Plant Lipids (P) Ltd. v. Synthite Industries Ltd. & Ors.

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The Tax Publishers 2019 TaxPub(CL) 0217 (NCLAT-Chen) : (2019) 212 CompCas 0181 : (2019) 002 CLJ 0073 Plant Lipids (P) Ltd. v. Synthite Industries Ltd. & Ors. COMPANIES ACT, 2013 --Refusal of registration and appeal against refusal --Refusal of transfer without sufficient cause Direction to register transfer----Where company refused to register the transfer of shares in favour of the petitioner without any sufficient cause, said refusal was contrary to law.--SIL was initially created as a private company. Subsequently, it became a deemed public company. A shareholder of SIL transferred his equity shares in favour of PLPL. Both the parties executed share transfer forms and PLPL paid consideration towards the said transfer. When PLPL lodged the documents relating to the transfer with the board of directors of SIL to register the transfer of the shares, it refused to register the transfer on the ground that the lodgment was in violation of article 23A of the Articles of Association (AoA) of the company. Thus, PLPL filed petition under section 58 against SIL. Held: The shareholding of PLPL constituted 0.02% of the overall shareholding of SIL, thus, there were no chances of hostile takeover of the company by PLPL. There was nothing on record to suggest that PLPL had derived any benefit as a competitor, which was otherwise to be enjoyed by SIL. Further, article 23A was deleted from the time when the company became a deemed public company and the same was admitted by SIL. Therefore, the reliance on article 23A, which was not the part of the AoA was misconceived. Hence, SIL was directed to register the transfer of shares in the name of PLPL. Companies Act, 2013, Section 58 *REFERRED :* McDowell and Co. Ltd. v. Shaw Wallace and Co. Ltd. (2002) 108 Comp Cas 306 (CLB), Estate Investment Co. P. Ltd. v. Siltap Chemicals Ltd. reported in (1999) 96 Comp Cas 217 (CLB), Karamsad Investments Ltd. v. Nile Ltd. (2001) 34 SCL 269 (AP) : (2002) 108 Comp Cas 58 (AP), Bajaj Auto Ltd. v. N. K. Firodia (1971) 41 Comp Cas 1 (SC), Bank of Maharashtra v. Sangli Bank Ltd. (1992) 73 Comp Cas 125 (CLB) ; MANU/CLB/0002/1992, Mafatlal Industries Ltd. v. Gujarat Gas Co. Ltd. (1999) 97 Comp Cas 301 (Guj), Western Maharashtra Development Corporation Ltd. v. Bajaj Auto Ltd. (2010) 154 Comp Cas 593 (Bom), Messer Holdings Ltd. v. Shyam Madanmohan Ruia (2010) 159 Comp Cas 29 (Bom), Benarsi Das Saraf v. Dalmia Dadri Cement Ltd. (1958) 28 Comp Cas 435 (Punjab), Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala (1961) 31 Comp Cas 387 (SC), Shree Krishna Agency Ltd. v. CIT (1971) 82 ITR 372 (SC) ; (1971) 3 SCC 377, Surinder Singh Sibia v. Vijay Kumar Sood (1992) 1 SCC 70, Shailesh Prabhudas Mehta v. Calico Dyeing and Printing Mills Ltd. (1994) 80 Comp Cas 64 (SC) ; (1994) 3 SCC 339 and Vasant Investment Corporation Ltd. v. Company Law Board reported in (2000) 102 Comp Cas 421 (Bom) SUBSCRIBE FOR FULL CONTENT

The Tax Publishers 2019 TaxPub(CL) 0217 (NCLAT-Chen) : (2019) 212 CompCas 0181 : (2019) 002 CLJ 0073

Plant Lipids (P) Ltd. v. Synthite Industries Ltd. & Ors.

COMPANIES ACT, 2013

--Refusal of registration and appeal against refusal --Refusal of transfer without sufficient cause Direction to register transfer----Where company refused to register the transfer of shares in favour of the petitioner without any sufficient cause, said refusal was contrary to law.--SIL was initially created as a private company. Subsequently, it became a deemed public company. A shareholder of SIL transferred his equity shares in favour of PLPL. Both the parties executed share transfer forms and PLPL paid consideration towards the said transfer. When PLPL lodged the documents relating to the transfer with the board of directors of SIL to register the transfer of the shares, it refused to register the transfer on the ground that the lodgment was in violation of article 23A of the Articles of Association (AoA) of the company. Thus, PLPL filed petition under section 58 against SIL. Held: The shareholding of PLPL constituted 0.02% of the overall shareholding of SIL, thus, there were no chances of hostile takeover of the company by PLPL. There was nothing on record to suggest that PLPL had derived any benefit as a competitor, which was otherwise to be enjoyed by SIL. Further, article 23A was deleted from the time when the company became a deemed public company and the same was admitted by SIL. Therefore, the reliance on article 23A, which was not the part of the AoA was misconceived. Hence, SIL was directed to register the transfer of shares in the name of PLPL.

Companies Act, 2013, Section 58

REFERRED : McDowell and Co. Ltd. v. Shaw Wallace and Co. Ltd. (2002) 108 Comp Cas 306 (CLB), Estate Investment Co. P. Ltd. v. Siltap Chemicals Ltd. reported in (1999) 96 Comp Cas 217 (CLB), Karamsad Investments Ltd. v. Nile Ltd. (2001) 34 SCL 269 (AP) : (2002) 108 Comp Cas 58 (AP), Bajaj Auto Ltd. v. N. K. Firodia (1971) 41 Comp Cas 1 (SC), Bank of Maharashtra v. Sangli Bank Ltd. (1992) 73 Comp Cas 125 (CLB) ; MANU/CLB/0002/1992, Mafatlal Industries Ltd. v. Gujarat Gas Co. Ltd. (1999) 97 Comp Cas 301 (Guj), Western Maharashtra Development Corporation Ltd. v. Bajaj Auto Ltd. (2010) 154 Comp Cas 593 (Bom), Messer Holdings Ltd. v. Shyam Madanmohan Ruia (2010) 159 Comp Cas 29 (Bom), Benarsi Das Saraf v. Dalmia Dadri Cement Ltd. (1958) 28 Comp Cas 435 (Punjab), Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala (1961) 31 Comp Cas 387 (SC), Shree Krishna Agency Ltd. v. CIT (1971) 82 ITR 372 (SC) ; (1971) 3 SCC 377, Surinder Singh Sibia v. Vijay Kumar Sood (1992) 1 SCC 70, Shailesh Prabhudas Mehta v. Calico Dyeing and Printing Mills Ltd. (1994) 80 Comp Cas 64 (SC) ; (1994) 3 SCC 339 and Vasant Investment Corporation Ltd. v. Company Law Board reported in (2000) 102 Comp Cas 421 (Bom)