RAGHUVENDRA S. RATHORE, J. - (1.) THIS revision petition is directed against the order dated 10.9.98 passed by learned Special Magistrate (Economic Offences), Rajasthan, Jaipur whereby he had convicted the petitioners for the offence under Section 113(2) of the Companies Act, 1956 and sentenced them for a fine of Rs. 3,000/- each. Being aggrieved of the said order, the petitioners preferred an appeal which came to be decided by the learned Additional Sessions Judge, No.1, Jaipur City, Jaipur on 8.9.99 who had partly allowed the same and as against 5 accused persons namely, S.N.Bangad, Srikant Bangad, P.S. Duttarai, V.K.Roongata and B.V.Vankatesh order of acquittal was passed. But as against the petitioners, M/s B.F.L., Software Ltd., Calcutta and R.K.Lakhotiya, the appeal was dismissed.
(2.) IN short, the relevant facts of the case are that a complaint came to be lodged in the year 1996 against the Company (M/s B.F.L. Software Ltd.- petitioner No.1) and 7 of its personnels by Atul Singhal in the Court of Special Magistrate, Economic Offences, Rajasthan, Jaipur, for the offence under Section 113 of the Companies Act. It had been alleged in the complaint that the complainant had purchased 200 share certificates of the petitioner company on 4.9.94. On having purchased the said shares, the complainant had sent the same to the petitioner company for the purpose of having them transferred in his own name. A transfer deed, with all formalities having been done for that purpose, was sent to the petitioner company through registered post. The company had received the share certificates on 22.9.94. According to the complainant, the petitioner company after receipt of the share certificates had not returned them to him after due transfer within the statutory period of two months, as given under the provisions of Section 113 of the Companies Act. Thereafter, registered letter dated 6.3.95 and 2.6.95 were also sent but they had not been replied by the accused persons. Subsequently, a notice through an advocate was also sent to the Company Secretary on 9.9.95. IN response to the said letter, the company stated that the share certificates had been sent to the complainant on 20.12.94. Another notice was sent through counsel by the complainant on 10.11.95 but the same was not replied to by the Company Secretary. On filing of the aforesaid complaint, the learned trial Court proceeded with the matter by recording the statements of the complainant under Section 200 and his witnesses under Section 202 Cr.P.C. Thereupon, the learned Magistrate after considering the evidence of the witnesses as well as the documentary evidence took cognizance for the offence under Section 113 (2) of the Companies Act. On 21.8.96 a process, through summons was issued to the accused. On their appearance through counsel, accusation was read over on 3.7.97. The statement of complainant was recorded as PW/1. The statements of the accused persons were then recorded under Section 313, through their counsel. On conclusion of trial, the learned trial Court convicted the accused persons for the offence under Section 113(2) of the Companies Act, 1956 and sentenced them for a fine of Rs. 3,000/- each vide his judgment dated 10.9.98. An appeal filed thereafter, against the said judgment by the accused persons, was partly allowed on 8.9.99 by the learned Additional Sessions Judge No.1, Jaipur City, Jaipur to the extent of acquitting the accused persons, other than the present petitioners, and the co-accused Shri R.K.Lakhotia, the Company Secretary. Hence, the present revision petition has been filed by M/s B.F.L. Software Ltd., and Shri B. V. Venkatesh, the President and Managing Director of the Company. The learned counsel for the petitioners has contended that the complainant had failed to provide the company with a valid transfer deed, as envisaged under the provisions of the relevant law, so much so that the signatures were not tailing to the specimen signatures with the company. Further, he has submitted that the learned courts below have passed the impugned orders which is contrary to the provisions of Section 113 of the Companies Act. He has also submitted that the company is entitled to refuse a transfer if it does not fulfill the requirement under the relevant law. It is only in case where the transfer is duly stamped and otherwise valid and the company refuses to transfer the same, then only it would be in default under the provisions of the Act of 1956. In the instant case, the company had refused to transfer the said 200 shares sent by the complainant on account of major disparity in the signatures of the transferor on the transfer deed from his specimen signatures in the records of the company. The learned counsel has also submitted that both the courts below have overlooked the material on record, as for instance, Ex.P/9 which categorically states that the company cannot transfer the said 200 shares on account of disparity in the signatures of the transferor. In the last, he has submitted that refusal for transfer was at the most beyond the statutory period as envisaged under Section 111 of the Act of 1956, for which penal provisions are contained under sub-section (12) of the said Section. It is submitted that in no case, the petitioners could be held liable and convicted under Section 113(2) of the Act. In support of his submissions, the learned counsel for the petitioner has placed reliance on the cases of Bibhuti Bhusan Das Gupta & Anr. Vs. State of West Bengal, AIR 1969 SC 381; H.V.Jayaram Vs. Industrial Credit & Investment Corpn. Of India Ltd. & ors., (2000) 2 SCC 202; Basavaraj R. Patil & ors. Vs. State of Karnataka & ors., JT 2000 (Suppl.1) SC 422; and Keya Mukherjee Vs. Magma Leasing Ltd. & Anr., JT 2008 (4) SC 487. In response to the aforesaid submissions made by the counsel for the petitioners, the learned counsel for the respondent has submitted that the learned courts below have rightly convicted and sentenced the accused petitioners as they had committed the offence under Section 113(2) of the Companies Act, 1956. He has further submitted that the company had not only failed to transfer the shares as on today, but has also not returned the same to the complainant. Further, he has submitted that when a request for transfer was made to the accused company, then they were duty bound to consider the application for registration of transfer and do the needful in accordance with the relevant law. In default of which, the company and other officer of the company were liable to be punished under sub-section (2) of Section 113 of the Act. Therefore, it has been submitted that the learned courts below have not committed any illegality or infirmity in passing the orders and as such no interference is called for by this Court. Before adverting to the finding arrived at by the learned courts below in the instant case, it would be appropriate to consider the relevant provisions of law: 108 Transfer not to be registered except on production of instrument of transfer.