AI Drafter 
TaxTMI 
TaxTMI 
2018 (11) TMI 1779
X X X X Extracts X X X X
X X X X Extracts X X X X
....INA MALHOTRA (JUDICIAL MEMBER).- 1. The petitioners collectively hold an equity of approximately 22 per cent. in respondent No. 1-company. Aggrieved by certain acts of the respondents, they have filed the present petition under sections 241 and 242, alleging oppression and mismanagement at the hands of respondents Nos. 2 and 3, directors of the respondent-company who are stated to be in charge of the affairs of its business operations. 2. The grievance of the petitioners stems from the respondent-company's acceptance of the transfer of shares by respondent No. 7 in favour of respondents Nos. 5 and 6, which they allege is in violation of the articles of association of the respondent-company. The approval of the registration of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bhavik Ajay Patel 100 10.99 11. Jyotinda S. Patel 200 2.00 5. The petitioners submit that despite being a closely held group of members, respondents Nos. 2 and 3 have not kept the petitioners informed about the important developments with respect to the affairs of respondent No. 1-company. Notices of meetings have never been effected on them and financial statements and other statutory records have not been furnished despite requests. The situation prompted the petitioners to write a letter dated February 20, 2015 calling upon the respondent-company to provide all relevant documents including the memorandum of association, articles of association as well as financial statements and minutes of all extraordinary general m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... board of directors of the number of shares, the fair value and the name of the proposed transferee and the board of directors must offer to the other shareholders, the shares offered at the fair value and if the offer is accepted, the shares shall be transferred to the acceptor and if the shares or any of them are not so accepted within one month from the date of notice to the Board, the member proposing transfer shall, at any time within three month afterwards, be at liberty, subject to articles 8 and 9 thereof, to sell and transfer the shares to any person at the same or at higher price. In case of any dispute, regarding the fair value of the share it shall be decided and fixed by the company's auditors whose decision shall ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... shares in this case is governed by article 8(1) of the articles of association of the respondent-company, and not article 7, as it was a transfer from a member to member. Article 8(1) of the articles of association provides for as under : "Article 8.-(1) No transfer of shares shall be made or registered without the previous sanction of the directors, except when the transfer is made by any member of the company to another member or to a member's spouse or child or children or his/her heirs and the directors may decline to give such sanction without assigning any reason, subject to section 111 of the Act." 8. Learned senior counsel for respondents Nos. 1-3 has argued that the reliance of the petitioners on article 7 of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5, 2013 respectively without the sale being offered to other members, or seeking prior approval of the Board. Having adopted the same mode, they are estopped from raising such an objection for impugning the transfer of shares from respondent No. 7 to respondents Nos. 5 and 6, both being members from 2004 and 2009 respectively. 10. Having heard learned senior counsels in this case, this Bench is of the opinion that the grounds invoked for oppression and mismanagement are unsustainable. Reliance on article 7 of the articles of association is misplaced. The facts of this case would be governed by article 8 which are categorical and explicit and need no elucidation or interpretation. The articles govern transfer of equity. There is no ambigu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the price expected. The object of article 7 is only to ensure that the shareholding is restricted to the existing shareholders. Article 8 is an exception to the above provision and is applicable when the transfer takes place within the existing members. In such a situation articles of association are not violated as the only logic behind these articles is to prevent an outsider from purchasing shares without giving opportunity to existing members to exercise their rights. 11. With respect to the second objection of not being granted an opportunity to object to the said transfer on grounds of undesirability and raising objections, we agree with the arguments addressed by learned senior counsels for the respondents that approval of tran....