JUDGMENT & ORDER : M.R. SHAH, J. 1. Feeling aggrieved and dissatisfied with the impugned order passed by the learned Company Law Board dated 26.5.2006 dismissing the said appeal preferred by the appellant herein filed under the provisions of Section 111-A of the Companies Act, 1956 seeking direction against the respondent no.1 Company to register the transfer of 38,04,100 shares in favour of the petitioner, original applicant- Appellant - Mehsana District Central Cooperative Bank Limited has preferred present appeal. 2. The facts leading to the present appeal in nutshell are as under: 2.1. It is the case on behalf of the appellant Bank that appellant lent an amount of Rs. 40 Crores to respondent no.2- Petrofils Cooperative Ltd (hereinafter referred to as "Petrofils") by way of fixed deposits which carried interest @ 18% p.a between 23.11.1995 to 18.02.1996. That the deposits were for the period between 60 days and 90 days. It is the case on behalf of the appellant Bank that against the aforesaid finance deposit of Rs. 40 crores, by way of security, the Petrofils agreed to handover custody of 38,04,100 equity shares of respondent no.1- Gujarat Industries Power Company Limited. According to the appellant, the Petrofils handed over the custody of 5 share certificates which are in respect of 38,04,100 equity shares of respondent no.1 company to one Jashlok Finance Services who as such was broker/agent of the Petrofils. According to the appellant, the said share certificates were handed over to the said Jashlok Finance Services vide letter dated 19.12.1995. According to the appellant, the Petrofils in the year 1997 agreed to create second charge on the fixed assets of Petrofils in favour of the Bank. According to the appellant, the appellant addressed a letter to Jashlok Finance Services to exercise the power of transfer of shares in the name of appellant bank. Accordingly and as per the appellant, Jashlok Finance Service vide letter dated 25.5.1999 sent letter/notice to the Petrofils giving notice of 30 days as required under letter dated 19.12.1995. It appears that thereafter in the month of August 1999, the appellant also filed application for interim injunction. 2.2. It appears that thereafter the Petrofils came to be wound up and liquidator came to be appointed on 11.04.2001. The appellant Bank also filed its claim with the Liquidator of the Petrofils to the extent of Rs. 89.29 crores on 30.01.2001. It appears that thereafter in the month of August 1999, the appellant also filed application for interim injunction. 2.2. It appears that thereafter the Petrofils came to be wound up and liquidator came to be appointed on 11.04.2001. The appellant Bank also filed its claim with the Liquidator of the Petrofils to the extent of Rs. 89.29 crores on 30.01.2001. That the Jashlok Finance Service informed Petrofils that the custody of the equity shares are with the appellant bank. That in the month of June 2005, the appellant filed an application in the pending Special Civil Suit No.758 of 1999 for direction to transfer the shares in favour of the appellant bank. According to the appellant, in its meeting held on 18.07.2005 the Board of Directors of appellant passed a board resolution to take steps for transfer of shares. That thereafter, the appellant bank addressed letter to the MCS Limited, Baroda, the share transfer agents of respondent no.1 along with the letter dated 25.7.2005 and the appellant bank handed over five original equity share certificates together with duly filled in and executed transfer deeds for transfer of 38,04,100 equity shares of respondent no.1 in favour of the appellant. 2.3. That MCS Limited confirmed the receipt of 38,04,100 equity shares for transfer. That the respondent no.1 has refused to register the transfer of the shares in favour of the appellant bank on the following reasons: "(1). The Shares held by any promoter of the company is covered under the Undertaking to the Term Lending Institutions to the effect that these shares will not be transferred/hypothecated/pledged etc. in favour of any person or entity and Petrofils being one of the promoter has also given such undertaking to the company and hence without prior approval of the term lending institutions the transfer cannot be affected in the favour of any party including you. (copy of undertaking of Petrofils is attached as Annexure A). (2).You may refer to the News Paper Notice published in the newspapers viz. Loksatta and Indian Express, notifying to the general Public to not to deal with the shares held by Petrofils and if any body does so the company will be in no way be responsible for any loss or damage arising out of the refusal by the company to transfer the shares in question. Loksatta and Indian Express, notifying to the general Public to not to deal with the shares held