The transfer of shares in a third company pursuant to an order sanctioning a scheme of amalgamation does not require compliance with the provisions of Section 108(1) of the Companies Act, 1956 and the transferee of the shares pursuant to an order sanctioning a scheme of amalgamation is entitled to cite such shareholding to meet the qualification under Section 399 thereof any time after the order sanctioning the scheme becomes effective.

Sanjib Banerjee, J.

The question of law raised is so trivial that the appeal under Section 10F of the Companies Act, 1956 does not call for a judgment; a two-page order dictated in five minutes would have sufficed. It is the other aspect of the matter that needs to be recognised and highlighted, particularly in the light of the backbreaking numbers of pending cases of every description in courts and tribunals.

2. The appeal is at the behest of the company in respect whereof a petition under Sections 397 and 398 of the Companies Act, 1956 has been launched in 2009 before the Company Law Board, complaining of oppression and mismanagement by the management of such company. The order appealed against is one of May 23, 2014 on the application by the company and its management for vacating an ex-parte ad interim order of August 20, 2009. The appellants maintain that since the names of the petitioners before the CLB did not figure in the company's register of members, the petitioners lacked the qualification under Section 399 of the said Act of 1956 to launch any proceedings complaining of oppression or mismanagement in the affairs of the company. The appellants insist that notwithstanding the petitioners before the CLB asserting in the relevant petition that the second petitioner controlled 50 per cent of the undisputed paid up capital in the company, since the second petitioner's claim to such shareholding was by virtue of orders passed on two successive schemes of amalgamation without such petitioner before the CLB having its name recorded in the company's register of members, the relevant petitioner's claim as to its shareholding in the company had to be altogether disregarded.

3. The inane question of law that arises in this appeal is whether a transferee company can cite the shareholding of a transferor company in a third company, upon the sanction of a scheme of amalgamation, as requisite qualification under Section 399 of the said Act of 1956 to institute proceedings under Section 397 or Section 398 of the said Act of 1956 against the third company.

4. In order to attach a modicum of seriousness and confer a degree of respectability to the question so that a negative answer thereto may even be considered, the appellants have referred to Sections 41, 84 and 108 of the said Act of 1956. The appellants suggest that since the compliance with the provisions of Section 108 of the Act 1956 has been judicially regarded to be mandatory, there is no escaping from its applicability in every situation. The appellants submit that since Section 41 of the Act of 1956 defines a "member" of a company, the corollary would hold good: that unless the conditions are satisfied in print, any charlatan claiming as a member of a company should not be regarded as such. With equal aplomb, the appellants claim that since a share certificate is prima facie evidence of the title of the member to such shares as indicated in Section 84 of the Act of 1956, a person cannot pass off as a member of a company without producing the share certificates in support of his assertion as a member.

5. The tenacity in stretching the tenuous argument is amplified in the citing by the appellants of the judgments reported at (2005) 11 SCC 73 (Claude-Lila Paruleker v. Sakal Papers (P) Limited); (2010) 155 Comp Cas 431 (CLB) (Morgan Ventures Limited v. Blue Coast Hotels and Resorts Limited); (2011) 4 Comp LJ 23 (Del) (In the Matter of: Spice Communications Limited); (2007) 4 CHN 678 (In the Matter of: Areva T and D India Limited); (1986) 2 SCC 656 (General Radio and Appliances Company Limited v. M.A. Khader) and (2007) 2 SCC 431 (Peerless General Finance and Investment Company Limited v. Poddar Projects Limited). But before the law as was recognised in such cases is deciphered, it is necessary to notice the essential facts leading up to the legal issue raised in this appeal.

6. There is no dispute that the first petitioner before the CLB holds 20 shares in the company. On