Company Law Board
Smt. Kana Sen And Ors. vs C.K. Sen And Co. Pvt. Ltd. And Anr. on 17 June, 1997
Equivalent citations: [1998]91COMPCAS25(CLB)
ORDER
1. This is an appeal filed on April 12, 1996, jointly by Smt. Kana Sen, Shri Prasenjit Sen and Shri Premjit Sen (hereinafter referred to as "the appellants") under the provision of Section 111(3) of the Companies Act, 1956 (hereinafter referred to as "the Act"), for issuance of necessary directions to C. K. Sen and Company Private Limited (hereinafter referred to as "the respondent-company") to register the transmission of shares in the names of the appellants so that the names of the appellants may appear along with other surviving joint holders of the said shares of the respondent company.
2. The facts of the instant case are that appellant No. 1, Smt. Kana Sen, is the widow of the late Shri Dip Kishore Sen. The respondent company is a private company limited by shares, having its registered office at Calcutta in the State of West Bengal. The deceased, Dip Kishore Sen, was the registered member of the respondent company, the relevant particulars of which are given below :
(i) Share Scrip No. 88 towards 5 fully paid-up equity shares (Nos. 46 to 50) in the name of Shri Dip Kishore Sen.
(ii) Share Scrip No. 127 towards 5 fully paid-up equity shares (Nos. 573 to 577) in the name of Shri Dip Kishore Sen.
(iii) Share Scrip No. 95 towards 5 fully paid-up equity shares (Nos. 11 to 15) in the name of Shri Dip Kishore Sen, Smt. Tushar Sen and Shri Debi Kishore Sen.
(iv) Share Scrip No. 94 towards 6 fully paid-up equity shares (Nos. 27 to 32) in the name of Shri Dip Kishore Sen, Smt. Tushar Sen and Shri Deb Kishore Sen.
(v) Share Scrip No. III towards 11 fully paid-up equity shares (Nos. 578 to 588) in the name of Shri Dip Kishore Sen, Smt. Tushar Sen and Shri Debi Kishore Sen.
The instant petition relates to shares indicated in items Nos. (iii) to (v) supra. Dip Kishore Sen died intestate on February 26, 1991, leaving behind him his wife and two sons who are the appellants herein. The appellants, being the only legal heirs and representatives of the late Dip Kishore Sen, obtained a succession certificate on April 20, 1993, from the Court of District Judge, Alipore, Shri N. K. Biswas, Third Assistant District Judge in Act 39, Case No. 725 of 1991, inter alia, in respect of those shares. Appellant No. 1 applied to the respondent company on or about June 8, 1993, for transmission of both the categories of shares of the late Dip Kishore Sen in her single name as also jointly with Smt. Tushar Sen and Shri Debi Kishore Sen. Along with the said application, the original share scrips as also a copy of the succession certificate has been lodged with the respondent company on June 8, 1993. The respondent company by a letter dated March 22, 1994, informed appellant No. 1 that the equity shares of the company singly held by the late Dip Kishore Sen, have been transmitted in her name and fresh certificates have been issued but some controversy has arisen as regards the transfer of shares jointly held by the late Dip Kishore Sen with Smt. Tushar Sen and Shri Debi Kishore Sen. By a further letter dated May 4, 1994, to appellant No. 1, the respondent company intimated their inability to transmit in her name the shares (bearing Scrips Nos. 95, 94 and 111) jointly standing in the names of Shri Dip Kishore Sen, Smt. Tushar Sen and Shri Debi Kishore Sen, pursuant to the restriction contained in Article 35 of the articles of association of the respondent company. Appellant No. 1 also sent demand notices to the respondent company for transmission of the said shares in her name which were also replied to by the advocate of the respondent company maintaining the same stand as referred to in their letter dated May 4, 1994. The present appeal has been filed on April 12, 1996, much after the two month period stipulated in Section 111(3) of the Act. In the reply filed on July 15, 1996, the respondent company has contended mainly on two grounds that the appeal having been filed much beyond the two month period from the refusal letter dated May 4, 1994, is barred by limitation and that in view of the specific bar in Article 35 of the articles of association of the respondent company, the refusal to transmit the shares in the name of appellant No. 1 was justified. The said reply affidavit has been affirmed by Shri Deb Kishore Sen, the managing director and principal officer of the respondent company. In the rejoinder, filed on August 14, 1996, the appellants have denied that their appeal is barred by limitation and that the provisions of Article 35 of the articles of association restrict the transmission of shares. The appellants have asked for a copy of the legal opinion on the basis of which the respondent company refused the transmission of shares but the respondent company refused to provide such a copy of legal opinion to the appellants.
3. In the course of hearing held before this Bench on February 14, 1997, Shri Tapash Gan Choudhury, advocate and Shri Jayanta Kumar Datta, advocate, appeared for the appellants and Shri Ananjan Mitter, counsel appeared for the respondent company. Learned counsel for both the sides advanced their arguments on the basis of their stand taken in the appeal, reply and the rejoinder. Citing the case in Smt Kamalabai v. Vithal Prasad Co. Pvt. Ltd. [1993] 77 Comp Cas 231 (Kar), learned counsel for the appellants has argued that on the death of a registered member (Dip Kishore Sen), his legal representatives and heirs are in effect entitled to be the shareholders, for the right has devolved on them through the death of the member whose name is still on the register of members of the respondent company. Referring to the second proviso to Section 108 of the Act, he further submitted that it enables the respondent company to register as shareholder appellant No. 1 to whom the right to shares in question devolves which right has passed by transmission and that the provisions relating to transfer of shares as indicated in Article 35 of the articles of association of the respondent company, do not apply to the instant case of transmission of shares by devolution of right by succession on the legal representatives and heirs of the deceased member. He further submitted that it is only transmission of shares from the deceased member to his legal representatives and heirs and as such there is no sale or transfer of shares in question. He also argued that appellant No. 1 has applied to the respondent company, on June 8, 1993, supported by necessary papers, for transmission of the shares in question but since then in spite of repeated persuasions by appellant No. 1 with the respondent company, the transmission of shares has not so far been effected. He also argued that the refusal of transmission of shares to appellant No. 1 by the respondent company is not justifiable in law and the present application is not at all barred by limitation as the appellant was pursuing the matter with the respondent company for amicable settlement after the receipt of refusal letter but ultimately no positive result could be secured in getting the shares transmitted in favour of appellant No. 1.
