Delay Equals Refusal: NCLT Kochi Orders Share Transmission in Favour of Legal Heir
Sangeetha Prathap
The National Company Law Tribunal (NCLT) Kochi Bench has held that prolonged delay by Whispering Kera Ecological Homestay Pvt. Ltd. in processing a request for transmission of shares of a deceased shareholder amounts to refusal in law, and has directed the company to transfer the shares in favour of the surviving legal heir. A coram of Judicial Member Vinay Goel and Technical Member Madhu Sinha allowed the appeal filed by the sister of the deceased shareholder after finding that there was no valid reason for the company to withhold action on the transmission request. The Tribunal noted that although the legal heir produced all necessary documents including the inheritance certificate issued by the Swiss authorities, the company continued to raise procedural objections and did not complete the transmission.
The dispute arose following the death of Sylvaine Perret-Gentil, who held 6,000 equity shares in the company and was the majority shareholder. The legal heir – her sister, along with their mother – was recognised as the only legal heirs under the Swiss inheritance certificate. The mother issued a No Objection Certificate authorising the transfer of all 6,000 shares to the appellant. Despite emails and a formal written request dated 15 February 2024 seeking transmission, the company neither completed the transfer nor communicated a refusal. The Registrar of Companies reported that the company had only two shareholders, the deceased and the respondent director, indicating that the majority control of the company continued to remain frozen due to the inaction on transmission.
The company argued that the Power of Attorney executed in favour of the appellant’s representative was invalid as it lacked proper stamping and apostille formalities, and that original apostilled documents were required before transmission could be considered. It contended there was no refusal, and any delay was due to the heir’s failure to provide original documents. The Tribunal rejected this position, clarifying that such technical objections cannot be used to defeat the rights of a legal heir. The Bench observed that the legal heir had furnished the relevant documents and, in any case, defects relating to stamping of the Power of Attorney were curable. It reiterated that under law, once documents establishing heirship are submitted, the transmission should be carried out without insisting upon unnecessary procedural conditions.
The Tribunal examined the Articles of Association and found that Clause 14 expressly provides for transmission to legal heirs without requiring prior approval of the directors. Therefore, once the appellant submitted the inheritance certificate and NOC from the co-heir, the company was duty-bound to carry out the transmission. The Tribunal also held that the Companies Act permits a legal heir to approach the NCLT when a company either refuses or unduly delays transfer of shares, and that delay beyond a reasonable period is legally understood as refusal. In support of this conclusion, the Tribunal noted that the company’s emailed communication did not amount to a valid refusal, yet it failed to carry out the transfer for several months despite the submission of documents and physical verification.
The Tribunal also referred to earlier observations made by the Kerala High Court in earlier disputes between the deceased shareholder and the company director, noting that such remarks pointed to wider implications on the State’s reputation as a tourism destination. While the Tribunal consciously limited itself to its jurisdiction under Sections 58 and 59 of the Companies Act, it remarked that the company should have complied with the High Court’s orders in spirit by ensuring proper governance and transparency.
The Tribunal recorded that the appellant had ultimately produced all documents and had facilitated physical verification during the hearing. It held that the only remaining requirement was an indemnity bond to safeguard the company from any future claims. It directed both legal heirs to submit indemnity bonds, and upon receipt of the same, the company must transfer the shares to the appellant within ten days. The appeal was thus allowed.
Appearance
For Appellant: Santosh Mathew, Lavkesh Bhambani, Sanjay Vashistha, Sr. Advocates
For Respondents: Advocate Bijoy Pulipra
Cause Title: Isabelle Fabienne Perret-Gentil vs Whispering Kera Ecological Homestay Private Limited and Ors
Case No: Company Appeal (C/Act)/03/KOB/2024
Coram: Judicial Member Vinay Goel, Technical Member Madhu Sinha
