NCLAT Companies Act, 2013 specifically regulates the mechanism for Transfer & Transmission of Securities

NCLAT Companies Act, 2013 specifically regulates the mechanism for Transfer & Transmission of Securities

The Hon'ble National Company Law Appellate Tribunal has dismissed the Appeal preferred under Section 421 read with Section 58 and 241 of the Companies Act, 2013 against the impugned order passed by National Company Law Tribunal, Bangalore Bench.

Herein, the Appellant was aggrieved by the impugned order of the Tribunal as the Tribunal had directed to the Appellant No.1, Company (Positive edge Technology Pvt. Ltd.) to give effect to the transmission of shares of late Mr. Santanu Mondal, the deceased Director and Shareholder of Appellant No.1 Company in favour of Respondents by rectifying its register of members and also to pay all consequential benefits on par with other shareholders with effect from 01.05.2017.

The Appellant against the impugned order prayed for setting aside the impugned order dated 26.02.2020 passed by the Tribunal.

The Appellant mainly contended that the respondents were putting pressure on the Appellants for transmission of 5000 equity shares erstwhile held by Mr. Mondal in the Appellant No.1 Company without complying with the Indian Laws Intestate Succession. The Appellants also stated that as per the laws of Intestate Succession Application in the State of California, USA the surviving spouse and surviving issue exclude all other possible heir to the state of the deceased by as per Indian Law for Intestate Succession to the property of the Hindu, the mother of the deceased is also a class-I heir and thus inherits along with surviving spouse and issues of the deceased.

As per the Appellant, the mother should have been given a share. The Appellants have also stated that the Article of Association of the company is conferring discretion upon the Board of Directors in such transmission matters. Since the Appellant had failed to provide succession certificate so they have not agreed for the transfer of shares.

The Appellate Tribunal observed that it was very much clear that both the Appellants and the Respondents were known to each other for a long time and knew each other families also. It was not in dispute that the Appellant No.2 had purchased the share of California, US based Company on the same identity from the Respondents. It was also not disputed that in the objections filed by the Appellant before the Tribunal, they had not raised the issue of mother as an inheritor.

As per the Tribunal, the Appellants (Respondent at Tribunal) had raised only the issue of production of probate and appropriate legal heir Certificate from Respondents at Tribunal. The issue of mother of Late Mr. Mondal, legal heir was not raised at Tribunal and hence a new ground.

In any case the mother had already released her rights as far as back on 25.12.2015 by way of a letter. Even the Respondents were agreeable that the shares be transmitted in the name of the all three (mother, wife and daughter). Identity was not denied, he could not take a plea topsy-turvy. He was prohibited by his conduct-estoppel by conduct.

The Tribunal also elucidated that the Appellant company had not assigned a tenable or sound reason as well as taken the correct approach to the issue of transmission. The appellant himself had purchased the shares of the respondents of USA based company at a consideration on the same plea, no doubt, but taking a different plea in India and without communicating in explicit terms when this fact was known to the Appellant no.2 since the date of death of Late Mondal or earlier.

Indian Evidence Act, 1872 does not permit taking one stand at one place & a different stand at other place. Companies Act, 2013 vide chapter IV specifically regulates the mechanism for Transfer & Transmission of Securities. Hence, as per Section 430 of the Companies Act, Civil Court is not to have Jurisdiction on such issues. In view of these observations, the Appeal was dismissed and the order of NCLT, Bengaluru Bench was upheld.