M/S DOVE INVESTMENTS PVT. LTD. AND ORS. versus M/S GUJARAT INDUSTRIAL INV. CORPORATION AND ANR.

Citation: [2006] 1 S.C.R. 1087 · Decided: 02-02-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

\ 
.. 
M/S DOVE INVESTMENTS PVT. LTD. AND ORS. 
A 
v. 
M/S GUJARAT INDUSTRIAL INV. CORPORATION AND ANR. 
FEBRUARY 2, 2006 
[S.B. SINHA AND P.K. BALASUBRAMANYAN, JJ.] 
B 
Companies Act, 1956: 
Section 108(/c)-Transfer of shares-Registration of-Delay in filing 
application for-Registration of transfer allowed-High Court affirming the C 
order-Held, Section 108 requires the applicant desiring to obtain 
registration of transfer of shares in its favour to comply with the provisions 
contained therein-Even if a statute is directory in nature, the same should 
be substantially complied with-What would satisfy the requirements of 
substantial compliance would depend upon facts of each case-On facts, D 
. appellants not prejudiced by act of respondent No. I in not filing application 
for registration of transfer of shares within prescribed period-With a view 
to do complete justice no interference with order of High Court called for-
Constitution of India, Articles 136 and 142. 
Appellants took a loan of Rs.4.5 crores from respondent No. I. By way E 
of security respondent Nos.2 to 4 pledged 25,92,800 shares in favour of 
respondent No.1. On 2.1.2001 respondent No. I lodged the said share 
certificates along with share transfer forms with the appellants for 
transferring the same in its name on the ground that there had been delay in 
repayment of the loan. Upon compliance of requisite formalities as envisaged F 
by Section 108 of the Companies Act, 1958, respondent No.I was to present 
the said shares with the appellants by 8.12.1999. Respondent No.1 raised a 
grievance that the appellant, though had registered a transfer of 2,99,800 
shares pledged by respondent Nos.2 to 4, they failed to effect registration of 
transfer in respect of the remaining shares, that the shares were freely 
transferable and the conduct of appellant in not effecting the transfer was G 
mala fide and without sufficient cause. On an application filed by respondent 
No.I, the Company Law Board directed the appellants to register transfer of 
the remaining shares in the name of respondent No. I. The appeals filed by 
the appellants and respondent Nos.2 to 4 were dismissed by the High Court. 
1087 
H 
1088 
SUPREME COURT REPORTS 
(2006] I S.C .R. 
A The judgment of the High Court was challenged in the present appeals. 
It was contended for the appellants that since the prnvisions of s.108 of 
the Act, in so far as the obligations for registration of the shares, were not 
complied with by respondent No.I within the time stipulated, the appellants 
had discretion in registering the shares in terms of Section 108; and that 
B the Company Law Board and the High Court erred in exercising their 
jurisdiction. For respondent No.I it was contended that provisions of Section 
108 of the Act were directory and not mandatory. 
Dismissing the appeals, the Court 
C 
HELD: 1.1. Section 108 of the Companies Act, 1956 requires the 
applicant desiring to obtain the registration of transfer of shares in its favour 
to comply with the provisions contained therein. It is, therefore, ordinarily 
for the applicant to comply with all formalities. If it does not do so it cannot 
make the company bound to effect the transfer, unless sufficient and cogent 
D reasons are assigned. The time is specified for filing of such an application 
in the prescribed form and upon complying with the requirements prescribed 
therein. [ 1093-A, B[ 
1.2. Whether a statute would be directory or mandatory will depend upon 
the scheme thereof. Ordinarily a procedural provision would not be mandatory 
E even if the word "shall" is employed therein unless a prejudice is caused. 
However, even if a statute is directory in nature the same should be 
substantially complied with. What would satisfy the requirements of 
substantial compliance, however, would depend upon the facts of each case. 
[ 1093-C; 1095-D[ 
F 
P. r Rajan v. TP.M Sahir & Ors., [2003[ 8 SCC 498; Chandrakant Ut1am 
Chodankar v. Dayanand Rayu Mandrakar and Ors .. [2005] 2 SCC 188; 
Mohan Singh and Ors. v. International Airport Authority of India and Ors., 
(1997[ 9 SCC 132; Kai/ash v. Nankhu and Ors .. (2005[ 4 SCC 480 and Salem 
Advocate Bar Association .. TN. v. Union of India, [2005[ 6 SCC 344, relied 
G on. 
Crawford on Statutory Construction, p. 539, referred to. 
1.3. The appellants do not state as to how they would be prejudiced by 
the act of respondent No. I in not filing the application for registration of 
transfer of share

Excerpt shown. Read the full judgment & AI analysis in Lexace.