- (1) A company shall not register a transfer of shares in, or debentures of, the company, unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee, has been delivered to the company along with the certificate relating to the shares or debentures or if no such certificate is in existence, along with the letter of allotment of the shares or debentures: 111. Power to refuse registration and appeal against refusal.- (1) If a company refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any shares or interest of a member in, or debentures of, the company, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. Under sub-section (12) If default is made in complying with any of the provisions of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to (five hundred rupees) for every day during which the default continues. 113. Limitation of time for issue of certificates.- (1) Every company, unless prohibited by any provision of law or of any order of any Court, tribunal or other authority, shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within two months after the application for the registration of the transfer of any such shares, debentures or debenture stock, deliver, in accordance with the procedure laid down in section 53, the certificates of all shares, debentures and certificates of debenture stocks allotted or transferred: ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... The expression transfer for the purposes of sub-section (1) would mean a transfer duly stamped and otherwise valid and does not include any transfer which the company is for any reason entitled to refuse to register and does not actually register.
(3.) A glimps of the aforesaid provisions of law shows the method, procedure and time-limit under which a transfer of shares are to be done by the company and any default committed in following the procedure for the purpose of transfer or if it is done in violation of period prescribed under the said provisions, makes the company liable for penalization. Transfer of shares is to be done when it is duly stamped and otherwise valid. However, the company is entitled to refuse the transfer for a valid reason given under the law. It is the case of the petitioner, from the very beginning, that the transfer of shares could not be made as there was discrepancy in the signatures of the transferor on the deed from the specimen signatures in the record of the company. The provisions under Section 113 of the Companies Act only provides the limitation of time for issuance of certificates. A company shall within two months after the receipt of the application for the registration of the transfer of any such shares, is to deliver in accordance with the procedure laid down in Section 53, in default of which the company and every officer of the company shall be punishable with fine which may extend to Rs. 5,000/- for every day during which the default continues. But in the instant case, it is the case of the accused petitioners, as revealed from Ex.P/9 on record, that they had sent the refusal for transfer for the reasons given in it i.e., the discrepancy in the signatures of the transferor. Section 111 of the Act provides that if the company refuses to register the transfer of any shares, it shall, within two months from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of refusal to the transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. It is also to be noted that the expression transfer for the purpose of the relevant clause would mean a transfer duly stamped and otherwise valid and does not include any transfer which the company is for any reason entitled to refuse to register and does not actually register. As in this case, the signatures of the transferor were not tailing with the specimen signatures in the record of the company, then the company was entitled to refuse the same and it was so done. The said intimation was sent by the company in the month of October, 1995. Therefore, the refusal conveyed by the company was certainly beyond the statutory period, as provided under Section 111 of the Act of 1956. But, so far as provisions of Section 113 of the Act is concerned, it does not envisage a situation where the company, for the reasons to be recorded, had refused to transfer the shares. Therefore, in my considered opinion, when the Company had sent the refusal under the provisions of Section 113 of the Act of 1956 beyond the period of limitation, then prima facie the provisions under Section 111 of the Act of 1956 relating to default in complying with the same at the most could have been attracted. Admittedly, in the present case there had not been any charge in respect of the offence under Section 111 of the Act of 1956. In view of the above, it is clear that the provisions under Section 113 of the Act of 1956 are not attracted and consequently, the petitioner company cannot be said to have committed any default resulting in criminal offence in accordance with sub-section (2) of Section 113 of the Act of 1956. It is also to be noted that the provisions of Section 108 are mandatory in nature as laid down by the Hon'ble Supreme Court in the case of Mannalal Khetan etc. Vs. Kedar Nath Khetan & ors., AIR 1977 SC 536. Therefore, the petitioner company could not have registered the transfer of shares without proper instrument of transfer duly executed by the transferor as his signatures were patently different from his specimen signatures as per the record of the company. ;