REPORTABLE

SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 3322-3323 OF 2018

(Arising out of S.L.P. (Civil) Nos.8204-8205 of 2018)

(Diary No. 485 of 2018)

MACKINTOSH BURN LIMITED ... APPELLANT (S)

VERSUS

SARKAR AND CHOWDHURY ENTERPRISES

PRIVATE LIMITED ... RESPONDENT (S)

J U D G M E N T

KURIAN, J.:

Delay condoned. Leave granted.

2. The appellant is a public company with majority of shares

held by the Government of West Bengal. The respondent, which is

holder of 28.54 per cent of the shares purchased 100 shares,

which together would make its holding 39.77 per cent, sought

registration of the shares. Since, no orders were passed on the

registration, the respondent approached the Company Law Board,

Kolkata Bench, Kolkata. It was mainly contended by the appellant

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that the respondent Company is controlled by a competitor in

business, and hence, it would not be in the interest of the

Government Company to permit such transfer. The Company Law

Board, however, rejected the contentions and directed

registration as per order dated 16.09.2015. The order, to the

extent relevant, reads as follows:

“6. Having considered (sic) the Company

Petition, reply, rejoinder and the arguments (oral

and written), it is observed that the Respondent

Company is a Government of West Bengal

Undertaking wherein 51.01% of the total issued,

subscribed and paid up share capital is held by the

Government of West Bengal which correspondence

to 454 equity shares of Rs.3,500/- each. Besides, the

Petitioner Company is a member of the Respondent

Company being the registered shareholder of 254

equity shares of Rs. 3,500/- each. As stated in the

Company Petition, on or about 02.07.2014, the

Petitioner Company purchased additional 100 shares

of and in the Respondent Company from one Shri

Sankar Naik in physical mode and the Petitioner

Company vide letter dated 02.04.2014, forwarded

the original share certificates along with the transfer

deeds duly signed, stamped and executed to the

Respondent Company for registering the transfer of

the said 100 shares in the name of the Petitioner

Company. But, the said communication returned

with the postal endorsement “refused” and hence,

the Petitioner Company through its Advocate issued

a notice dated 09.06.2014 calling upon the

Respondent Company in the share register, which

was responded to by the Respondent Company vide

communication dated 16.06.2014. Thereafter, once

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again the Petitioner Company vide letter dated

02.07.2014, forwarded all the original share

certificates together with the duly executed and

stamped transfer deeds to the Respondent Company

for effecting registration of the transfer in the name

of Petitioner Company. Apart from this, the Petitioner

Company followed up the matter by issue of

reminder dated 25.08.2014 to the Respondent

Company, but in vain. Consequently, legal notice

dated 11.09.2014 was issued calling upon the

Respondent Company to take immediate steps to

register and record the name of the Petitioner

Company as the registered owner in relation to the

aforesaid 100 shares. In this regard, the Respondent

Company has replied that the action of the Petitioner

Company has been contrary to the SEBI Act as well

Substantial Acquisition of Shares and Takeover

Regulations. In addition, the Petitioner Company is

controlled by M/s MKJ Group which is involved in

similar business as the Respondent Company is

carrying on and hence, the intention of the Petitioner

Company to purchase 100 equity shares is to take

over the control of the Respondent Company. It has

also been mentioned that on 13.03.2014, the

Petitioner Company had already made an

application for the sale of its said 254 Shares to the

Principal Secretary of Government of West Bengal,

Public Enterprises Division as well as the Managing

Director of the Respondent Company. In this context,

the Petitioner Company Advocate has averred that

the question of acquisition being violation of SEBI

Act or Takeover Regulation is not applicable in the

case of the Respondent Company as the shares of

the Respondent Company are not listed. Not only

this, the acquisition of 100 shares cannot and will

not change the control of the Respondent Company

even after registration of such transfer as the

Company will continue to remain as a Government

Company. It is also irrelevant in the present context

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as the Petitioner Company is controlled by MKJ

Group or that the business of the Respondent

Company and the MKJ Group are similar.

