Where Refusal is Due to Other Reasons
- Other reasons means
- Transfer of security is in contravention of any law, or
- Likely change in composition of Board of Directors which might be prejudicial to the interest of company
- In such cases, the company is under a legal obligation to make a reference to the company Law Board and forward copies of such reference to both the transferor and transferee.
- The transferor and transferee would be given an opportunity of making representation, if any, in writing, where after the Company Law Board would direct that the shares be either registered or not registered by the company.
- Where the order directs registration of transfer, the company is found to give effect to the registration within 10 days of the receipt of order of the Company Law Board.
- On the other hand, where the company Law Board has directed that the transfer of shares need not be registered, the company is obliged to intimate the transferor and transferee within 10 days of such direction.
Appeal Against Refusal
- Notice about refusal to register the shares, must be given by the company to the transferor and transferee, within two months, to the transferor and transferee. Company shall also intimate the reasons for refusal.
- Transferor or transferee, may appeal to the Company Law Board (CLB) in Form No. 1, as specified in CLB regulations, 1991, within two months of the receipt of notice of such refusal, or
- Where the company has sent no notice, within four months from the date on which the instrument of transfer was delivered to the company.
- Company Law Board, after hearing the parties, may pass any of the following orders.
- Dismiss the appeal, or
- Direct that transfer shall be registered within 10 days of he receipt of order, or
- Direct the rectification of the register and also direct the company to pay damages, if any, sustained by any party aggrieved, or
- May grant any interim injunction or stay, or
- Incidental or consequential orders regarding payment of dividend or the allotment of bonus or rights shares.
- In case of any default by the company, in complying with the orders of Company Law Board, the company ordinary defaulting officers may be fined in monetary terms.