the parties on November 17, 1995. The petitioner stated that unfortunately Smt. Harsha K. Doshi, the transferor and wife of the chairman of the company and Shri K. M. Doshi, chairman of the company expired in an accident. It is also stated by the petitioner that the original transfer deeds were executed on November 11, 1995, and were revalidated by the Registrar of Companies, Gujarat, Ahmeda-bad and thereafter the same were sent to the company for transfer of shares in favour of the transferee. The petitioner also stated that the company returned the share certificates and transfer deed without transferring the same by their letter dated November 19, 1998, on the ground that signature of the transferor differs from the signature recorded with the company (attestation required) and the transfer deed bears inadequate stamps. Thereafter by letter dated April 2, 1999, the transferee sent to the company again the transfer deeds and share certificates requesting the company to accept the signature on various grounds mentioned therein. The transferee also explained that the stamps are adequate and since the transferor expired, it was not possible to get her signature attested. The petitioner further stated that the respondent-company informed the transferee, i.e., the petitioner vide its letter dated April 20, 1999, that they are unable to give effect to the transfer deed unless and until it is properly authenticated. It is also stated by the petitioner that the objection of the company that the signature of the transferor differs from the signature recorded with the company, is not correct. Smt. Harsha K. Doshi was the wife of the late Shri Kishore M. Doshi, the then chairman of the company who expired in an accident. She had signed the transfer deeds and her signature is correct. The rejection of the company is wrong and mala fide. The petitioner further stated that the above transfers are linked with memorandum of understanding executed by and between the late Smt. Harsh K. Doshi and Rohit Estate Agency before the company made its public issue. The said MoU was signed by Smt. Harsha K. Doshi, wife of the late K. M. Doshi and was witnessed by the then chairman of the company the late Shri K. M. Doshi. The transfer deeds were also signed by both the above persons and their signatures in the transfer deeds are the same as appeared in the MoU. It is also stated by the petitioner that the intention of the company is mala fide and with a view not to transfer the shares, the company has asked to attest the signature of the transferor who is deceased and attestation of the signature of the deceased is not feasible and the MoU and the transfer deeds were signed by the late Harsha K. Doshi and were witnessed by the late K. M. Doshi. There is no difference in their signatures.
4. The respondent-company has filed its reply by an affidavit dated December 18, 2000. It is stated that the petition is time-barred and that one Poonam K. Doshi, daughter of the deceased Smt. Harsha K. Doshi and Kishor Doshi, by her letter dated May 20, 1999, requested the respondent-company not to transfer any shares of her/the late parents till she receives succession certificate from the Bombay High Court. It is also stated in the reply of the respondent-company that the signature of the transferor differs from the records maintained by the company and the same are not duly stamped as required by law and the company is not a party to the alleged MoU dated November 17, 1995, and therefore the respondent-company is not bound by the same. The respondent-company further stated in its reply that the names and identity of the petitioners in the petition. The MoU dated November 17, 1995, and transfer form are different. The respondent-company also stated in its reply that from the said MoU, it is clear that this is not a simple transaction of sale and purchase of the shares by a bona fide purchaser, but “loan” transaction wherein the shares in question were kept as security and if interpretation is made to the said MoU it is apparent that the petitioner has waived and/or given up her option of transfer of the shares. The transaction is hit by the provisions of the Money Lending Act and the Arbitration Act also. The respondent-company also stated in its reply that being a loan transaction and as the transferor had expired, the petitioner should have approached the heirs of the deceased transferor for the repayment of the loan and not the company for transfer. No objection from heirs is necessary in the above circumstances. The respondent also stated in its reply that if interpretation is made the company has not made any breach of “Listing Agreement Clause 12 and/or 12A as alleged by the petitioner. The respondent-company also stated that the shares in question are of the promoter’s quota affected by lock-in-period. It has also been stated in the reply that the company being a juristic person has nothing to do with relations and/or relation is to be taken into consideration. It is further stated that except bare words there is no authenticity of the signature of the transferor. He has emphatically denied in the aforesaid affidavit that the rejection of the company is wrong and mala fide as alleged.