6.1 Under the aforesaid facts and circumstances, it

is undoubtedly clear that the Respondent Company

received the share transfer deeds along with the

original share certificates for registration of the

transfer in favour of the Petitioner Company who is

already the second largest shareholder in the

Respondent Company. On one side, the Respondent

Advocate has made the submission that on

13.03.2014, the Petitioner Company had made an

application for sale of its 254 shares to the Principal

Secretary of Government of West Bengal, Public

Enterprises Division as well as the Managing Director

of the Respondent Company, on the other side,

doubt has been raised over the intention of the

Petitioner Company that the purported purchase of

100 equity shares is to take over the control of the

Respondent Company. Over and above, the plea has

been taken by the Respondent Company Advocate

that the Petitioner Company is controlled by M/s MKJ

Group and the business of the Respondent Company

and MKJ Group are similar, whereas the Government

of West Bengal is singly owing 51.01% of the paid up

capital of the Company and thereby, the MKJ Group

cannot acquire the control of the Respondent

Company. As a matter of fact, even if the purchase

of additional 100 shares by the Petitioner Company

is taken into consideration, the total shareholding of

the Petitioner Company will be 39.77% only. Besides,

Article 44 of the Article of Association of the

Respondent Company gives the authority to the

Board to decline the transfer of shares and when

such shares are not fully paid up. In the present

case, there is no lien on any share of the Petitioner

Company and also, the shares are fully paid up.

Thus, there seems to be no impediment in transfer

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of shares and hence, the Petitioner Company has the

right to get the shares transferred in its name.

6.2IN view of the legal position stated supra, I

am of the considered opinion that the conditions

specified in the concerned Article 44 regarding

transfer of shares have been duly filled by the

Petitioner Company and the registration of transfer

cannot be refused arbitrarily and the reason for

non-registration of transfer in favour of the Petitioner

Company on the suspicion of acquisition of control

by the Petitioner Company over the Respondent

Company is baseless and unfounded. Therefore, in

the interest of justice, I hereby direct the

Respondent Company to register the transfer of

impugned 100 shares in the name of the Petitioner

Company within 10 days of the receipt of this Order

and also, to make suitable entries in the register of

members thereafter.”

3. The order passed by the Company Law Board in C.P. No.

151 of 2014 was challenged by the appellant before the High

Court of Calcutta under Section 10F of the Companies Act, 1956.

In the Memorandum of Appeal, the following questions of law

were raised:

“XXV. FOR THAT following substantial questions of

law arise for consideration and determination by

this Hon’ble Court:

a.Whether the Learned Company Law Board was

to first consider whether the Appeal has been

filed within the time prescribed by Section 58

(4) of the Companies Act, 2013 which is

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condition precedent to assuming jurisdiction to

entertain the Appeal and should have refused to

entertain the Appeal?

b.Whether it was the inherent duty and

incumbent upon the Learned Company Law

Board to consider the question of as to whether

the Appeal had been filed within the time

prescribed under Section 58 (4) of the

Companies Act, 2013 and to reject the Appeal?

c.Whether the Learned Company Law Board

should have held that in any event the

application for recording of transfer of shares

made on 2

nd

April, 2014 was refused/rejected by

the letter dated 16.06.2014 served on the

respondent same day and the appeal not having

been filed within 60 days from 16

th

June, 2014

was barred under Section 58 (4) of Companies

Act, 2013.

d.Whether the Learned Company Law Board

should have held in view of the respondents

case in their Advocates letter dated 9

th

June,

2014 that registration was refused on 2

nd

April,

2014 the appeal filed on 29

th

September, 2014

was beyond the time fixed under Section 58 (4)

of the Companies Act, 1956 and was not

entertainable?

e.Whether the learned Company Law Board can

direct rectification of the share register in favour

of an applicant when the applicant is controlled

by Company which is a competitor in similar

business of the Company?

f.Whether the learned Company Law Board ought

to have considered that MKJ Group would have

access to the appellant and its trade secrets

and tenders submitted and policy decision of

the petitioner and act contrary to the interest of

the appellant and the public at large?

g.Whether the learned Company Law Board can

direct rectification of share registration within

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10 days from the receipt of the impugned order

without there being a valid good reason?

h.Whether on the notification of the Companies

Act, 2013 the Company Law Board is entitled to

give effect to the repealed provision of the

Companies Act 1956?

i.Whether the learned Company Law Board can

pass an order without considering the

submissions and arguments of a party in its

entirety?

j.Whether the learned Company Law Board can

pass an order without taking into consideration

the contention of the appellant by passing an

urreasoned order?

k.Whether the provision of the Companies Act,

2013 with relation of the time period fixed in

Section 58 and 59 are mandatory?

l.Whether in view of the notification of Section 58

and 59 of the Companies Act 2013, the Learned

Company Law Board had jurisdiction to

adjudicate an application there under in view of

the said provision only providing jurisdiction to

the Tribunal?”

