Section 59 Of Companies Act 2013: Rectification Of Register Of Members

Section 59 of the Companies Act, 2013

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 record, is, without adequate 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.

2. The Tribunal may, after hearing the parties to the appeal under sub-section (1) by order, either dismiss the appeal or direct that the company shall register the transfer or transmission within a period of ten days of the receipt of the order or direct rectification of the records of the depository or the register and in the latter case, direct the company to pay damages, if any, sustained by the party aggrieved.

3. The provisions of this section shall not restrict the right of a holder of securities to transfer such securities, and any person acquiring such securities shall be entitled to voting rights unless the voting rights have been suspended by the order of the Tribunal.

4. Where the transfer of securities is in contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, or this Act or any other law for the time being in force, the Tribunal may, on an application made by the depository, company, depository participant, the holder of the securities or the Securities and Exchange Board, direct any company or a warehouse to set right the contravention and rectify its register or records concerned.

5. If any default is made in complying with the order of the Tribunal under this section, the company shall be punishable with a fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. Every officer of the company in default shall be punishable with imprisonment for a term that may extend to one year or with a fine which shall not be less than one lakh rupees but which may extend to three lakh rupees, or with both.

Scope of Section 58 & 59

This article has been drafted to explain and amplify the scope and applicability of Section 58 and Section 59 of the Companies Act, 2013, dealing with refusal or neglect to transfer or transmission by a company and appeal thereof and rectification of register of members. For the proper appreciation of Sections 58 and 59, their text is reproduced hereunder:

(1) If a private company limited by shares 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 a law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days 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 transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.

(2) Without prejudice to sub-section (1), the securities or other interest of any member in a public company shall be freely transferable: Provided that any contract or arrangement between two or more persons in respect of the transfer of securities shall be enforceable as a contract.

(3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days from the date of receipt of the notice or, in case no announcement has been sent by the company, within a period of sixty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company.

(4) If a public company without sufficient cause refuses to register the transfer of securities within a period of thirty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, is delivered to the company, the transferee may, within a period of sixty days of such refusal or where no intimation has been received from the company, within ninety days of the delivery of the instrument of transfer or intimation of transmission, appeal to the Tribunal.

(5) The Tribunal, while dealing with an appeal made under sub-section (3) or sub-section (4), may, after hearing the parties, either dismiss the appeal or by order—

(a) direct that the transferor transmission shall be registered by the company and the company shall comply with such order within a period of ten days of the receipt of the order; or

(b) direct rectification of the register of members and also direct the company to pay damages, if any, sustained by any party aggrieved.

(6) If a person contravenes the order of the Tribunal under this section, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with a fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.