5. The petitioner by his affidavit dated January 16, 2001, has filed rejoinder to the reply of the respondent-company. In the reply the petitioner has stated that as per Sub-section (2) of Section 111A of the Companies Act, 1956, the shares and securities of a listed company are freely transferable. After the deletion of Section 22A of the Securities Contract (Regulation) Act, 1956, the restrictions on transfer of shares are no more in existence and now the company has no right to refuse the transfer of shares unless some prohibitory order of proper authority is produced and there is no provision now anywhere to refuse to register the transfer of shares on the ground of signature difference. It is also stated by the petitioner in its rejoinder that under the provisions of the Companies Act, 1956, and also as per the articles of association of the company, the transfer deeds are placed before the board of directors or a committee thereof and the transfer deeds are approved or rejected by passing necessary resolution. The respondent-company has not stated in its letter of refusal dated April 20, 1999, as to on which date the board meeting was held and the share transfer deeds were rejected. It is further stated in the rejoinder that the rejection letter is signed by one Mr. J. N. Goradia in Gujarati language as authorised signatory. It is nowhere mentioned in the affidavit in reply by the respondent-company as to who authorised Mr. Goradia to refuse the transfer. The letter of rejection is in English language whereas the same is signed by Shri Goradia in Gujarati language. It is doubted as to whether he has understood the contents of the letter. It is also stated in the rejoinder that the rejection letter did not make any reference or stipulation of the board resolution anywhere. It is also stated in the rejoinder that in fact no board resolution has been passed for rejection of the transfer of shares. It is further stated that the contention of the respondent that the petition is time-barred is not correct. The respondent-company refused to transfer the shares by its letter dated April 20, 1999, and the petition was filed on June 12, 1999, and hence the same is in time and not time-barred. It is also stated in the rejoinder that the respondent-company cannot take any action on a simple letter written by one Poonam K. Doshi. The application for transfer of shares was rejected by the respondent by its letter dated April 20, 1999, whereas the letter from Poonam K. Doshi is dated May 20, 1999, i.e., after the date of rejection by the respondent-company. It seems that the said letter is an afterthought and further the said Poonam K. Doshi has not submitted any legal document or any order of an appropriate court or succession certificate about the title or ownership of the equity shares in question. It is also stated in the rejoinder that the respondent-company has not produced the specimen signature card of the transferor in support of the so-called difference in the signature and the transfer deed signed by the transferor Mrs. Harsh K. Doshi who was the wife of the then chairman of the company Shri Kishor Doshi and the said transfer deeds were witnessed by the chairman. As per the general practice, the transfer deeds were approved by the board of directors and or committee of directors and signed or initialled by the director or chairman of the company. In this case the transfer deed itself is witnessed by the chairman which need not require any further verification of signature of the transferor, who was the wife of the chairman. The petitioner also stated in its rejoinder that the transfer deeds were sent to the respondent-company on or about January 24, 1998, and the market price of the shares as published in Gujarat Samachar and Economic Times both dated January 7, 1998, was Rs. 1.10 per share. Proper stamps were affixed accordingly on the transfer deeds. It is also stated in the rejoinder that it is fact that the company is not a party to the MoU dated November 17, 1995, and the said MoU was sent to the company so as to enable it to ascertain the correctness of the signature of the transferor who was the wife of the chairman of the company and this MoU would help the company to verify the signature of the transferor. It is also stated in the rejoinder that the petitioner has waived or given up her option of transfer of shares, is not correct and the transferor has not waived any such right and her claim to the title of share certificates on the basis of transfer deeds is still in existence and it is not correct to say that the transfer is hit by the provisions of the Money Lending Act and the Arbitration Act and both these Acts do not come in the way of transfer of share certificates. The petitioner has also stated that it is not necessary to obtain no objection certificate from the heirs of the transferor. On the contrary once the transfer deed is executed, it is binding on the heirs of the transferor. The petitioner also stated in its rejoinder that as per listing agreement, the respondent-company has failed to inform the transferee about the rejection of shares within the prescribed time-limit. Moreover, as required under Clause 10 of the listing agreement, the respondent-company has not informed the stock exchange, the name and designation of the person who has to verify the signatures and the signature of the transferor has not been verified by the proper and authorised person. The petitioner has further stated in the rejoinder that the respondent-company has not complied with the requirements of Clause 12 of the listing agreement with the stock exchange which reads as under ;
“On lodgement of the proper documents, the company agrees that it will register transfers of its securities in the name of the transferee except-
(a) when the transferee is, in exceptional circumstances, not approved by the directors in accordance with the provisions contained in the articles of association of the company, in which event the president of the exchange may be taken into confidence, if so requested, as to the reasons for such rejection ;
(b) when any statutory prohibition or any attachment or prohibitory order of a competent authority restrains the company from transferring the securities out of the name of the transferor ;
(c) when a transferor objects to the transfer provided he serves on the company within a reasonable time a prohibitory order of the court of competent jurisdiction.”
