The transfer of shares and removal of a director must comply with the provisions of the Companies Act. Any illegal actions in this regard can be challenged and rectified by the Company Law Board.

V.G. Sabhahit, J.—This appeal is filed by respondents Nos. 1 to 4 in Company Petition No. 17 of 2006, on the file of the Company Law Board, Additional Principal Bench, Chennai, being aggrieved by the order dated February 15, 2008 (B.V. Reddy v. Legend Technologies (India) P. Ltd. (2009) 147 Comp Cas 81), wherein, the Company Law Board has allowed the application filed by respondent No. 1 herein filed under sections 397 and 398 read with section 402 of the Companies Act (hereinafter called as "the Act" for short) with a view to regulate the conduct, of the company's affairs and passed the following order (page 129):

(i) The transfer of 28,500 shares by the petitioner in favour of the second respondent is hereby set aside and the company shall appropriately rectify its register of members by substituting the name of the petitioner in the place of the second respondent, in respect of the impugned shares, within thirty days of the receipt of the order and file an affidavit of compliance, within ten days thereafter;

(ii) N. Nityananda and Co., Chartered Accountants, Bangalore-560 004, (mobile No. 9844022328) are appointed to determine the price of each share in the company as at March 31, 2006, being the date approximate to the company petition, after verifying the books of account and other records of the company and on considering the submissions of the contesting parties on valuation of the shares of the company. The valuer shall submit his report within thirty days, under copy to the parties, upon which each group shall quote in sealed cover before the Company Law Board, the competitive price of each share in the company at the price higher than the price determined by the valuer, agreeing to buy or sell the shares of other group at the aforesaid higher price, within fifteen days thereafter. The parties are directed to be present on April 25, 2008, at 2.30 p.m., for consequential directions in furtherance of the offers which may be submitted by them and no seisin is retained over any of the other contentious issues involved in the main petition. The company will bear the remuneration of the valuer.

With the above directions, the main petition and the company applications stand disposed of. In view of this, all the interim orders are vacated. No order as to costs.

The material facts of the case leading up to this appeal with reference to the rank of the parties before the Company Law Board are as follows:

It is averred in the petition that the petitioner and the second respondent are the promoter shareholders of the first respondent-company (hereinafter called as "company" for short) which was incorporated on May 6, 1998, with Registration No. 23703, having its registered office at No. 26/A, Doddenakundi Industrial Area, Bangalore-560 048, Karnataka.

2. The petitioner subscribed for 50 per cent. of the capital at the time of incorporation and the balance 50 per cent. was subscribed by the second respondent. The authorised share capital of the company is Rs. 65,00,000 (rupees sixty five lakhs only) divided into 6,50,000 (six lakhs fifty thousand) equity shares of Rs. 10 (rupees ten only) each. The issued, subscribed and paid-up capital of the company as at March 31, 2005, was Rs. 28,40,000 (rupees twenty eight lakhs forty thousand only) comprising of 2,84,000 (two lakhs eighty four thousand) equity shares of Rs. 10 (rupees ten) each fully paid-up. The main object of the company is to carry on the business of manufacture and dealing in design, develop, manufacture, assemble, repair, maintain and service aerospace vehicles, their structures, systems, accessories, tooling, ground equipment.

3. It is further averred that though the first respondent-company is incorporated under the Companies Act, in substance it is a quasi-partnership which was functioning on the basis of mutual trust and confidence just as in the case of a partnership and the relationship between the parties was that as partners with all members taking an active r