MACKINTOSH BURN LIMITED versus SARKAR AND CHOWDHURY ENTERPRISES PRIVATE LIMITED

Citation: [2018] 3 S.C.R. 83 · Decided: 27-03-2018 · Supreme Court of India · Bench: KURIAN JOSEPH · Disposal: Disposed off

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Judgment (excerpt)

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MACKINTOSH BURN LIMITED
v.
SARKAR AND CHOWDHURY ENTERPRISES
PRIVATE LIMITED
(Civil Appeal Nos. 3322-3323 of 2018)
MARCH 27, 2018
[KURIAN JOSEPH AND
MOHAN M. SHANTANAGOUDAR, JJ.]
Companies Act, 2013: s. 58 – Refusal of registration and
appeal against refusal – Held: Under s. 58(2), the securities or
interest of any member in a public company are freely transferable
– However, u/s.58(4), it is open to the public company to refuse
registration of the transfer of the securities for a sufficient cause –
To that extent, s. 58 (4) has to be read as a limited restriction on the
free transfer permitted u/s. 58(2) – Right to refuse registration of
transfer on sufficient cause is a question of law and whether the
cause shown for refusal is sufficient or not in a given case, can be
a mixed question of law and fact – On facts, since no orders were
passed on registration of shares, respondent approached Company
law Board, which directed registration – Appellant having taken
specific grounds in the appeal and having raised questions of law
regarding its right to refuse registration of transfer on sufficient
ground, being a statutory appeal u/s. 10F, the High Court should
have considered the same among other questions of law –
Company Law Board, was of the view that the refusal to register the
transfer of shares can be permitted only if the transfer is otherwise
illegal or impermissible under any law – Going by the expression
“without sufficient cause” used in Section 58(4), said view cannot
be accepted – Refusal can be on the ground of violation of law or
any other sufficient cause – Conflict of interest in a given situation
can also be a cause – Whether the same is sufficient in the facts
and circumstances of a given case for refusal of registration, is for
the Company Law Board to decide since the aggrieved party is given
the right to appeal – Submission before the Company Law Board
that the whole transfer is deceptive and mala fide in the background
of the respondent company, should have been considered – In view
thereof, matter remitted to the Company Law Board for consideration
afresh of the appeal filed u/s. 58.
  [2018]  3 S.C.R. 83
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SUPREME COURT REPORTS
[2018] 3 S.C.R.
Disposing of the appeals, the Court
HELD: 1.1 Refusal of registration of the transfer of shares
and the appellate remedy are provided under Section 58 of the
Companies Act, 2013. Under Section 58(2) of the 2013 Act, the
securities or interest of any member in a public company are
freely transferable. However, under Section 58 (4), it is open to
the public company to refuse registration of the transfer of the
securities for a sufficient cause. To that extent, Section 58 (4)
has to be read as a limited restriction on the free transfer
permitted under Section 58 (2). Section 10F of the Companies
Act, 1956 provides that an appeal against an order passed by the
Company Law Board can be filed before the High Court on
questions of law. Right to refuse registration of transfer on
sufficient cause is a question of law and whether the cause shown
for refusal is sufficient or not in a given case, can be a mixed
question of law and fact. [Para 11, 12] [92-F; 94-A-C]
1.2 In the instant case, there is no resolution passed by the
company refusing to register the transfer of shares. Since the
Company Law Board has gone into the contentions by the
appellant for refusing to register transfer for all purposes, it has
to be taken that those contentions are the grounds taken by the
appellant for refusing to transfer the shares. The appellant has
taken several grounds in the memorandum of appeal and raised
questions of law as well on these aspects. No doubt, one of the
main questions of law stressed in the appeal pertains to the
limitation. But on going through the several grounds taken in
the Memorandum of Appeal and the questions of law raised
specifically in the appeal and the grounds, it is apparent that the
appellant had raised questions of law other than the question of
law on limitation. Hence, the High Court has gone wrong in its
view in the order dated 15.10.2015 that “the only question of law
sought to be urged in the present appeal is as to whether the
Company Law Board lacked authority in reviewing petition under
Section 5 of the Companies Act, 2013 beyond the period
envisaged in sub-Section 4 thereof”. [Para 13, 14] [94-D-F]
1.3 As per order 15.09.2017, the High Court, however,
declined to consider the review holding that th

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