Holding

The direction to register the shares in favour of respondent No.1 does not extend to respondent No.2, and until the shares are registered in the name of respondent No.1, the application of respondent No.2 for registration cannot be considered.

Summary

Peerless General Finance & Investment Co. Ltd. (appellant) held shares of Poddar Udyog Ltd. Under a court‑sanctioned scheme of arrangement, a portion of the business was transferred to Poddar Projects Ltd. (respondent No.1), which subsequently sold the shares to Vijaya Finance Corp. Ltd. (respondent No.2). The appellant refused to register the shares for respondent No.2, leading to an application under Section 111A of the Companies Act, 1956. The Company Law Board ordered registration in favour of respondent No.1 only, a decision upheld by the Calcutta High Court. While the appeal was pending, the appellant registered the shares in the name of respondent No.1, rendering the issue of registration for respondent No.2 academic. The Supreme Court held that until the shares are registered in the name of the original transferee, a subsequent transferee’s application cannot be considered, and the direction to register for respondent No.1 does not extend to respondent No.2. Consequently, the appeal was disposed of as infructuous.

Issues considered

Whether registration of shares transferred under a scheme of arrangement requires execution of a further instrument of transfer under Section 108 of the Companies Act, 1956.
Whether the direction of the Company Law Board to register shares in favour of the original transferee (respondent No.1) applies to the subsequent transferee (respondent No.2).
Whether the appeal becomes academic after the shares are registered in the name of respondent No.1.

Legislation cited

Companies Act, 1956s. 108, s. 111A, s. 391, s. 394

Subjects

share transferscheme of arrangementregistration of sharesCompanies Act 1956Company Law Boardsubsequent transfereeacademic issueappeal

Judgment

PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. A
J v.
PO DD AR PROJECTS LTD. & ANR.

FEBRUARY 13, 2007

[TARUN CHATTERJEE AND ALTMAS KABIR, JJ.] B

r Companies Act 1956-Sections 108, 391 and 394-Transfer of shares
·~
under scheme of arrangement-Registration of shares in name of subsequent
transferee-Execution of instrument of transfer-Compliance of-Held: Till
the time the shares are not registered in the name of original transferee, it
c
cannot be registered in the name of subsequent transferee-During pendency
of appeal, company has registered the shares in question in the name of
original transferee, the question having been rendered academic, appeal is
disposed of
D
PU Company held certain shares of the appellant-company. Under a
scheme of arrangement a part of the business division of PU was transferred
"' to the rt:spondent No.I. Thereafter, the respondent No.I sold the shares to
}
the respondent No.2. Respondent no. 2 lodged the shares with the appellant-
company for registration twice. Appellant-company did not register the shares.
Respondents filed application. Company Law Board allowed the same and E
directed the appellant-company to register the original shares in favour of
the respondent No.I, but did not grant any relief to the respondent No.2.
Respondent No.2 did not file any appeal. Appellant-company filed an appeal.
High Court upheld the order of Company Law Board. Hence the present appeal.

Appellant-company contended that the question involved in the matter
F
had been rendered academic since during the pendency of the appeal, the
appellant-company had registered the original shares in the name of the
respondent No.I-company; and that since the respondent No.2 had not
preferred any appeal against the order of the Company Law Board, the same
became final with regard to the respondent No.2. G
Respondent No. 2 contended that the decision of the Company Law Board,
_i.
as applicable to the respondent No.I would also operate in its favour.

Disposing of the appeal, the Court
573 H
.i
. ·j..__

574 SUPREME COURT REPORTS [2007] 2 S.C.R.

A HELD: Till such time the shares were not registered in the name of the
respondent No.I, the application of the respondent No.2 for subsequent -
registration of the same shares in its name could not be considered.
Accordingly, the direction given by the Company Law Board in respect of the
respondent No. I could not apply to the respondent No.2 and that is why the
said respondent No. 2 did not prefer any separate appeal against the order of
B the Company Law Board. The questions raised in the appeal have been
rendered academic since the appellant-company has since registered
the shares in question in the name of the respondent No.I-company.
(Paras 4 and 5) [575-G, H; 576-A, BJ ,.'\

c CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5929 of2005.

From the Judgment and final Order dated 2.8.2005 of the High Court of
Calcutta in ACO No. 215 of2004 in APOt No. 743/2004.