6. Thus, the company is bound to transfer the shares except under the above circumstances. It is also stated in the rejoinder that the respondent-company is a registered company and therefore it should have transferred the shares as stated in Clause 12 above. In fact this Clause 12 makes the transfer of shares compulsory. The petitioner has also stated in his rejoinder that the shares are of promoters quota and affected by lock-in-period, is not correct as the shares in question relate before the respondent-company came in public issue. This point has been raised by the respondent-company in its rejection letter and even if it is so, the lock-in-period of shares of promoter’s quota has already expired from the date of allotment. Thus, this question has lost its significance. Moreover, when the transfer deeds were signed and share certificates were delivered, there was no lock-in-period at all and on the share certificate even, no lock-in-period was mentioned.
7. The matter was finally heard on March 23, 2001. Counsel for both the parties were heard at length. It appears that the letter of refusal dated April 20, 1999, was on the ground of difference of signatures and the petition was filed on June 21, 1999. Accordingly, it appears that the petition is not time-barred. It further appears that the respondent-company has not submitted any evidence showing that the board of directors has passed any resolution refusing the transfer of shares. It further appears that as per Clause 12 of the listing agreement, the respondent-company has not intimated within the stipulated time about the rejection of the transfer of shares. As regards lock-in-period, firstly this point was never raised in the letter of rejection. Further, it appears that the transfer form in respect of shares in question was executed before the date of public issue and hence the question of lock-in-period is not applicable. The respondent-company has raised objection about the MoU stating that the respondent-company is not a party to the MoU dated November 17, 1999, which was entered into between the petitioner and the transferor. However, this objection is not tenable as the MoU was an additional document to establish the correctness of the signature of the transferor. Further the plea of the respondent-company that one Poonam K. Doshi by her letter dated March 20, 1999, requested the company not to transfer the shares till she submits the succession certificate, is not tenable as she had not submitted any legal documents or succession certificate. Moreover, the date of refusal of the transfer of shares was communicated to the petitioner by the respondent-company on April 20, 1999, whereas the letter of Poonam K. Doshi was dated May 20, 1999, i.e., the letter of refusal of transfer of shares was issued much before the letter of Poonam K. Doshi. Further, it is not correct to say by the respondent-company that the identity of the petitioner and the transferee is not known. It appears that the petition and the transfer deed have been signed by the same person namely Kosha C. Parikh. The MoU was entered into between the transferor and the partnership firm Rohit Estate Agency. Legally the shares cannot be held in the name of the partnership firm. Accordingly, the transfer deed was signed by the petitioner as one of the partners of the same firm and the same is in order, legal and perfect. It is also not correct to say by the respondent-company that the transfer deed has not been adequately stamped. It appears that the stamps have been affixed as per market price prevalent as on the date of execution of the transfer deed. The only lacuna it appears that the stamps have not been cancelled. However, this point has not been raised by the respondent-company in their letter while refusing the transfer of shares. However, in accordance with the judgment of the Division Bench, Madras High Court in Kothari Industrial Corporation Ltd. v. Lazor Detergents Pvt. Ltd. [1994] 81 Comp Cas 699 (Mad), it has been held that the registration of transfer form with uncancelled stamps is only an irregularity and not illegality because the State suffers no loss of revenue. Accordingly, the requirement of cancellation was directory and not mandatory.
8. It also appears from para. 8 of the affidavit dated December 18, 2000, filed by the chairman of the respondent-company wherein he has himself denied that the signature of the transferor does not differ from the signature of records with the company as alleged.
9. Section 111A of the Companies Act, 1956, provides that the shares of a public limited company shall be freely transferable. However, if a company without sufficient cause, refers to register the transfer of shares, the transferee may appeal to the Company Law Board for registration of the transfer of shares. The transfer of shares can be refused only on the grounds as stipulated in Sub-section (3) of Section 111A of the Companies Act, 1956, and on no other ground, the transfer of shares can be refused.
10. Having considered the pleadings and submissions made by counsel of both the parties and taking into consideration the facts and circumstances of the case and also the fact that the plea of the respondent is not tenable, we hereby order that the respondent-company should register the transfer of 3,50,000 equity shares in petition No. 37/111A/CLB/WR/2000, 2,00,000 equity shares in petition No. 34/111A/CLB/WR/2000 and 3,50,000 equity shares in petition No. 38/111A/CLB/WR/2000 in favour of the petitioner within 30 days from the date of receipt of this order. The above petitions are disposed of accordingly with no order as to costs.