31 January 2015
Narendera Kumar Agarwal, lodged with The Maghadh Stock Exchange Association (MSEA)(Company Limited by Guarantee)an instrument of transfer/nomination for transferring his interest as a member in the Company in favour Smt. Saroj Maloo. Transfer of membership by nomination was refused by MSEA on the ground that there is no relevant provision to that effect in its AOA.
Aggrieved by the refusal Smt. Saroj Maloo filed an appeal under Section 111 of the Act to the CLB
The stand taken by MSEA was that in case of a company limited by guarantee without share capital like MSEA membership cannot be transferred by nomination until a clause providing for nomination is incorporated in its Articles of Association. CLB convinced by MSEA contention & dismiss the application of Smt. Saroj Maloo and passed an order in favour of MSEA
Smt. Saroj Maloo preferred an appeal before the High Court of Patna against the said CLB order. The High Court held that no distinction can be made between transfer of share of a limited company limited by shares and transfer of other interest of a member in a company limited by guarantee. and held that refusal by MSEA was not justified and legal because there was no bar of transfer by nomination of other interest in the AOA of MSEA.
However the Supreme Court held that there is material difference between the set of Articles relating to companies limited by shares and limited by guarantee and as such same principles of transfer for shares and membership cannot apply. The right of a guarantee company to refuse to accept the transfer by a member of his interest in the company is on a different footing than that of a company limited by shares.
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