4. Learned counsel for the respondent company has drawn our attention to the specific restriction contained in Article 35 of the articles of association of the respondent company which is reproduced below :
"In the case of the death of any shareholder the survivor or survivors where the deceased was a joint holder, and the personal representatives of the deceased shareholder, where he was a sole holder or the holder of a certificate under Act VIII of 1889, or any other similar Act for the time being in force relating to the shares of such holder shall be the only person recognised by the company as having any title to sell and transfer his shares under and in terms of the immediately succeeding article hereof, but nothing herein contained shall release the estate of deceased joint holder from any liability in respect of any shares jointly held by him."
Learned counsel submitted that in view of the specific bar in Article 35 as set out above, the refusal of transmission of the shares in question to appellant No. 1 by the respondent company was justified. He further argued that the instant appeal is barred by limitation as the petition was filed beyond the two month period from the refusal letter of the respondent company.
5. We have carefully considered the pleadings, oral arguments and written submissions of the parties. With regard to the applicability of the Limitation Act to the proceedings before the Company Law Board, the Company Law Board had occasion to deal with this matter at great length in A. V. Sampat, Official Liquidator v. Dunlop India Ltd. [1996] 87 Comp Cas 398 (CLB). In this case, the Company Law Board have relied on certain decisions of the Supreme Court in the context of the applicability of the Limitation Act, viz., Nityanand M. Joshi v. Life Insurance Corporation of India, AIR 1970 SC 209 and Town Municipal Council v. Presiding Officer, Labour Court, AIR 1969 SC 1335, and came to the conclusion that the Company Law Board is not a court for the purpose of the Limitation Act and as such the said Act does not apply to the proceedings before the Company Law Board. Accordingly, we hold that the petition is not hit by the limitation prescribed under the Limitation Act, 1963. Learned counsel also argued that the petition is further hit by the time limit prescribed in Section 111(3) of the Companies Act, 1956. In the instant case, appellant No. 1 has applied to the respondent company in June, 1993, for transmission of the shares in question and in May, 1994, the respondent company intimated their inability to transmit the shares in question. The present appeal has been filed with the Company Law Board in April, 1996. The Bombay High Court has held in Shailesh Prabhudas Mehta v. Calico Dyeing and Printing Mills Ltd. [1990] 67 Comp Cas 533 that a company does not lose its right of refusal after a period of two months from lodgment except that it may become liable for penalty for not complying with the provisions of Section 111(1) as provided in Sub-section (12) of Section 111 of the Act. Therefore, we have to extend the same logic with regard to the applicability of the time limit specified in Sub-section (3) of Section 111, for the transferee/transferor, especially relating to the period of two months. Although the instant petition has been filed beyond the period of two months from the date of the refusal letter of the respondent company, such delay does not take away the right of the transferee to file an appeal to the Company Law Board. In view of the above, our conclusion is that the petition is maintainable and is not hit by the time limit prescribed in Sub-section (3) of Section 111 of the Act.
6. We now deal with the ground of refusal of the respondent company to the transmission of shares in question to the appellants in the context of the specific restriction contained in Article 35 of the articles of association which has been reproduced in para. 4 (supra). On a plain reading of Article 35 of the articles of association of the respondent company, it is observed that in the case of the death of any shareholder, the survivor or survivors where the deceased was a joint holder, shall be the only person recognised by the company as having any title to sell and transfer his shares. This Article 35 speaks of the authority of the particular person recognised by the company having title to sell or transfer shares only, and does not deal with the transmission of shares. Article 32 of the articles of association of the respondent company as annexed to the petition, provides that the regulations contained in Table "A" in the First Schedule to the Companies Act, 1956, shall apply to the company, except so far as the same are specifically excluded or special provisions made in these articles. In the absence of such provisions and as the company is a private company limited by shares, regulation 25 of Table "A" in Schedule I to the Companies Act, 1956, will be applicable. The said regulation 25 is reproduced hereinbelow :
"25. Transmission of shares.-(1) On the death of a member, the survivor or survivors where the member was a joint holder, and his legal representatives where he was a sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares.
(2) Nothing in Clause (1) shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons."
7. In the instant case, the shares in question are held jointly and one of such joint holders died. So, it is the survivor or survivors who is/are to be recognised as having title to the said shares. This being the position, the appellants herein, the heirs and legal representatives of the deceased joint holder (the late Dipkishore Sen) cannot be the holders of the shares in question, by transmission of shares, under the aforesaid regulation. In the facts and circumstances of the case, the citation of the Karnataka High Court decision in Smi. Kamalabai v. Vithal Prasad Co. Pvt. Ltd. [1993] 77 Comp Cas 231, as referred to by learned counsel for the appellants, is not applicable to the instant petition. For these reasons, the instant appeal must fail and is dismissed.
8. No order as to costs.