C.P. No. 34 of 2010. Case: Amrex Marketing P. Ltd. Vs Alcon Resort Holdings Ltd. and Another. Company Law Board

Case Number:C.P. No. 34 of 2010
Party Name:Amrex Marketing P. Ltd. Vs Alcon Resort Holdings Ltd. and Another
Counsel:For Appellant: Atul Daga and For Respondents: Ms. Sylvia Albuquerque Keyoor Bakshi, Practising Company Secretary for ICICI Trusteeship Service Ltd.
Judges:Vimla Yadav, (Member)
Issue:Companies Act, 1956 - Sections 111, 111A, 111A(2), 111A(3), 3(1)(iv), 9
Judgement Date:April 26, 2013
Court:Company Law Board
 
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Order:

Vimla Yadav, (Member), (Mumbai Bench)

  1. In this order I am considering Company Petition No. 34 of 2010 filed by the petitioner against the respondents under sections 111A of the Companies Act, 1956 (hereinafter referred to as "the Act") in the affairs of respondent No. 1 company namely M/s. Alcon Resort Holdings Ltd., incorporated on July 8, 1988, having its registered office at First Floor, Velho Building, Panaji, Goa, India-403 001. The company was converted into a public limited company with effect from August 8, 1989. The authorised share capital of the company is Rs. 10,00,00,000 divided into 1,00,00,000 equity shares of Rs. 10 each. The issued share capital of the company is Rs. 9,85,00,000 divided into 98,50,000 equity shares of Rs. 10 each. Respondent No. 1 company is into the business of owning of building, houses, apartments, structures of residential, office, industrial, institutional or commercial or developer of co-operative housing societies, companies, developers of housing schemes, townships, holiday resorts, hotels, motels and in particular preparing of building site, constructing, reconstructing, erecting, altering, improving, enlarging, developing, etc. The petitioner-company's Amrex Marketing P. Ltd.'s case is that the board of directors of the petitioner at its meeting held on June 27, 2008, unanimously accorded the consent to the company to purchase various securities/financial instruments from time to time. On January 22, 2010, the petitioner passed another unanimous resolution to purchase 1,60,000 equity shares of the company from ICICI Bank Ltd. (hereinafter referred to as "ICICI") and authorised Mr. Arvind Parasramka, director and Mrs. Kavita Parasramka, director of the petitioner to sign the share transfer forms and all other necessary documents pertaining to the share transfer and follow up the matter with the company. ICICI Bank Ltd., transferred 1,60,000 equity shares of the company along with the share transfer form being Form 7B, the 1,60,000 equity shares are contained in one certificate bearing numbers 34530001-3690000 and duly executed share transfer form along with all the original share certificates and all other relevant papers were sent to the company, in person, vide letter dated January 29, 2010. The same was not accepted by the company and the representative of the petitioner was humiliated and asked to go back. Thereafter, the letter dated February 22, 2010, was sent through the advocate of the petitioner was sent to the company since no reply was received from the company. Another reminder letter dated June 16, 2010, was sent to the company since no reply was received from the company even after the lapse of more than 4 months from the date, of the first letter notice of refusal rejecting the registration of the aforesaid transfer was issued by the company on June 23, 2010. In the aforesaid notice of refusal, the company has claimed that it had sent a letter dated April 30, 2010 to the petitioner's advocate Shri Syamal Ganguli with a photocopy of the alleged reply dated April 30, 2010, to the petitioner. However the company's advocate has not received any such letter. It was pointed out that the company has rejected the registration of the transfer as per article 38 of the articles of association of the company, without mentioning the reasons for the use of the absolute discretion of the board of directors. It was argued that the silence of the company reflects the connivance between the board of directors of the company and the promoters or some exiting members, who do not wish to settle the issues but their only intent is to harass and deprive the petitioner.

  2. It was pointed out that the transferor, i.e., ICICI is a leading bank of the country. ICICI has confirmed to the petitioner that ICICI is completely authorised to transfer the subject shares to the petitioner and that there has been no violation of any contract or law. Mr. Uday Kamath and Mr. Shashin Wamanse, who have acted on behalf of the transferor, i.e., ICICI are duly empowered to do so by virtue of the resolution passed at the meeting of the board of directors of ICICI held on May 30, 1998 and office order dated July 7, 2008. The company is a public limited company and its shares are freely transferable as per the definition of a public limited company as contained in section 3(1)(iv) of the Companies Act, 1956. The articles of association of a public limited company cannot contain any restriction on the transfer of the shares of the company, in any manner whatsoever. The articles of association of the company do not contain any specific reference to the agreement as mentioned by the company. Clause 38 of the articles of association does not and cannot convey any extraordinary rights to the company to refuse the transfer of the subject shares since the clause itself is subject to the Act. The articles of association of the company do not provide that the right to transfer the subject shares have been restricted in one or other manner or that there are any conditions attached therewith. It was argued that the company is bound to register the transfer in accordance with the provisions of the Companies Act, 1956 and the articles of association of the company. It was alleged that the action of the company is biased towards the promoters or the existing shareholders of the company. The board of directors of the company have been grossly negligent in their duties by refusing to register the transfer and giving undue preference to the evil desire of the promoters or existing shareholders of the company, the promoters and directors of the company are acting against the interest of the petitioner with a mala fide intention.

  3. It was argued that the refusal by the respondent to transfer shares in favour of the petitioner is without any basis and bad in law. The refusal to transfer is contrary to the provisions of the Companies Act, 1956 and judicial decisions in this respect. The respondent-company is a public limited company and its shares as per law are freely transferable, every member of the public has the freedom to purchase and, every shareholder, the freedom to transfer. There cannot be any fetters on the transferability of shares of a public company. The respondent-company has cited article 38 of the articles of association of the company for refusing transfer of shares in favour of the petitioners it is submitted that the said article 38 is void as it is contrary to the provisions of section 111A and section 9 of the Companies Act, 1956. The said article vests absolute and uncontrolled discretion in the hands of the board of directors of the respondent-company to decline to register any transfer of shares and without citing any reason for such refusal. The said article...

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