4. The High Court by order dated 15.10.2015, dismissed the

appeal. The Court took the view that since the appeal filed by the

respondent before the Company Law Board under Section 58/59

of the Companies Act, 2013 was liable to be admitted and

considered even beyond the period of limitation, there was no

other question of law taken in the appeal. To quote the relevant

portion:

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“The Court : The only question of Law ought

to be urged in the proposed appeal is as to

whether the Company Law Board lacked authority

in receiving the petition under Section 58 of the

Companies Act, 2013 beyond the period envisaged

in sub-section (4) thereof.”

5. The order dated 15.10.2015 passed by the High Court was

challenged in Special Leave Petition (Civil) No. 35029 of 2015 by

the appellant. The Special Leave Petition was permitted to be

withdrawn with liberty to approach the High Court. The said order

dated 04.01.2016 reads as follows:

“The learned counsel for the petitioner seeks

permission to withdraw the special leave petition

with liberty to approach the High Court. Permission

is granted with the above liberty. Accordingly, the

special leave petition is dismissed as withdrawn.

We make it clear that we have not considered the

special leave petition on merits.”

6. It appears the appellant filed an application to recall the

judgment. The same was dismissed by order dated 08.08.2016.

The High Court took the view that the liberty granted to the

appellant was to file a proper review and not to seek a fresh

hearing by recalling the judgment dated 15.10.2015. To quote:

“The Court: The basis of the present

application appears to be an order passed by the

Hon’ble Supreme Court on 4th January, 2016

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preferred against the order passed by a

Coordinate Bench on 15th October, 2015. It

appears from the order of the Hon’ble Supreme

Court that the petitioner prayed for withdrawal of

the special leave petition with liberty to approach

the High Court. The Hon’ble Supreme Court

granted the said liberty. This application has been

filed with a prayer for de novo and or fresh

consideration of the order dated 15th October,

2015 on a specious plea that the coordinate bench

did not consider important questions of law while

dismissing the 10F appeal. The petitioner in effect

seeks a review of the order passed by a

Coordinate Bench. The application is also not

accompanied by a memorandum of review. The

application is not in form. The petitioner has also

not approached the Coordinate Bench seeking

review of the order.

Under such circumstances, this application

stands dismissed. However, there shall be no order

as to costs.”

7. The appellant challenged the said order dated 08.08.2016

before this Court.

8. By order dated 11.11.2016, it was clarified that it would

be open to the appellant to file a proper review. Accordingly, the

appellant filed a review before the High Court. The said review

petition was dismissed by the High Court holding that there was

no mistake capable of correction in review and that the correction

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could be done only by a superior forum. The order dated

15.09.2017 of the High Court reads as follows:

“The Court :- The grounds cited for seeking

reconsideration of the order dated October 15,

2015 have more to do with the merits of the

original appeal under Section 10F of the

Companies Act, 1956 than what is evident from

the relevant order. Not every mistake is capable of

correction in a review. A mistake of law or in the

appreciation of facts may be made, but the same

would be amenable to correction by a superior

forum and not by way of a review.

Since no grounds of review are made out,

RVW No.59 of 2016 is dismissed without going into

the merits of the grounds urged.

There will be no order as to costs.”

9. The present appeal is filed compositely challenging the

orders dated 15.10.2015 and 15.09.2017.

10. We have extensively heard Shri C. Aryama Sundram,

learned Senior Counsel appearing for the appellant and Shri

Shyam Divan, learned Senior Counsel appearing for the

respondent.

11. Refusal of registration of the transfer of shares and the

appellate remedy are provided under Section 58 of the

Companies Act, 2013. This provision had come into force at the

relevant time. The Section reads as follows:

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“58. Refusal of registration and appeal

against refusal.-(1) If a private company limited

by shares 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 securities or interest of a member in the

company, it shall within a period of thirty days

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 transferor and the

transferee or to the person giving intimation of

such transmission, as the case may be, giving

reasons for such refusal.

(2) Without prejudice to sub-section (1), the

securities or other interest of any member in a

public company shall be freely transferable:

Provided that any contract or arrangement

between two or more persons in respect of

transfer of securities shall be enforceable as a

contract.

(3) The transferee may appeal to the Tribunal

against the refusal within a period of thirty days

from the date of receipt of the notice or in case no

notice has been sent by the company, within a

period of sixty days from the date on which the

instrument of transfer or the intimation of

transmission, as the case may be, was delivered to

the company.

(4) If a public company without sufficient

cause refuses to register the transfer of securities

within a period of thirty days from the date on

which the instrument of transfer or the intimation

of transmission, as the case may be, is delivered

to the company, the transferee may, within a

period of sixty days of such refusal or where no

intimation has been received from the company,

within ninety days of the delivery of the

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instrument of transfer or intimation of

transmission, appeal to the Tribunal.

