TALAYAR TEA COMPANY LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) In these matters, the petitioners are challenging an order of the Company Law Board dated February 10/19, 1983 by which the appeals filed by respondents 2 to 10 under S. 111 of the Companies Act, 1956 were allowed and the petitioner company was directed to register them as shareholders of the company.

(2.) The respondents had applied to the company for registration of the transfer of shares in their favour on 17/12/1980. The company was of opinion that these applications for transfer were not maintainable. The grounds on which this view was taken are now immaterial because both the Company Law Board and the High court have rejected this ground and, after hearing both counsel, we are of the opinion that the ground of rejection was not correct and that the applications were properly made.

(3.) Under the statute, it is clear that where the Board of Directors of a company have not given any reasons for refusing to register transfer of shares, the Company Law Board should give an opportunity to the company to state the reasons and then decide the application and the appeal on merits. In the present case, we are of the opinion that the company did not have this opportunity because right through it was maintaining the stand that the applications for transfer had not been properly made. It is unnecessary to enquire whether the company was justified in the stand which it took and whether it should not have furnished their decision on merits and the reasons therefor at least before the Company Law Board or the High court. In our opinion, interests of justice required that the Company Law Board should have given an opportunity to the company to consider the applications and either accept them or state the reasons for which the applications are to be rejected so far as their merits are concerned. The High court was in our opinion, in error in upholding the order of the Company Law Board directing the company to register the transfer without giving the company such opportunity. Their finding to this effect is set aside.