Das - (1.) THE genesis of disputes in this matter arose in the refusal of THE Calcutta Stock Exchange Association Limited ('CSEA') to register share No. 127 in the name of the petitioner, a member of CSEA, purchased by him for valuable consideration from another member of CSEA. Proforma Respondent.
(2.) The brief facts relating to the case are that on 15-5-1995, Shri Radha Kishan Purohit (Proforma Respondent) sold his share No. 127 in CSEA to the petitioner for a consideration of Rs. 2.00 lakhs. The said sum was duly paid the petitioner by cheque dated 15-5-1995. On 18-5-1995, Proforma respondent delivered to the petitioner the said share No. 127 with duly executed transfer deed and a letter addressed to CSEA acknowledging receipt of the said sum and requesting transfer of the said share to the petitioner as per article No. 44 of CSEA. On 30-6-1995, the petitioner addressed a letter to CSEA requesting to transfer the said share No. 127 in his name. With the said letter, the petitioner enclosed the letter dated 18-5-1995 of the Proforma respondent, the share scrip and duly completed and stamped transfer deed and also paid the transfer fee. Thus, all requirements for transfer were completed by the petitioner. After a lapse of about six months, CSEA by letter dated 10-1-1996, requested the petitioner to send a cheque drawn in favour of CSEA being the consideration value for effecting transfer of the said share No. 127. By letter dated 28-3-1996, the petitioner objected to the said request to pay consideration money as the same has already been paid to Proforma Respondent as provided in Article 44 of the articles of association of CSEA. Inspite of the said protest, CSEA repeatedly by letters of diverse dates called upon the petitioner to deposit with it the consideration value of the said shares.Finally, by letter dated 4-11-1997, CSEA intimated the petitioner that the committee at its meeting held on 21-10-1997, has rejected the petitioner's application for transfer of the said share No. 127. The reasons for such rejection given therein were that Proforma respondent did not comply with several decisions of the arbitration sub-committee in various cases including non-member cases and in spite of repeated intimation he did not appear before the meeting of the defaulter sub-committee. Further, he had not paid membership subscription and fee of the Customers' Protection Fund and CSEA was proceeding to take action against him as per provisions of articles of CSEA. Thereafter, from time to time, letters were exchanged between the parties and ultimately on 16-7-1998 the petitioner filed the present petition for appropriate reliefs. It has been contended by the learned counsel for the petitioner that the application for transfer of the said share No. 127, made on 30-6-1995, was complete in all respect and was in due compliance with Articles 44 and 46 of CSEA. Thus, there was proper lodgement for transfer and the transferee (the petitioner herein) has duly purchased the said shares and properly lodged it for transfer in his name. In that view of the matter, the petitioner has acquired all lawful rights of owner of the said shares and is entitled to transfer and registration of it. CSEA is lawfully bound to register the transfer. It has been further contended that CSEA is obliged to decide the transfer request within two months from the date of its lodgement as provided under proviso to Sub-section (2) of Section 111A of the Companies Act, 1956 ('the Act') but in the present case, CSEA has failed to do so. Within a reasonable time CSEA did not take any action on the said application for transfer and refused to register transfer of the said shares without sufficient cause. It did not reject the same until 21-11-1997 and till then by letters dated 10-1-1997, 29-8-1997 and 16-9-1997, CSEA kept on insisting upon petitioner to deposit with it the consideration amount. Such direction according to the learned counsel for the petitioner is without any lawful authority and contrary to Article 44 and 46 of the articles of association of CSEA. The learned counsel vehemently urged that the refusal to transfer for the reasons contained in the letters dated 21-10-1997 and 26-5-1998, are unlawful and belated and could not create any lawful right in CSEA to exercise any line or forfeit the share in question. Furthermore, the failures complained of on the part of the Transferor and allegations against him happened much long after the transfer application made in June, 1995. Before May, 1996, Transferor was not asked by CSEA to explain anything and only in November, 1997 CSEA decided to expel the transferor. In the circumstances, CSEA has no lawful authority to apply Articles 29(1) and/or 30 and/or and 32 and/or 39 of the articles read with Bye-laws and such lien can not destroy the right of the petitioner which had already accrued to him. In support of his contentions, the learned counsel for the petitioner has relied upon the following cases:-- Mathrubhumi Printing & Publishing Co. Ltd. v. Vardhaman Publisher Ltd. 73 Comp. Cas. 80 (Ker.). Gower 3rd Edn. Pages 407, 408 and 409. Pennington 4th Edn. 316, 347 and Braidford Banking Co. v. Brigg. [1886] 12 AC 29 (HL). Unity Co. (P.) Ltd. v. Diamond Sugar Mills AIR 1971 Cal. 18, 36. Sha Malchand & Co. Ltd. v. Jawahar Mills Ltd. AIR 1953 SC 98, 104.
(3.) THE learned counsel appearing for CSEA argued that on proper interpretation of Section 111A, the present application is not maintainable as the request to transfer the share was made by the petitioner on 30-6-1995 and there was no refusal by CSEA within a period of two months. THE refusal was made after two months and the instant application was made within two months from the date of refusal. In this connection, he drew our attention to Ramaiya's Guide to companies Act, fourteenth Edition, page 1071 under the heading 'Scope of Section'. It has been further argued that CSEA had a lien in respect of the share in question and forfeited the same in exercise of its powers provided in the Articles of Association and its Bye-laws. He relied upon Articles 29, 30, 31, 32, 34, 39, 40, 45 and 46. It has been further submitted that ninety five arbitration claim cases were instituted against the Proforma Respondent for diverse breaches and defaults committed by him and two of such claims were instituted on 17-2-1995 and 17-4-1995, which were long prior to the sale of share in question on 18-5-1995. Inasmuch as at least two cases were pending against the Proforma Respondent prior to the date of sale, the said Proforma Respondent Could not have sold and the petitioner could not have purchased the same. It has been further contended that CSEA in terms of its articles ultimately forfeited the share in questing after giving numerous and repeated opportunity of hearing to both the transferor and transferee and inasmuch as there was no refusal on the part of CSEA to register the share within a period of two months from the date of lodgement. Accordingly, CSEA is not now bound to register such share in the name of the petitioner. It has also been contended by the learned counsel for CSEA that the petitioner being an existing member of CSEA ought to have checked whether there was an existing lien of CSEA over and in respect of the share and the so called sale of the share is hit by the provisions of Section 16 of the Sale of Goods Act and the principle of Caveat Emptor-Buyer be aware. In the conclusion, it has been argued that the right of the petitioner is against the Proforma Respondent. CSEA having lien over the share there was never any concluded sale between the petitioner and Proforma Respondent and as such the petitioner has no locus standi to maintain the present petition as purchaser of the share in question. In support of his contentions, the learned counsel for CSEA relied upon the decisions reported in Mathrubhumi Printing & Publishing Co. Ltd.'s case (supra); 1983 Vol. II Comp. L.J. page 69 and Luxmi Tea Co. Ltd. v. Pardip Kumar Sarkar 67 Comp. Cas. 518 (SC).;