Ashok H. Desai, Bhaskar P. Gupta, S. Sukumaran and K. Rajeev for the
Appellant.
D
R.F. Nariman, C. Mukund, Neeraj, Pankaj Jain, Ashok Kumar Jain and
Bijoy Kumar Jain for the Respondents.
.,
The Judgment of the Court was delivered by
E ALTAMAS KABIR, J. I. Certain shares of the appellant-company were
being held by Poddar Udyog Limited. Under a scheme of arrangement
sanctioned by ~he Calcutta High Court on 19th August, 1997, a part of the
business division of Poddar Udyog Limited was transferred to the respondent
No. I herein. On 3rd September, 1999, the respondent No. I, Poddar Projects
F Limited, sold ~he shares to the respondent No.2, Vijaya Finance Corporation
Limited. The said respondent lodged the shares with the appellant-company
herein for registration on 12th November, 200 I. The appellant-company refused
to register the ~aid shares on 9th January, 2002 and intimated the advocate
for the respo~dent No.2 of its said decision.

G 2. On 16th May, 20.02, the shares were again lodged for registration on
behalf of the respondent No.1-Poddar Projects Limited, but once again the
appellant-company refused to register the same. .....
-
3. Such refusal led to the filing of an application by the respondents
herein under Section 111 A of the Companies Act, 1956 on 28th October, 2002.
H

I !
PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. •« PODDAR PROJECTS LTD. [ALTMAS KABIR.I.] 575

..,,.. The Company Law Board allowed the application filed by the respondent A
No. I herein by directing the appellant-company to register the original shares
in favour of the respondent No. I, but declined to grant any relief to the
respondent No.2. The respondent No.2 accepted the order and did not prefer
any appeal. The appellant-company being dissatisfied with the decision of the
Company Law Board filed an appeal before the Calcutta High Court under
Section IOF of the Companies Act, 1956. Before the Calcutta High Court, it was B
submitted on behalf of the appellant-company that since no transfer deed was
delivered in terms of Section 108 (IA) of the Companies Act, the lodgment
r.. for registration was itself defective and could not, therefore, be acted upon.
It was further submitted that till such time as the shares were not registered
in favour of the respondent No. I-company, the same could not be registered c
in the name of the subsequent transferee, namely, the respondent No.2 herein.
Certain other objections were also taken regarding cancellation of stamps and
the fact that the transferee was not a desirable person.

4. The Calcutta High Court negated the submissiOns made on behalf of
the appellant-company and affirmed those of the Company Law Board. It is D
against the said order of the Calcutta High Court that the instant appeal has
·' been filed.

" 5. Although, in the appeal a question was raised as to whether for
registration of transfer of shares effected under a scheme of arrangement or
compromise or amalgamation sanctioned by a competent court under Sections E
391 and 394 of the Companies Act, it is necessary to execute a further
instrument of transfer as contemplated by Section I 08 of the said Act, at the
time of the hearing of the appeal, it was submitted on behalf of the appellant-
company that the said question had been rendered academic. It was submitted
that during the pendency of the appeal, the appellant-company had complied F
! with the direction of the Calcutta High Court and had registered the original
shares in the name of the respondent No.1-compnay. Since the respondent
No.2 had not preferred any appeal against the order of the Company Law
Board, the same became final as far as the respondent No.2 is concerned.
Although, on behalf of respondent No.2, it was submitted that the decision
of the Company Law Board, as applicable to the respondent No. I, would also G
operate in its favour, such a submission is not acceptable since the respondent
,> No.2 stands on a different footing. Till such time as the shares were not
registered in the name of the respondent No. I, the application of the respondent
No.2 for subsequent registration of the same shares in its name could not be
considered. Accordingly, the direction given by the Company Law Board in H
576 SUPREME COURT REPORTS [2007] 2 S.C.R.

A respect of the respondent No. I could not apply to the respondent No.2 and
that is why the said respondent No.2 did not prefer any separate appeal
against the order of the Company Law Board.

6. As pointed out by Mr. Ashok Desai, learned senior counsel, appearing
on behalf of the appellant-company, the questions raised in the appeal have
B been rendered academic having regard to the fact that the appellant-company
has since registered the shares in question in the name of the respondent
No.I-company.

7. The appeal is, therefore, disposed of as having become infructuous
C and the questions raised therein are left open for decision in an appropriate
case.

8. There will be no order. as to costs.

N.J.. Appeal disposed of.