Karnataka High Court
Naveen Kumar And Others vs Karnataka Theatres Limited, Mangalore ... on 13 February, 1998
Equivalent citations: [1998]93COMPCAS443(KAR), AIR 1999 KARNATAKA 71, (1998) 31 CORLA 394, (1998) 3 COMLJ 468, (1998) 4 KANT LJ 763, (1998) 93 COMCAS 443
ORDER
1. Since this batch of company petitions involve common questions of law, therefore these have been heard together and are being disposed of by a common judgment.
2. These petitions have been filed under Section 155 of the Companies Act, 1956 (in short "the Act") with a prayer to direct the respondent-company to rectify the register of members by entering their names as holders of equity shares to the extent they have purchased and applied for transfer. The Board of Directors have rejected the transfer applications filed by the petitioners on the ground that the transfer will not be in the interest of shareholders and the company. The necessary details of each of the petitioners, the shares sought to be transferred, its value and date of rejection has been produced in a tabular form, which is being reproduced hereunder:
Sl. No. Sl. No. C.P. No. No. of shares Share Cer. No. Date of Refusal 1 2 3 4 5
1. 26
of 1988 10 112 24-1-1987 275
2. 27 of 1988 10 447 24-1-1987 472
3. 28 of 1988 10 284 24-1-1987 488
4. 29 of 1988 11 473 24-1-1987 469
5. 30 of 1988 10 63 24-1-1987 357
6. 31 of 1988 10 159 24-1-1987 263
7. 33 of 1988 10 95 24-1-1987 314
8. 39 of 1988 10 62 24-1-1987 346
9. 108 of 1987 10 226 15-9-1986
10. 36 of 1989 6 439 8-11-1986
3. Mr. Naganand, learned Counsel for the respondents, has sought to justify the impugned rejection to transfer the shares by placing reliance on Regulation 20 of Table-A of the Companies Act, 1913, which reads thus:
"The directors may decline to register any transfer of shares, not being fully paid shares, to a person of whom any transfer of shares on which the company has a lien. The directors may also suspend registration of transfers during the 14 days immediately preceding the ordinary general meeting in each year. The directors may decline to recognize any instrument of transfer unless;
(a) A fee not exceeding Rs. 2/- is paid to the company in respect thereof;
(b) The instrument of transfer is accompanied by the certificate of the shares, to which it relates and such other evidence as the directors may reasonably require to show the right of the transferor to make the transfer.
If the directors refuse to register a transfer of any shares, they shall, within two months after the date on which the transfer was lodged with the company, send to the transferee and the transferor notice of the refusal".
4. Under identical situation as appearing in the present case this Court in the case of the respondent-Company itself has held that the refusal to transfer the shares was beyond the competence of the Board of Directors and has accordingly approved the direction of the Company Law Board to register the shares applied for transfer. In the said view of the matter the impugned resolution of the Board of Directors of the respondent-company cannot be held to be sustainable in law.
5. Despite the said legal position, Sri Naganand, learned Counsel for the respondent-Company, has taken technical objection with regard to the very maintainability of these petitions under Section 155 of the Act on the ground that the petitioners herein had an alternative remedy by way of an appeal to the Central Government under Section 111 of the Act and the same having not been filed within the prescribed period these petitions cannot be entertained by this Court after lapse of more than a year. According to him, keeping in view the sound principles laid down for exercise of discretionary powers, the High Courts have always refused to exercise their discretionary jurisdiction on the ground of laches resulting from unexplained delays in approaching the Court.
6. So far as the objection regarding alternate remedy is concerned I am not detaining myself in exploring the law on the said aspect since the Supreme Court has already dealt with the same in the case of Harinagar Sugar Mills Limited v Shyam Sunder Jhunjhunwala and Others, wherein it has been held that:
"A person aggrieved by the refusal to register transfer of shares has, since the enactment of the Companies Act, 1956, therefore two remedies for seeking relief under the Companies Act: (1) to apply to the Court for rectification of the register under Section 155 and (2) to appeal against the resolution refusing to register the transfers under Section 111".
7. In the above view of the matter, the law has given an option to the aggrieved person whose application for transfer of shares has been rejected by the Board of Directors either to file an appeal before the Central Government under Section 111 of the Act or to approach this Court under Section 155 thereof for seeking appropriate direction regarding rectification of the register of members.
8. The remedies are independent, giving an open option to the aggrieved person to opt for either of the two. Therefore, only because the petitioner had an alternative remedy of appeal by itself cannot be a ground for not entertaining the present petitions. Accordingly the preliminary objection to the said extent is rejected.
9. The second aspect of the preliminary objection is as to whether the petitioners can be held to be guilty of laches in approaching this Court after the lapse of about a year from the date of rejection of their applications. This again has two aspects namely: (i) the laches are caused because of unreasonable delay in approaching this Court or (ii) because of having been filed beyond any statutory period of limitation. To answer this part of the objection one first needs to examine and ascertain whether there is any statutory period of limitation prescribed either under the Act or any other law for the time being for preferring applications under Section 155 of the Act. Admittedly the Act does not contemplate any period of limitation for filing an application under Section 155. Therefore, one has next to ascertain as to whether any provision of Limitation Act applies to filing of such application.
10. Article 137 of Part II of second division of the Schedule to the Limitation Act, 1963 provides a limitation of three years in respect of any application for which no period of limitation is provided elsewhere in the said division. The Supreme Court after examining the scheme under the Limitation Act has held that the said residuary Article will apply to filing of all applications in Court for which no limitation has been provided by the Legislature. After distinguishing the earlier judgment of the Supreme Court in the case of Kerala State Electricity Board, Trivandrum v T.P. Kunhaliumma, which was based on an interpretation of Article 181 of the Indian Limitation Act, 1908, it has been held that:
"The changed definition of the words "applicant" and "application" contained in Section 2(a) and 2(b) of the 1963 Limitation Act indicates the object of the Limitation Act to include petitions, original or otherwise, under special laws. The interpretation which was given to Article 181 of the 1908 Limitation Act on the principle of ejusdem generis is not applicable with regard to Article 137 of the 1963 Limitation Act. Article 137 stands in isolation from all other Articles in Part I of the third division. This Court in Nityananda M. Joshi v Life Insurance Corporation of India, has rightly thrown doubt on the two-Judge Bench decision of this Court in Town Municipal Council, Athani v Presiding Officer, Labour Court, Hubli, where this Court construed Article 137 to be referable to applications under the Civil Procedure Code. Article 137 includes petitions within the word "applications". These petitions and applications can be under any special Act as in the present case.
The conclusion we reach is that Article 137 of the 1963 Limitation Act will apply to any petition or application filed under any Act to a Civil Court. With respect we differ from the view taken by the two-Judge Bench of this Court in Athani Municipal Council's case, supra, and hold that Article 137 of the 1963 Limitation Act is not confined to applications contemplated by or under the Code of Civil Procedure. The petition in the present case was to the District Judge as a Court. The petition was one contemplated by the Telegraph Act for judicial decision. The petition is an application falling within the scope of Article 137 of the 1963 Limitation Act".
11. For the said reasons, in my opinion, objection raised by Mr. Na-ganand, appearing for first respondent, regarding entertainment of present application on the ground of laches has to be rejected since the present applications under Section 155 of the Act has been filed well within the period of limitation of 3 years. Accordingly, the impugned resolution of the Board of Directors is set aside with a direction to the first respondent to rectify the register of members by entering the names of the petitioners in terms of their application for transfer of shares. The first respondent will also be liable to pay consolidated cost of Rs. 5,000/- to the petitioners.