MC DOWELL AND COMPANY LIMITED Vs. SHAW WALLACE AND COMPANY LIMITED

JUDGEMENT

(1.) THE petitioner, McDowell & Company Ltd., had lodged an aggregate of 5,100 equity shares of the face value of Rs. 10 each with Shaw Wallace & Company Limited (hereinafter referred to as 'the company') for transfer in favour of the petitioner in two lots of 4,000 and 1,100 on 14 October, 1999, and on 1/2 November, 1999, respectively. By letters dated 12 November, 1999, and 29 November, 1999, the company intimated the petitioner that the shares/debentures operations committee of the Board of directors of the company in the meeting held on 29 October, 1999, had rejected registration of the transfer of the said 5,100 shares in favour of the petitioner. THE reasons for rejection intimated to the petitioner, are as follows:

(2.) In the letter dated 12 November, 1999, it was asserted that the decision of the shares/debenture operation committee had been ratified by the Board of directors of the company on 29 October, 1999. In view of the refusal to register the transfer of the said 5,100 shares in this favour, the petitioner has applied under Section 111A of the Companies Act, 1956. The company has filed reply to the petition. The petitioner has filed a rejoinder to such reply.

(3.) LEARNED counsel on behalf of the petitioner has relied on the decisions reported in Estate Investment Co.(P) Ltd. v. Siltap Chemicals Ltd. (1999) 1 Comp LJ 314 (CLB) : 96 Comp Cas 217 (CLB) ; Bakhtawar Construction Co. Pvt. Ltd. v. Blossom Industries Ltd. (2000) 1 Comp LJ 118: (2000) 99 Comp Cas 44 (CLB). In Estate Investment Co. (P) Ltd. v. Siltap Chemicals Ltd., supra, the Company Law Board had held that the term 'sufficient cause' as used in the proviso to Sub-section (2) of Section 111A has to be seen with reference to the grounds specified in Sub-section (3) which relates to post-registration issues. In the case of post-registration, the register of members can be rectified only on three grounds, i.e., if the transfer is in contravention of the provisions of the Securities Exchange Board of India Act, 1992, or regulations made there-under, the provisions of Sick Industrial Companies (Special Provisions) Act, 1985, or any other law for the time being in force. In other words, refusal to register on the grounds of sufficient cause could only be on these grounds, and such refusal on any other ground cannot be considered to be a sufficient cause. The ratio of the decision in the said case is equally applicable in the instant case before us.