Procedure Against Refusal To Transfer Shares Under The Provisions Of Section 58 Of The Companies Act 2013.
The member of a public company can transfers his shares voluntarily at any time as per the provisions specified by the Articles of the Association of the Company, if the company refuse to transfer shares than the member of the company may adopt the process specified under section 58 of the Companies act 2013.Section 58 of the Companies Act, 2013, deals with process of the company to be followed by on refusal to register the transfer of securities.
Refusal By The Private Company
- 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 of the right to any securities or interest of a member in the company, then the company shall send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, was delivered to the company. Notice shall contain the reasons for refusal to register the transfer or transmission.
- 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, was delivered to the company.[Section 58(3)]
Refusal By The Public Company
- 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, 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 instrument of transfer or intimation of transmission, appeal to the Tribunal. .[Section 58(4)]
- The Tribunal, while dealing with an appeal 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.[Section 58(5)]
- If a person contravenes the order of the Tribunal he shall be punishable with imprisonment for a term not less than one year but may extend to three years and with fine not less than one lakh rupees which may extend to five lakh rupees.[Section 58(6)]\
Where the articles of association of a company confers a discretion on the directors with regard to acceptance of transfers, this discretion is a fiduciary one to be exercised bona fide in what the Board considers to be in the interest of the company. If on a true construction of the articles, the directors are only given the powers to reject on certain prescribed grounds and it is proved that on these grounds the request for transfer was rejected, the Court cannot substitute the opinion of the Board. If the articles of association give an unconfined discretion, the court would interfere with it only on proof of malafide intensions.
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