• When a request for company registration of transfer or transmission of shares or other rectification securities issued by a private company is refused by its Board of Directors. Whether such refusal is in pursuance of any power of the company under its articles or otherwise the private company should 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 transferor and the transferee or to the person giving intimation of such transmission, as the case may be, and such intimation should contain the reasons for such refusal. [Sub-section(1) of section 58 of the 2013 Act].

  • It is necessary to note that the shares or debentures or other interest of any member in a company are movable properties transferable in the manner provided by the articles of the company. [Section 44 of the 2013 Act]
  • The transferee may appeal to the National Company Law Tribunal against the refusal within a period of thirty days from the date of the receipt of the notice or in case no notice has been sent by the company, within a period of sixty days of from the date on which the instrument of transfer or the intimation of transmission, as the case may be, is delivered to the company. [Sub-section (3) of section 58 of the 2013 Act].
  • 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 or rectification as the case may be, is delivered to the company, the transferee may, within a period of sixty (60) days of such refusal or where no intimation has been received from the company, within ninety days of the delivery of the instrument of transmission or rectification , appeal to the Tribunal. [Sub-section(4) of the section 58 of the 2013 Act].
  • The above provisions are applicable only with respect to cases where the company has refused to register the request for registration of transfer or transmission even after submitting all necessary documents together share transfer instruments, if applicable and evidence showing death of the original security holder and will or legal heir certificate/ succession certificate.
  • If the name of any person is, without sufficient cause, entered in the register of members of the company, or after having been entered in the register, is, without sufficient cause, omitted there from, or is a default is made, or unnecessary delay takes place in entering the register, the fact of any person having become or ceased to be a member, the person aggrieved, or any member of the company , or the company registration may appeal in such form as may be prescribed, to the Tribunal , or to a competent court outside India, specified by the Central Government by notification, in respect of foreign members or debenture holders residing outside India, for rectification of the Register. [Sub-section (1) of section 59 of the 2013 Act].
  • The above provisions show that it is possible apply to the Tribunal seeking an order directing a company to rectification of its Register of Members or Register of other securities or records of a Depository.
  • The word ‘sufficient Cause’ is to be tested in relation to the Act and the Rules, without sufficient cause entered or omitted to be entered means done or omitted to do in contradiction of the Act and the Rules or what ought to have been done under the Act and the Rules or what ought to have been done under the Act and the Rules but not done.

rectification

  • It may be noted that the above provision comes to the rescue to apply only in relation to a need for rectification of the register of members and not to register of any other securities. Further where it pertains to rectification of register of members or debenture holders residing outside India, such application must be made to a competent court outside India.
  • The tribunal may, after hearing the parties to the appeal under sub-section (1) by order, either dismiss the appeal or direct that the transfer or transmission or rectification shall be registered by the company within a period of 10(ten) days of the receipt of the order or direct rectification of the records of the depository or the register and in latter case, direct the company to pay damages, if any, sustained by the party aggrieved. It may be noted that the statue has not prescribed any time limit within which the appeal or as the case may be the application should be disposed of by the Tribunal. [Sub-section (2) of section 59 of the 2013 Act]
  • The provision of this section shall not restrict the right of a holder of securities, to transfer such securities and any person acquiring such securities shall be entitled to voting rights unless the voting rights have been suspended by an order of the Tribunal. [Sub-section(3) of section 59 of the 2013 Act].
  • Where the transfer of securities is in contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956, the securities and exchange board of India Act, 1992 or this Act or any other law for the time being in force, the Tribunal may, on an application made by the depository, company, depository participant, the holder of the securities and the Exchange Board, direct any company registration or a depository to set right the contravention and rectify its register or records concerned for rectification.[Sub-section (2) of section 59 of the 2013 Act]

rectification

  • The very word “rectification” connotes something what ought to have been done but by the error not done and what ought not to have been done was done requiring correction. Rectification in other words, is the failure on the failure on the part of the company to comply with the directions under the Act.
  • Please note that the Tribunal has not yet been constituted under Section 408 of the 2013 Act. BY virtue of the Companies ( Removal of Difficulties) order, 2013, the powers of the Tribunal Under section 24, 58 and 59 of the 2013 Act have been conferred upon the Company Law Board (CLB).
  • Therefore for this purpose application may be made to CLB and the application must be in the prescribed form in accordance with the Company Law Board Regulations, 1991 and the same must be filed with the prescribed fee in accordance with the Company Law Board (Fees on Applications and petitions) Rules, 1991.
  • The fee on application for rectification must be paid by way of demand draft duly drawn in favor of pay and Account Officer , Ministry of corporate affairs, payable at new Delhi, Kolkata, Mumbai, Chennai as the case may be.
  • The fee as per the Serial No.35 for an application under section 58 or 59 of the 2013 act, as given in the schedule to the Company Law Board (Fees on applications and petitions) Rules, 1991 is Rs.100/- (Rupees one hundred only) as amended by Notification No. GSR. No. 772(E) dated 03.11.14
  • please note that there are four benches of the CLB in India, viz., the Delhi Bench, the Chennai bench, the Mumbai Bench, the Kolkata Bench.
  • Application must be made to the bench under the jurisdiction of which the registered office of the company is situated. For instance, a company having its registered office in Coimbatore can file an application only before the Chennai bench, which has jurisdiction over states of Andhra Pradesh, Telangana, Karnataka, Kerala, Tamilnadu and Union Territories of Pondicherry and Lakshadweep Island.