(5) The Tribunal, while dealing with an appeal

made under sub-section ( 3) or sub-section (4),

may, after hearing the parties, either dismiss the

appeal, or by order—

(a)direct that the transfer or transmission

shall be registered by the company and

the company shall comply with such

order within a period of ten days of the

receipt of the order; or

(b)direct rectification of the register and

also direct the company to pay

damages, if any, sustained by any party

aggrieved.

(6) If a person contravenes the order of the

Tribunal under this section, he shall be punishable

with imprisonment for a term which shall not be

less than one year but which may extend to three

years and with fine which shall not be less than

one lakh rupees but which may extend to five lakh

rupees.”

(Emphasis supplied)

12. Under Section 58(2) of the Companies Act, 2013, the

securities or interest of any member in a public company are

freely transferable. However, under Section 58 (4), it is open to

the public company to refuse registration of the transfer of the

securities for a sufficient cause. To that extent, Section 58 (4) has

to be read as a limited restriction on the free transfer permitted

under Section 58 (2). Section 10F of the Companies Act, 1956,

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provides that an appeal against an order passed by the Company

Law Board can be filed before the High Court on questions of law.

Right to refuse registration of transfer on sufficient cause is a

question of law and whether the cause shown for refusal is

sufficient or not in a given case, can be a mixed question of law

and fact.

13. In the instant case, there is no resolution passed by the

company refusing to register the transfer of shares. Since the

Company Law Board has gone into the contentions by the

appellant for refusing to register transfer for all purposes, it has to

be taken that those contentions are the grounds taken by the

appellant for refusing to transfer the shares.

14. The appellant has taken several grounds in the

memorandum of appeal and raised questions of law as well on

these aspects. No doubt, one of the main questions of law

stressed in the appeal pertains to the limitation. But on going

through the several grounds taken in the Memorandum of Appeal

and the questions of law raised specifically in the appeal and the

grounds, it is apparent that the appellant had raised questions of

law other than the question of law on limitation. Hence, the High

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Court has gone wrong in its view in the order dated 15.10.2015

that “the only question of law sought to be urged in the present

appeal is as to whether the Company Law Board lacked authority

in reviewing petition under Section 5 of the Companies Act, 2013

beyond the period envisaged in sub-Section 4 thereof”.

15. As per order 15.09.2017, the High Court, however,

declined to consider the review holding that the same was beyond

the scope of review and that the same can be corrected only by a

superior forum.

16. We are afraid that the stand taken by the High Court

cannot be justified in the factual background we have explained

and the legal position analysed above. The appellant having taken

specific grounds in the appeal and having raised questions of law

regarding its right to refuse registration of transfer on sufficient

ground, being a statutory appeal under Section 10F of the

Companies Act, 1956, the High Court should have considered the

same among other questions of law.

17. Be that as it may, as we have been taken through the

grounds before the Company Law Board, we propose to consider

the matter from that stage. The Company Law Board, it appears,

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was of the view that the refusal to register the transfer of shares

can be permitted only if the transfer is otherwise illegal or

impermissible under any law. Going by the expression “without

sufficient cause” used in Section 58(4), it is difficult to appreciate

that view. Refusal can be on the ground of violation of law or any

other sufficient cause. Conflict of interest in a given situation can

also be a cause. Whether the same is sufficient in the facts and

circumstances of a given case for refusal of registration, is for the

Company Law Board to decide since the aggrieved party is given

the right to appeal. The contention of the appellant before the

Company Law Board that the whole transfer is deceptive and

mala fide in the background of the respondent company, should

have been considered.

18. In that view of the matter, we do not think that we should

go in further detail on the merits of the contentions. The order

dated 16.09.2015 passed by the Company Law Board, Kolkata

Bench, Kolkata, the order dated 15.10.2015 in ACO No. 199 of

2015 in APO No. 448 of 2015 and the order dated 15.09.2017 in

RVWO 59 of 2016 and ACO 171 of 2016 in APO 448 of 2015 are

set aside. The matter is remitted to the Company Law Board, now

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the National Company Law Tribunal for consideration afresh of the

appeal filed under Section 58 of the Companies Act, 1956. We

make it clear that the Tribunal shall pass orders afresh

uninfluenced by any of the observations and findings in the order

dated 16.09.2015 of the Company Law Board, orders of the High

Court or of this Court. We direct the Tribunal to pass orders

expeditiously since the appeal is of the year 2014. The appeals

are disposed of accordingly.

19.There shall be no order as to costs.

............................................J.

(KURIAN JOSEPH)

............................................J.

(MOHAN M. SHANTANAGOUDAR)

NEW DELHI;

MARCH 27, 2018.

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