Company Law Board
P.R. Gokkale vs Tamilnad Mercantile Bank Ltd. on 11 May, 2001
Equivalent citations: [2002]110COMPCAS866(CLB)
ORDER
Balasubramanian, Vice-Chairman
1. In this petition filed under section 111A(2) of the Companies Act, 1956 ('the Act'), the petitioner has sought for a direction to the respondent-Bank to register 10 shares lodged by the petitioner for registration of transfer, which the Bank has refused to do.
2. According to the petitioner, he had purchased 10 shares in June, 1999 and lodged the same with the Bank for registration of transfer. The Bank returned the share certificate along with the transfer deed on the ground that the documents had been filed beyond the validity period of two months from the date of presentation to the prescribed authority and that the stamps had not been properly cancelled. Thereafter, he lodged proper transfer instrument alongwith the share certificate to the Bank on 19-8-1999. However, the Bank through a letter dated 12-10-1999 informed the petitioner that the Board of Directors had decided to refuse registration of transfer. On a further representation made by the petitioner seeking registration of transfer, the bank informed the petitioner that the Board of Directors had once again refused registration of transfer on the ground that the admission of the petitioner as a shareholder would not be in the best interest of the Bank, and as such once again, the Bank refused to register the transfer of shares.
3. In its reply, the Bank has submitted that the petitioner is an ex-employee of the Bank and had been dismissed for various irregularities committed by him while in service with the Bank and therefore the Board of Directors suspected that the purchase of the shares by the petitioner would not be for the purpose of investments, but to devise strategy to drag the bank into further litigation and therefore, rejected the registration of transfer.
4. We have heard the learned counsel for both the sides who reiterated the averments in the pleadings. The Bank being a public company, is governed by the provisions of section 111A, according to which, the shares of a public company are freely transferable. The power to refuse registration of transfer in public companies is limited only to the grounds as indicated in section 111A(3). In the present case, the ground on which the Board of Directors of the Bank had refused registration of transfer of the 10 shares lodged by the petitioner is not governed by the provisions of section 111A(3). Therefore, the refusal to register the transfer of shares is without sufficient cause and as such we direct the Bank to register the shares impugned in the petition within one month from the date the petitioner lodges transfer instrument along with the share script with the Bank.
5. With the above directions, the petition is disposed of with no order as to cost.