Full Judgment Text
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PETITIONER:
SHRI NARENDERA KUMAR AGRAWAL
Vs.
RESPONDENT:
SMT. SAROJ MALOO AND ORS.
DATE OF JUDGMENT20/09/1995
BENCH:
NANAVATI G.T. (J)
BENCH:
NANAVATI G.T. (J)
ANAND, A.S. (J)
CITATION:
1995 SCC (6) 114 JT 1995 (7) 369
1995 SCALE (5)519
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
NANAVATI, J.
Leave granted
These two appeals are filed against the judgment and
order dated 28.4.92 passed in Company Appeal No.1 of 1991
and the order dated 4.8.92 passed in Civil Review No.55 of
1992 by the High Court of Patna.
The Maghadh Stock Exchange Association (hereinafter
referred to as ‘MSEA’) is registered as a company under
Section 25 of the Companies Act (hereinafter referred to as
the ‘Act’). It is a company limited by guarantee and not
having a share capital. Appellant, Narendera Kumar Agarwal,
lodged with MSEA on 9th February, 1989 an instrument of
transfer/nomination for transferring his interest as a
member in the Company in favour of Respondent No.1, Smt.
Saroj Maloo. On 10.8.89 she was informed by MSEA that
transfer of membership by nomination in her favour was not
possible in absence of any provision to that effect in its
Articles of Association. Aggrieved by the refusal Smt. Saroj
Maloo filed an appeal under Section 111 of the Act to the
Company Law Board (hereinafter referred to as the Board).
The stand taken by MSEA before the Board was that in the
Articles of Association there was no provision regarding
nomination of membership leading to transfer of the same in
favour of nominee, prior to June 1989 and that in case of a
company limited by guarantee without share capital like MSEA
membership cannot be transferred by nomination until a
clause providing for nomination is incorporated in its
Articles of Association. It was also contended that a
request for nomination could not have been received and
considered till a provision in that behalf was incorporated
in the Article 27A, the request to transfer could not be
granted as it did not fulfil the requirements prescribed by
that provision. The action of MSEA was also sought to be
supported on the ground that Shri Narendera Kumar Agarwal
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had subsequently cancelled his request contained in his made
by a letter dated 6.2.89 to transfer his interest in favour
of Smt. Saroj Maloo. The Board was of the view that if there
is no provision for transfer of other interest in the
Articles of Association of a company limited by guarantee
and having no share capital then the member cannot transfer
his interest to a third person. The Board held that in
absence of such a provision and because Smt. Saroj Maloo
failed to establish her case of proper lodgement of the
transfer of other interest of the member as required by the
amended Article 27A of the Articles of Association the
action of MSEA was justified. It, therefore, dismissed her
application.
She preferred an appeal before the High Court of Patna
against the said order passed by the Board. The High Court
held that no distinction can be made between transfer of
share of a limited company limited by shares and transfer of
other interest of a member in a company limited by
guarantee. Following the decision of this Court in V.B.
Rangaraj vs. V.B. Gopalkrishnan and others reported in 1992
(1) SCC 160 wherein it is held that the only restriction of
the transfer of the shares of the company is as laid down in
its Articles of Association and a restriction which is not
specified in the Article is not binding either on the
company or on the shareholders, the High Court held that as
there was no bar of transfer by nomination of other interest
in the Articles of Association of MSEA, refusal by MSEA was
not justified and legal. It also held that subsequent
incorporation of Article 27A in the Articles cannot justify
the action of the MSEA. It, therefore, allowed the appeal
and directed MSEA to transfer the interest of Narendera
Kumar Agrawal in the company in favour of Smt. Saroj Maloo.
While doing so, the High Court observed that it has
proceeded only on the basis that there was no such bar for
transfer when the application was made.
It was contended on behalf of the appellant that the
High Court did not consider all the relevant aspects before
directing MSEA to register the transfer. It was submitted
that though other interest of member in a company like the
shares is a moveable property and transferable the transfer
can be made in the manner provided by the Articles of the
Association. The learned counsel appearing for MSEA also
submitted that if the High Court had carefully examined the
Articles of Association of MSEA then it would have noticed
that it does contain restrictions with respect to transfer
of membership.
Section 28 provides that the Articles of Association of
a company limited by shares may adopt all or any of the
regulations contained in Table A in Schedule I. It further
provides that in the case of any such company which is
registered after the commencement of the Act if Articles are
not registered or if Articles are registered in so far as
Articles do not exclude or modify the regulations contained
in Table A those regulations shall in so far as applicable
be the regulations of the company in the same manner and to
the same extent as if they were contained in duly registered
Articles. In respect of other companies Section 29 provides
that the Articles of Association of such company shall be in
such one of the forms in Tables C, D and E in Schedule I as
may be applicable or in a form as near thereto as
circumstances admit. It further provides that nothing
contained in that Section shall be deemed to prevent a
company from including any additional matters in its
Articles in so far as they are not inconsistent with the
provisions contained in the form in any of the Tables C, D
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and E adopted by the company. In this case, it is not
disputed that Table C will be applicable. If Tables A and C
are compared it becomes apparent that there are material
differences between the two. These differences and their
effects have not been considered by the High Court. The High
Court has also not considered who can be a member of a
company limited by guarantee and of the nature and type like
MSEA and whether that would make any difference in the
matter of transfer of other interest of a member in such a
company. It was submitted that for becoming a member of a
company like MSEA certain qualifications are necessary and
that would by necessary implication, even in absence of
Articles of Association. But restrictions on transfer of
membership by nomination.
All the relevant material is not before us and,
therefore, we do not think it proper to express any opinion
on the merits of the controversy raised before us. We are of
the opinion that the High Court should have examined all
these relevant aspects and ought not to have disposed of the
matter by merely observing that no distinction can be made
in the matter of transfer of share or other interest between
a company limited by shares and a company limited by
guarantee. We, therefore, set aside the judgment and order
passed by the High Court in Company Appeal No.1 of 1991 and
in Civil Review No.55 of 1992 and remit the matter back to
the High Court for deciding the appeal afresh after hearing
both the sides and considering all the relevant aspects. It
is clarified that it will also be open to the parties to
raise their contentions regarding fulfillment of the
requirements of Section 108. The appeals are disposed of
accordingly. There shall be no order as to costs.