Transfer of Shares | Case Analysis | Dove Investments v. Gujarat Industrial Investment Corp.

By Utkarsh Gupta Company Law Judiciary December 30, 2004

TaxGuru Citation: 2004 taxguru.in 4
Case Name: M/s. Dove Investments Private Ltd. Vs. Gujarat Industrial Investment Corporation Ltd. (Madras High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Madras High Court

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M/s. Dove Investments Private Ltd. Vs. Gujarat Industrial Investment Corporation Ltd. (Madras High Court); C.M.A.No. 3188 of 2004 and Civil Misc., Appeal No. 3223 of 2004; 30/12/2004

FACTS OF THE CASE

M/s. Gujarat Industrial Investment Corporation Limited is a Government of Gujarat Undertaking, filed Company Petition No. 13/111A/SRB of 2003 under Section 111A[1] of the Companies Act, 1956 against

1. M/s. Sterling Holiday Resorts (India) Limited

2. M/s. Dove Investments Private Limited

3. M/s. Maxworth Investments Private Ltd., and

4. N. Mohan

before the Company Law Board, Southern Region Bench, Chennai.

To register the transfer of 22,93,000 shares of the company pledged by respondents 2 to 4 in favor of the petitioner.
It is seen that the Gujarat Industrial Investments Corporation Ltd., a wholly-owned Government of Gujarat financial institution advanced a loan of Rs. 5 Crores in 1996 to the company for the conduct of its business, for which the company offered the shares held in the name of respondents 2 to 4 being the Company’s promoters and associates, by pledging the shares.
Since the Company committed default in repayment of the loan amount, the petitioner lodged with the Company, the original certificates of the pledged shares together with duly stamped and executed instruments of transfer for effecting registration of the transfer thereof in their name. It is the grievance of the petitioner that though the Company had registered the transfer of 2,99,800 shares pledged by respondents 2 and 3, it failed to effect the registration of the transfer in respect of the remaining 22,93,000 shares.
It is also the claim of the petitioner that in spite of repeated demands and lawyer’s notice dated 29.7.2003, calling upon the company to transfer the balance 22,93,000 shares in the name of the petitioner in Demat form, the Company failed and refused to register the transfer of the pledged shares in favor of the petitioner.
In order to circumvent the claim of the petitioner, the respondents 2 to 4 have filed Civil Suits in City Civil Court, Chennai for permanent injunction restraining the Company from affecting the transfer of the pledged shares in favor of the petitioner.
The respondents 2 to 4 filed a common counter affidavit wherein it is stated that the petitioner failed to comply with the provisions of sub-section (1C), according to which the instruments of transfer ought to have been stamped or endorsed by the petitioner and thereafter delivered them to the Company together with the share certificates for registration of the transfer within two months from the date so stamped or endorsed.
The requirements of Section 108 of Companies Act 1956, being mandatory have not been duly satisfied and therefore the Company is not under an obligation to effect the transfer of shares in the name of the petitioner.
The petitioner filed a rejoinder stating that the plea of non-compliance with the requirements of Section 108(1C) has neither been raised before the Civil Court nor in the present proceedings. The Company has already given effect to the transfer of 2,99,800 shares.

ISSUES