Delay Equals Refusal, NCLT Kochi Directs Company To Transfer Shares To Legal Heir

The National Company Law Tribunal at Kochi has recently held that the prolonged delay by Whispering Kera Ecological Homestay Pvt. Ltd. in acting on a request to transmit shares of a deceased shareholder amounted to a refusal to transfer, and has directed the company to complete the transfer in favour of the surviving legal heir.

The tribunal allowed the appeal filed by the shareholder's sister after finding that the company had no valid reason to withhold the transmission request.

A coram of Judicial Member Vinay Goel and Technical Member Madhu Sinha noted that the legal heir had produced all required legal documents, including a certificate of inheritance issued by Swiss authorities, and held that procedural objections raised by the company could not justify the delay.

It stated, "Except for certain technical objections, no substantial reason has been shown to decline transfer of shares in favour of the Appellant."

The dispute arose after one Sylvaine Perret-Gentil, who held 6,000 shares in the company, passed away on 2 August 2023. Her sister, the appellant, and their mother were recognised as the only legal heirs under the inheritance certificate. The mother subsequently executed a No Objection Certificate authorising transfer of the entire shareholding to the appellant.

Despite repeated emails and a written request dated 15 February 2024 seeking transmission, the  company neither completed the transfer nor issued a formal refusal. The Registrar of Companies reported that the company has only two shareholders, with the deceased holding the majority stake.

The company argued that the Power of Attorney given to the heir's representative was invalid due to insufficient stamping and that original apostilled documents were required before any transmission could take place. It asserted that there had been no refusal to transfer shares and that any delay was attributable to the heir.

Rejecting the company's stance, the tribunal held that such objections could not override the rights of a legal heir.

It observed, "The issue regarding insufficiently stamped power of attorney and other technical issues are curable defects…. So that would not have any bearing or hurdle for getting the shares transferred, and such type of technical objections are not tenable under the present given circumstances."

Referring to the company's Articles of Association, the tribunal observed that the transfer should have been completed once the legal heir submitted the necessary documents, and that director approval was not required in such circumstances, since Clause 14 specifically provides for transmission to legal heirs.

The tribunal noted that the Companies Act allow a legal heir to seek relief from the NCLT when a company either refuses or unduly delays the transfer of shares, and also empower the Tribunal to order corrections to the company's records. It noted that if a company does not act within a reasonable period, such inaction amounts to refusal in law.

The tribunal also referred to earlier remarks of the Kerala High Court in disputes involving the same parties, observing that allegations of cheating and criminal breach of trust against the company's directors are serious and have wider implications for the State's efforts to promote tourism as a sustainable livelihood sector.

Finding that the appellant had produced all necessary documents and had facilitated physical verification, the tribunal directed both legal heirs to execute indemnity bonds to safeguard the company from future claims. After the bonds are submitted, the company must transfer the shares within ten days.