2011 (7) TMI 1013 - Board - Companies Law

Petition to Register Shares Dismissed for Negligence

The petition seeking registration of shares was dismissed due to the petitioner's negligence in not lodging the shares for transfer promptly, ... Transfer of shares - rectification of register of member – Held that:- Petitioner after purchase of shares in the year 2000 admittedly had not lodged till 2007 nearly for a period of 7 years. Not lodging the shares for transfer with the Rl-company for a period of 7 years is the petitioner's negligence and it is not the mistake or default of the company who are in no way connected with the transaction entered between the petitioner, i.e., transferee and the respondents, i.e., transferors - company is not in default - petition is dismissed Issues Involved:1. Entitlement to Registration of Shares2. Delay in Lodging Shares for Transfer3. Requirement of PAN Card for Transfer4. Jurisdiction and Applicability of Section 111 vs. Section 111A of the Companies Act, 19565. Company's Obligation to Register Transfer6. Negligence and Default of the PetitionerIssue-wise Detailed Analysis:1. Entitlement to Registration of Shares:The petitioner sought the registration of 1,000 shares in her name, purchased through respondent No. 4, who acted on behalf of respondents Nos. 5 to 13. Despite paying the full consideration and receiving share certificates and transfer deeds in January 2000, the shares were not transferred to her name. The petitioner discovered in 2007 that the shares had been sub-divided and transferred to various accounts without her knowledge, constituting an alleged 'illegal act of criminal breach of trust.'2. Delay in Lodging Shares for Transfer:The petitioner admitted that she did not lodge the shares for transfer until 2007, citing the absence of a PAN Card as the reason. The respondents argued that there was no requirement for a PAN Card for share transfer in 2000, as this requirement was introduced by SEBI in 2009. The petitioner's delay of nearly seven years was deemed as negligence, not attributable to the company or other respondents.3. Requirement of PAN Card for Transfer:The petitioner claimed she could not lodge the shares in 2000 due to the lack of a PAN Card. However, the respondents countered that the PAN Card requirement for share transfer was introduced only in 2009. The petitioner's argument was found to be without merit, as she could have obtained a PAN Card within a reasonable time from the Income-Tax Authorities.4. Jurisdiction and Applicability of Section 111 vs. Section 111A of the Companies Act, 1956:The petitioner filed the petition under Section 111 of the Companies Act, 1956, which applies to private companies. The correct provision for public companies is Section 111A. The petition was found to be a misapplication of the law, as the petitioner had not lodged the shares for transfer, and thus, there was no refusal by the company to register the transfer.5. Company's Obligation to Register Transfer:The company is not obligated to register the transfer of shares unless a proper instrument of transfer, duly stamped and executed by both the transferor and transferee, is lodged with the company, along with the share certificate, as per Section 108(1) of the Act. In this case, the petitioner had not lodged the shares for transfer, and therefore, the company was not in default.6. Negligence and Default of the Petitioner:The petitioner's failure to lodge the shares for transfer for nearly seven years was deemed as negligence. The company and other respondents were not at fault. The petitioner's claim was dismissed due to her failure to comply with the necessary legal requirements and the significant delay in taking action.Conclusion:The petition was dismissed on the grounds of the petitioner's negligence, misapplication of Section 111, and failure to lodge the shares for transfer within a reasonable time. The petitioner was not entitled to the relief sought, and no orders as to cost were made.