Companies Act Section 58 — Refusal of registration and appeal against refusal
CHAPTER IV SHARE CAPITAL AND DEBENTURES
Commercial / Corporate
Summary
Sub-section (1) covers a private company limited by shares that refuses to register the transfer of securities or the transmission of a member's interest by operation of law. If such a refusal happens, the company must send a notice of the refusal to the transferor and the transferee, or to the person who gave intimation of the transmission, within thirty days from the date the transfer instrument or transmission intimation was delivered to the company. The notice must include the reasons for the refusal.
Sub-section (2) states that, without affecting sub-section (1), the securities or other interest of any member in a public company shall be freely transferable. It also provides that any contract or arrangement between two or more persons regarding the transfer of securities shall be enforceable as a contract.
Sub-section (3) gives the transferee the right to appeal to the Tribunal against the refusal. The appeal must be made within thirty days from the date of receipt of the notice of refusal. If no notice has been sent by the company, the appeal must be made within sixty days from the date the transfer instrument or transmission intimation was delivered to the company.
Sub-section (4) deals with a public company that refuses to register the transfer of securities without sufficient cause within thirty days from the date the transfer instrument or transmission intimation is delivered. In such a case, the transferee may appeal to the Tribunal within sixty days of such refusal, or if no intimation has been received from the company, within ninety days of the delivery of the transfer instrument or transmission intimation.
Sub-section (5) describes what the Tribunal may do when dealing with an appeal under sub-section (3) or sub-section (4). After hearing the parties, the Tribunal may either dismiss the appeal, or by order, direct that the transfer or transmission shall be registered by the company, with the company required to comply within ten days of receiving the order. Alternatively, the Tribunal may direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.
Sub-section (6) sets out the penalty for contravening an order of the Tribunal under this section. A person who contravenes such an order shall be punishable with imprisonment for a term of not less than one year but which may extend to three years, and with a fine of not less than one lakh rupees but which may extend to five lakh rupees.
Official Text
(1) If a private company limited by shares refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transfer or and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.
(2) Without prejudice to sub-section (1), the securities or other interest of any member in a public company shall be freely transferable:
Provided that any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract.
(3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days from the date of receipt of the notice or in case no notice has been sent by the company, within a period of sixty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company.
(4) If a public company without sufficient cause refuses to register the transfer of securities within a period of thirty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, is delivered to the company, the transferee may, within a period of sixty days of such refusal or where no intimation has been received from the company, within ninety days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal.
(5) The Tribunal, while dealing with an appeal made under sub-section (3) or sub-section (4), may, after hearing the parties, either dismiss the appeal, or by order—
(a) direct that the transfer or transmission shall be registered by the company and the company shall comply with such order within a period of ten days of the receipt of the order; or
(b) direct rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved.
(6) If a person contravenes the order of the Tribunal under this section, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.