Date of Judgement:
4 September, 2001
Bench:
A.K. Banerji J., Chairman
Parties:
Petitioner: Rajiv Das
Respondent: United Press Limited
Subject
This case dealt with whether the company can refuse splitting of shares of the joint holder on the ground that the petitioner failed to comply with statutory requirements relating to transfer.
Legal Provisions
Section 108 of Companies Act, 1956 states that the transfer of shares shall not be valid unless duly stamped.
Overview
- The petition was filed under Section 111 seeking splitting of 3738 fully paid up equity shares of the company which was held jointly by the petitioner and the second respondent Shrimati Kanti Devi, in two equal lots and for placing the name of the petitioner on the first place in the lot.
- The petitioner claimed that he holds a total of 8,143 fully paid equity shares in the first respondent company out of which 3738 shares were held jointly with the second respondent.
- The petitioner owing to differences with the respondent applied for splitting of shares and subsequently the petitioner applied to the company to split the shares.
- The company asked the petitioner to lodge transfer forms and share certificates before the shares could be split into two lots.
- The petitioner contended that the respondent kept the certificates in her custody to avoid split in holding.
- The respondents, filing their reply, opposed the petition. It was contended by the respondents that the petitioner had started interfering in the management of the company and had forcibly taken away various important records and documents of the company which resulted in an FIR being lodged against the petitioner.
- Further, the respondents denied that the petitioner held 8143 fully paid equity shares. It was stated by the respondents that the petitioner held 100 fully paid ordinary equity shares jointly and that Shrimati Bijlee Devi was the first named joint holder.
- The respondent stated that the respondents failed to comply with provisions relating to transfer deeds, therefore the company could not grant the request of splitting shares.
- However, the contentions by the respondent were denied by the petitioner and he reiterated his contentions stated in petition.
Issues
- Whether the company’s refusal on splitting of shares valid?
Judgement Analysis
- The Company Law Board after careful examination of respective submission by the parties contended that the contentions of the counsel for the respondent were well founded and acceptable. Further, the Company Law Board observed that the request for splitting of shares, the consent of the other joint holder was not taken nor were the certificates or transfer deeds duly stamped and signed.
- The counsel for the respondent relied on the case Hemalata Saha v. Stadmed Ltd, wherein it was held that the company is not bound to recognise the claim of division of shares without proper instrument of transfer.
- The board observed that the allotment of shares in severalty can be done only in action for partition, when the parties have agreed mutually for the partition and the company cannot partition the shares on its own as no such power is provided in the Act.
Conclusion
The Company Law Board held that the where the shares were held in joint names and one of the joint holders intends to split the shares equally between the joint holders by issuing fresh certificates, the company shall not be legally bound to do so unless the share transfer deeds executed by both the joint holders being duly stamped are lodged with the company along with the share certificates as per provisions prescribed in Section 108 of the Companies Act, 1956.
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