India: Limitation Period For Applying For The Rectification In The Register Of Members

Introduction

Earlier section 111 & 111A of the Companies Act, 1956 dealt with the provisions of rectification of register of members. Such provisions provided a right to the company, members and a transferee to get themselves registered with the company or to rectify a mistake committed by the Company in entering the name of a person in the register of members of the company and in case there is a refusal on the part of the company to register the legitimate transfer of shares, such person whose bonafide transfer is refused to be registered had a right to apply to the Company Law Board to get the register of members rectified.

In the present article we are dealing with the provisions of Section 111 (2) and 111 (4) in the light of the provisions of the Limitation Act, 1963.

Section 111 : Power to refuse the registration and appeal against registration

Section 111 (1) provides that if a company 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 shares or interest of a member in, or debentures of the company, it shall, within two months 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 transferee and the transferor or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.

Further Section 111 (2) of the Companies Act, 1956 provides the right to appeal in a case where the company refuses the bonafide & legitimate transfer to the transferor or transferee, or the person who gave intimation of the transmission by operation of law to the tribunal for the registration of the transfer. Section 111 (2) provides that the transferor or transferee, or the person who gave intimation of the transmission by operation of law, as the case may be, may appeal to the Tribunal (presently; Company Law Board) against any refusal of the company to register the transfer or transmission, or against any failure on its part within the period referred to in sub-section (1), either to register the transfer or transmission or to send notice of its refusal to register the same.

Section 111 (3) provides the limitation under which such person has a right to apply to the Tribunal in an appeal against the refusal or in a case where no communication for refusal is received from the company neither the company has registered the transfer thereby entering the name of the transferee in the register of members of the company. Section 111 (3) provides that such person whose application for registering the transfer has been refused by the company on account of the grounds specified in Sub- Section 1, such person shall file an appeal to the Tribunal as specified in Sub – Section 2, within 2 months of the receipt of the notice of such refusal or, where no notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission, as the case may be, was delivered to the company.

It is pertinent to mention here that the provision as to the appeal reference to the Tribunal for the purposes where the company has refused the registration of the transfer application of a person is clear. The Companies Act, 1956 clearly provides the time period of 2 months and 4 months in the cases illustrated under Sub-Section 3.

Further, Section 111 (4) of the Companies Act, 1956 provides that :-

The above stated Sub-Section 4 of Section 111 of the Companies Act, 1956 provides a right to the company to apply to the Tribunal for the rectification of the register of members where the name of any person is without sufficient cause entered in the register of the members of the Company. Clearly, there is no limitation or time period specified under Section 111 or elsewhere in the Companies Act, 1956 which provides the limitation period in regard to the rights of the Company to apply to the Tribunal for rectification of the register of members. However, it is known to all that the provisions of the Companies Act, 1956 are now replaced by the Companies Act, 2013 and the major portion of the 2013 Act is operational. The replacement of Section 111 and 111A is Section 59 in the 2013 Act. Section 59 of the 2013 Act provides as under:

59. (1) If the name of any person is, without sufficient cause, entered in the register of members of a company, or after having been entered in the register, is, without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place in entering in 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 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.

Even Section 59 (1) of the 2013 Act is silent with respect to the Limitation Period to be applied. It is also seen that the provisions of this section are often intended to be abused by the Company and its management who wishes to oust the particular shareholders with their rightful ownership in the company by applying to the Tribunal for rectification under this Section by way of filing belated applications and interpreting the section in their own benefit.

In this light it is important to know whether the provisions of the Limitation Act, 1963 apply to the Application or Petition preferred by the Company u/s 59 (1) of the Companies Act, 2013 and/or Section 111 (4) of the Companies Act, 1956.

The preamble of the Limitation Act, 1963 provides that it is an Act to consolidate and amend the law for the limitation of suits and other proceedings and for purposes connected therewith.

It is worth noting here that according to the Section 10E (4D) Every Bench²shall be deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973, and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860), and for the purpose of section 196 of that Code.

Moreover, Article 137 (under Part II) of the Schedule to the Limitation Act, 1963 provides the limitation period of three years dealing with the "Any other application for which no period of limitation is provided elsewhere in this Division". According to the Kerala State Electricity Board v. T.P. Kumhaliumma - AIR 1977 SC 282 Judgment of the Hon'ble Supreme Court of India, it was held that article 137 of the Limitation Act, 1963 will apply to any petition for rectification of the share register, which prescribes a period of three years of the transfer of shares. The said decision of the Hon'ble Supreme Court has been used for reference to decide the belated applications filed by the Companies and/or its management who with mala fide wish to oust certain members resorting by filing the belated Applications/ Petitions u/s 111 (4) of the Companies Act, 1956. In the matter of A. Devarajan Vs. N.S. Nemura Consultancy India Pvt. Ltd. and A. Panneerselvam the Chennai bench of the Hon'ble Company Law Board observed that the in the light of the Kerela State Electricity Board Judgment (Supra) of the Hon'ble Apex Court, the period of limitation as mentioned under Article 137 of the Limitation Act, 1963 shall apply to the proceedings before the Company Law Board initiated u/s 111 (4).

Conclusion

In the light of the above, it can be said that the period of limitation is not provided anywhere in the Companies Act with respect to the applications/petitions filed u/s 111 (4) [now replaced with Section 59 (1)] of the Companies Act, 2013 but the period of limitation for such applications/petitions shall be governed by the provisions of Article 137 of the Limitation Act, 1963. Hence the period of limitation for applying for the rectification for register of members by the company under the provisions of Section 59 (1) of the Companies Act, 2013 is three years.

Footnotes

1.Vth Year Student, Symbiosis Law School, Pune.

2. Of the Company Law Board

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