CANARA BANK Vs. ANKIT GRANITES LIMITED

JUDGEMENT

(1.) THIS is a petition originally filed under Section 111(4) of the Companies Act, 1956 (hereinafter referred to as "the Act") and subsequently considered under Section 111A on an application made by the petitioner against M/s. Ankit Granites Limited (hereinafter referred to as "the company") for rectification of the register of members of the company by entering the name of the petitioner in respect of the shares impugned in the petition. The petition came up for hearing from time to time and finally on October 13, 1998.

(2.) The facts of the case, in brief, are that the petitioner, being a nationalised bank, had extended certain credit facilities to the company against the security of, among other things, pledge of the impugned shares held by promoters of the company. The pledged shares are required to be transferred in the name of the petitioner in accordance with Circular No. DBOD No. SIC.BC.114/C.739(A4) of 1986, dated October 24, 1986, issued by the Reserve Bank of India. Accordingly, the petitioner, had lodged 6,01,270 shares with the company on April 21, 1995, for effecting transfer in favour of the petitioner. In spite of protracted correspondence, the company failed to effect the transfer in favour of the petitioner. Hence, the petition.

(3.) DURING the hearing, Shri R. Parthasarathy, authorised representative for the petitioner while reiterating the submissions made in the pleadings submitted that the petitioner had extended foreign bills discounting facility for carrying on business of the company. The impugned shares were pledged by the promoters of the company in favour of the petitioner. The Reserve Bank of India guidelines stipulate that whenever advances granted by banks against the security of shares exceed Rs. 10 lakhs, the said shares are required to be transferred in the bank's name. The company being a listed company failed to comply with the requirements of Section 22A of the Securities (Contracts) Regulation Act, 1956, and also clause 47 of the articles of association of the company before refusal of transfer of the impugned shares. The credit facility being enjoyed by the company since June, 1994, to carry on its day-to-day operations cannot be said to be temporary in nature. The shares are, therefore, required to be transferred in favour of the petitioner in accordance with the Reserve Bank of India guidelines. The petitioner will comply with the listing agreement as and when the impugned shares are transferred by the company. As the shares are yet to be transferred in favour of the petitioner, there is no violation of the listing agreement entered into between the company and the stock exchange. In view of the indebtedness of the company, Shri Parthasarathy sought for transfer of the impugned shares in favour of the petitioner.