Refusal of registration and appeal against refusal.
58. (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 transferor 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 orderâ€”
(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.
SHARE CAPITAL AND DEBENTURES
Section 58 is brought to force with effect from September 12, 2013. It provides remedy in case of refusal by company to transfer securities.
Corresponding provision is Section 111 under the Companies Act, 1956, which ceased to be effective from September 12, 2103.
Whereas the constitution of the National Company Law Tribunal (‘Tribunal’) is likely to take some time, the Ministry of Corporate AffairsÂ in exercise of the powers conferred by sub-section (1) of section 470 of the Companies Act, 2013 madeÂ the Companies (Removal of Difficulties) Order, 2013 andÂ clarified thatÂ until a date is notified by the Central Government under sub-section (1) of
section 434Â for transfer of all matters, proceedings or cases to the Tribunal, the Board of Company Law Administration (ie. Company Law Board) shall exercise the powers of the Tribunal under sections 24, 58 and section 59 in pursuance of the second proviso to sub-section (1) of section 465 of the said Act.