rectification

  • Every application made to the CLB must be made in the form of a petition in Form. No. 1 in Annexure 2 to the Regulations.
  • While making an application to CLB, please ensure that the documents required to be attached as per the Annexure 3 with the petition as per Regulation 18 of the CLB Regulations, 1991 are properly enclosed. In case of an application under Section 58 or 59, depending upon whether company is the petitioner or any other person, the requisite documents will change.

Where the company itself the petitioner, enclose the following documents:

  • Copy of the memorandum and articles of association
  • Latest audited balance-sheet and profit and loss account , auditor’s report and director’s report.
  • Authenticated copy of the extract of the Register of members.
  • Copy of the resolution of the Board or committee of Directors(where applicable)
  • Any other relevant documents.
  • Affidavit verifying the petition
  • Bank draft evidencing payment of application fee.
  • Memorandum of appearance with copy of the Board Resolution or the executed Vakalatnama, as the case may be.
  • The Two extra copies of the petition.

Where the petition is made by any other person, enclose the following documents:

  • Documentary evidence in support of the statements made in the petition including the copy of the letter written by the petitioner to the company for purpose of registering the transfer of, or the transmission of the right to, any share, or interest in, or debentures as also a copy of the letter of refusal of the company.

rectification

  • Copies of the documents returned by the company
  • Any other relevant document
  • Affidavit verifying the petition
  • Bank draft evidencing payment of application fee.
  • Memorandum of appearance with copy of the Board’s Resolution or the executed Vakalatnama, as the case may be.
  • Two extra copies of the petition.
  • Please note that the petitioner must serve an advance notice with a copy of the petition, reference or application on the respondent(s) and shall produce evidence of such service at the time of presentation of such petition, reference or application in CLB.
  • Where the number of respondents is more than five, Secretary or Bench officer may permit the petitioner to file extra copies of the petition at the time of issue of notice to the respondents. The petitioner shall serve the copy of the reference ;or petition other than a petition under sections 49,79, 80A, 111 and/or 111A  and 113,118,144,163196,219,225,284,304 and 307 of the companies of the 1956 Act and under sections 58 and 59 of the 2013 act upon the concerned ROC having jurisdiction over the company registration and shall attach to and to present with his petition, reference an acknowledgement from the office of the ROC receiving copy of the petition or reference so served.
  • The general heading of the petition should also be as in Form NO.1 in Annexure 2.
  • In the petition, please give the requisite particulars and enclose the required documents and please give a concise statement of facts in a chronological order, each paragraph containing as nearly as possible a separate issue for rectification, fact or otherwise. There should be a declaration that the petition has been made within the applicable period of intimation. The petitioner further declares that he had not previously filed any application for rectification, writ petition or suit regarding the matter in respect of which this petition for rectification has been made, before any court of law or any other authority or any other Bench or the Board and not any such rectification application, writ petition or suit is pending before any of them. Further the petitioner must set out the relief(s) prayed for.
  • The petition should be presented by the petitioner in person through authorized representative to the office of the bench or be sent by registered post with acknowledgement due addressed to the Secretary or Bench officer of the bench concerned , as the case may be.
  • Please note that the CLB has powers to direct the company registration or any other person concerned who is a respondent in the petition to pay damages to the person who is aggrieved and in the interregnum the CLB has powers to suspend the voting rights too on the shares or other securities which from the subject matter of the petition.

rectification

  • Please note that complicated question questions of fact involving questions of fact involving questions of the title to shares or other securities may not be adjudicated by CLB.
  • If issue arise in the rectification, whether the applicant is the owner of the shares ; whether there is fraud or forgery in holding the shares or the very title to the shares, then such issues will be beyond the jurisdiction of the company court and will have to be decided by the Civil Court.
  • Please note that any default in complying with the order of the Tribunal will entail a fine of not less than Rs. 1,00,000 but which may extend to Rs. 5,00,000 and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 1 year or with fine which shall not less than Rs. 1,00,000 but which may extend to Rs.3,00,000 or with both.

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