12.9.3 (Procedure of Transfer)

Section 108 requires the transfer to be in a Proper instrument of transfer known as Share Transfer Form which is required to be presented to the Registrar of Companies before it is signed and filled up by the transferor. The Registrar will stamp or otherwise endorse thereon the date on which it is so presented to him. However, the transfer form is not necessary in case of transfer of securities effected through the depository as per the Depositories Act, 1996.

A company shall not register a transfer of shares, unless a proper instrument of transfer duly stamped and executed by the transferor and by the transferee, has been delivered to the company along with the share certificate. A reading of s.108 of the Companies Act, 1956 and s.12 of the Indian stamp Act,1899, clearly shows that the instrument of transfer of shares should bear the requisite stamps and the adhesive stamps should be cancelled at the time of affixation of such stamps and execution of the document. If these requirements are not complied with, then the

instrument, although bearing an adhesive stamp but not cancelled, cannot be said to be an instrument 'duly stamped'. Accordingly, transfer shall not be valid  [Nuddea

Tea Co. Lt d. v. Ashok Kumar Saha &+ Other s (1988) 64 Comp. Cas.775].

Time of stamping the transfer-deed. Is it necessary that stamps be affixed before deed is executed or they could be affixed anytime before delivery. ln Prafulla Kumar Rout v. orient Engg. works (P) Ltd. (1986) 60 Comp. Cas. 65 (ori.) it was observed that all that s.108 (IA) (b) requires is that before delivery the stamps should be affixed and it does not require the stamps to be affixed prior to execution of the documents.

However, in Mathrubhumi Printing &+ Publishing Co. Ltd. a. Vardhaman Publishers Ltd. (1992) 73 Comp. Cas 80 (Ker), the Kerala High Court observed:

If the instrument is not properly executed or the stamp affixed to the instrument is not cancelled before execution or at least at the time of execution, the said instrument must be deemed to be unstamped.

Cancellation of the stamps by the staff of the company does not make transfer instrument duly stamped. The contention of the company that stamps were cancelled by them (the company) before the Board of Directors considered the transfer shall not be upheld as valid [Subhash Chander v. vardhman Spg. & Gen. Mills Ltd. (CLB Order dt. 12.11.1993)].

Lodging the transfer. Every instrument of transfer completed in all respects, be delivered to the company:

            (i) in the case of shares dealt in or quoted on a recognised stock exchange, at any time before the date on which the Register of members is closed, for the first time after the date endorsed by the Registrar or within 12 months from the date of such endorsement, whichever is later;

            (ii) in any other case, within two months from the date of such endorsement.

Section 110 provides that the application for the registration of transfer may be made either by the transferor or the transferee. where it is made by the transferor and relates to partly paid-up shares, the company must give notice of application by prepaid registered post to the transferee. Lf the transferee does not object to the transfer within two weeks from the receipt of the notice, then his name may be entered on the register of members. With regard to an application by the transferee or by the transferor relating to fully paid-up shares, no such notice is required.

Transfer of shares held in joint names. In case of shares held in joint names, the transfer form must be signed by all of them, unless a specific authorisation is made in favour of any or some of them. Thus, in Shanta G. Pommeret v. Sakel papers(p) Ltd. (1990) 69 Comp. Cas. 65(Bom.) where though four persons were shown as transferors of shares, only three had signed the shares, only three had signed the share transfer form and fourth had not authorised the other to sign on his behalf, it was held, that transfer of shares was not valid.

Transfer when complete? Transfer becomes compete and the transferee becomes a

shareholder only when the transfer is registered in the company's register [Mathrubhumi Printing & Publishing Co. Ltd. o. Vardhaman Publishers Ltd. (1992)73 Comp. Cas.80 (Ker.)].