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1995 Supreme(SC) 974
SUPREME COURT OF INDIA
A.S. Anand and G.T. Nanavati, JJ.
Civil Appeal Nos. 8432-33 of 1995
Decided On: 20.09.1995
Narendera Kumar Agrawal Appellants
Vs.
Saroj Maloo (Smt) and Ors. Respondent
Counsel for the Parties
For Appellant/Petitioner/Plaintiff: K.K. Lahiri and Ejaz Maqbool, Advs.
For Respondents/Defendant: Harish N. Salve, Sr. Adv., N. Bakru, Krishna Kumar, N.A. Siddiqui and Gauri Rasgotra, Advs.
EJAZ MAQBUL, GAURI RESGOTRA, HARISH N.SLAVE, K.K.LAHRI, KRISHAN KUMAR GOGNA, N.A.SIDDIQUI, N.BAKRU
Headnote:
Companies Act - Section 25,111,29, - Maghadh Stock Exchange Association - Articles of Association - Article 27-A - Company limited by guarantee and not having a share capital - Appellant lodged with MSEA an instrument of transfer/nomination for transferring his interest as a member in Company in favour of Respondent - 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 refusal filed an appeal under Section 111 of Act to Company Law Board - Stand taken by MSEA before Board was that in Articles of Association there was no provision regarding nomination of membership leading to transfer same in favour of nominee prior to June 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 Articles of Association - Even after incorporation of Article 27-A request to transfer could not be granted as it did not fulfil requirements prescribed by that provision - Action of MSEA was also sought to be supported on ground that had subsequently cancelled his request contained in his letter to transfer his interest in favour of - Board was of view that if there is no provision for transfer of other interest in Articles of Association of a company limited by guarantee and having no share capital then member cannot transfer his interest to a third person - Board that in absence of such a provision and because failed to establish her case of proper lodgement of transfer of other interest of member as required by amended Article 27-A of Articles of Association action of MSEA was justified - It therefore dismissed her application - Held, Section 28 provides that Articles of Association of a company limited by shares may adopt all or any of regulations contained in Table in Schedule - It further provides that in case of any such company which is registered after commencement of Act if Articles are not registered or if Articles are registered insofar as Articles do not exclude or modify regulations contained in Table those regulations shall insofar as applicable be regulations of company in same manner and to same extent as if they were contained in duly registered Articles - In respect of other companies Section 29 provides that Articles of Association of such company shall be in such one of forms in Tables in Schedule 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 insofar as they are not inconsistent with provisions contained in form in any of Tables adopted by company - In this case it is not disputed that Table C will be applicable - If Tables are compared it becomes apparent that there are material differences between two - These differences and their effects have not been considered by High Court - High Court has also not considered who can be a member of a company limited by guarantee and of nature and type like MSEA and whether that would make any difference in 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 put restrictions on transfer of membership by nomination - Appeals Disposed Of
JUDGMENT
Nanavati, J.
1. Leave granted.
2. These two appeals are filed against the judgment and order dated 28-4-1992 passed in Company Appeal No. 1 of 1991 and the order dated 4-8-1992 passed in Civil Review No. 55 of 1992 by the High Court of Patna.
3. 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 9-2-1989 an instrument of transfer/nomination for transferring his interest as a member in the Company in favour of Respondent 1, Smt Saroj Maloo. On 10-8-1989 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 Articles of Association. Even after incorporation of Article 27-A, 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 had subsequently cancelled his request contained in his letter dated 6-2-1989 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 the 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 27-A of the Articles of Association the action of MSEA was justified. It, therefore, dismissed her application.
4. 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 v. V.B. Gopalakrishnan 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 27-A 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 Agarwal 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.
5. 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