by Petrofils and if any body does so the company will be in no way be responsible for any loss or damage arising out of the refusal by the company to transfer the shares in question. A copy of the Notices dated 3rd May, 1999 published in the newspapers is enclosed herewith for your reference as Annexure B. (3).The then Chairman and Managing Director of Petrofils Shri J K Desai had written a letter (copy marked to you also) wherein it was specifically mentioned that no transfer/invocation of shares in question be contemplated without 15 days prior intimation to Petrofils and the same needs to be complied with by you before lodging these shares for transfer (copy enclosed as Annexure C). (4).You may be aware that Petrofils is now under liquidation and all the assets would vest with the Liquidator appointed for the purpose and all the claims would lie to the liquidator and the order of liquidation may operate as bar on various actions including the transfer of such shares which are pledged with you before liquidation." 2.4. That the respondent no.1 company returned the original share transfer deeds, however it retained the original share certificates with it. That vide written objections dated 17.08.2005, the appellant took objections against the refusal to register transfer. That the respondent no.1 company vide communication dated 31.08.2005 informed the appellant that the shares cannot be transferred since the shares in question are subject matter of litigation in Special Civil Suit No.758 of 1999 filed by the appellant against the Petrofils- respondent no.2 herein. It appears that in the meantime respondent no.2- Petrofils addressed a letter dated 24.08.2005 to the appellant Bank objecting to transfer of share. At this juncture, it is required to be noted that as such the decision not to transfer shares was taken by respondent no.1 on 12.08.2005, even before any objection was raised by the respondent no.2- Petrofils. 2.5. It appears that thereafter the appellant bank addressed letter dated 3.9.2005 to the respondent no.1 stating that as pawnee, the appellant has absolute right upon default made by respondent no.2- Petrofils in repaying the deposits and that the pendency of Civil Suit is no ground. 2.6. 2.5. It appears that thereafter the appellant bank addressed letter dated 3.9.2005 to the respondent no.1 stating that as pawnee, the appellant has absolute right upon default made by respondent no.2- Petrofils in repaying the deposits and that the pendency of Civil Suit is no ground. 2.6. The respondent no.1 company against vide communication dated 12.09.2005 informed the appellant bank that in view of the pendency of the Civil Suit and unless respondent no.2- Petrofils gives its no objection, respondent no.1 will not transfer the shares. It is submitted that thereafter appellant bank approached the Company Law Board by way of Company Petition NO. 37 of 2005 under Section 111-A of the Companies Act and prayed that respondent no.1 be directed to register the transfer of 38,04,100 shares in favour of the appellant. That by impugned order, the Company Law Board has dismissed the said Company Petition. Hence, the appellant Bank has preferred the present Appeal. 3. Shri S.N. Soparkar, learned counsel for the appellant, Shri Shalin Mehta, learned counsel for the respondent no.1- company and Shri Mihir Joshi, learned counsel for the respondent no.2 company -Petrofils (now in liquidation). 4. It is vehemently submitted by Shri S.N. Soparkar, learned advocate for the appellant that in the present case learned Company Law Board has materially erred in dismissing the appeal under Section 111-A of the Companies Act and not directing the respondent no.1 company to register the transfer of 38,04,100 shares in favour of the appellant. 4.1. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that as such the learned CLB ought to have appreciated that the ground on which the respondent no.1 company refused to register the transfer of 38,04,100 shares in favour of the appellant were not tenable in law and were not sustainable. It is submitted that therefore, the learned CLB in exercise of powers under Section 111-A of the Companies Act ought to have directed the respondent no.1 to register the transfer of 38,04,100 shares which were held by the appellant by way of security, which were handed over to the appellant by the respondent no.2- Petrofils - its agent/broker as a security while taking fixed deposit of Rs. 40 crores from the appellant. 4.2. 40 crores from the appellant. 4.2. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that the subject shares were delivered to the appellant Bank through broker M/s Jaslok Finance Services as and by way of security for the amount of deposit of Rs. 40 Crores made by the appellant in favour of the respondent no. 2- Petrofils. It is submitted that there may be some dispute as to the exact date of handing over of the delivery but it is undisputed fact that M/s Jaslok Finance Services had actually handed over the physical possession of the original shares certificates as also the transfer deeds to the appellant. It is submitted that it is not in dispute that such documents were lodged by the appellant with respondent no. 1 for registering the transfer. 4.3. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that though the issue regarding the validity of the pledging of subject shares was not raised by the respondent no.1 - company before the Company Law Board that the Company Law Board gave its finding that since the issue of validity of shares is pending before the competent Civil Court, the transfer of shares can not be registered/effected. It is submitted that the Company Law Board has erred in holding that the Respondent Company No.1 has rightly refused to transfer the subject shares vide its letter dated 12.09.2005 on the ground of pedency of a suit being Special Civil Suit No. 758/1999 before the Court of Ld. Civil Judge (S.D.), Vadodara and until the appellant receives no objection certificate from Respondent no. 2- Petrofils, the respondent company shall not transfer the shares. It is submitted that while rejecting the appeal/application preferred by the appellant, Company Law Board has traveled beyond the scope of his jurisdiction as conferred under Section 111 of the Companies Act. 4.4. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that Section 111A(2) of the Companies Act specifically provides that shares of a Company are freely transferable, until and unless the Company is able to demonstrate "sufficient cause" to refuse such a transfer. It is submitted that the phrase "sufficient cause" has to be read in conjecture with subsection (3) of Sec 111-A of the Act and that would include only the grounds as referred to in sub section (3). 4.5. It is submitted that the phrase "sufficient cause" has to be read in conjecture with subsection (3) of Sec 111-A of the Act and that would include only the grounds as referred to in sub section (3). 4.5. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that Section 111-A of the Act relates to rectification of Register on Transfer. It is submitted that the word "rectification" connotes something that ought to have been done, but by error not done and what ought not to have been done was done requiring correction. It is submitted that rectification in other words is nothing but a failure on the part of the Company to comply with the directions under the Companies Act. It is submitted that proviso to Section 111-A(2) of the Act provides that a Company can refuse to register of shares by showing "sufficient cause". It is submitted that the phrase "sufficient cause" is to be tested in relation to the grounds and limitation as stipulated under Sec. 111- A (3) of the Act. In support of his above submissions, learned counsel for the appellant has relied upon decision of the Hon'ble Supreme Court in the case of Amonia Supplies Corporation Private Limited vs.Modern Plastic Containers Private Limited, (1998) 7 SCC 105 (para 28 to 31). 4.6. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that Section 111-A of the Act allows the shares or debentures of any company to be freely transferred. It is submitted that this provision contained in the law for the free transferability of shares is founded on the principle that the members of public must have the freedom to purchase and, every shareholder, the freedom to transfer. It is submitted that the principle of free transferability must be given a broad dimension in order to fulfill the object of the law. It is submitted that imposing restrictions on the principle of free transferability, is a legislative function, simply because the postulate of free transferability was enunciated as a matter of legislative policy when Parliament introduced Sec. 111-A into the Companies Act. It is submitted that therefore, the word "transferable" is of the widest possible import and by using the expression "freely transferable" has reinforced the legislative intent of allowing transfer of shares of public companies in a free and efficient domain. It is submitted that therefore, the word "transferable" is of the widest possible import and by using the expression "freely transferable" has reinforced the legislative intent of allowing transfer of shares of public companies in a free and efficient domain. It is submitted that the shares being freely transferable, refusal for such transfer can be made only on limited grounds viz. (i) transfer is malafide or transferee is not a bonafide investor (ii) transfer is in contravention to provisions of the Securities and Exchange Board of India, 1992, or (iii) transfer is in contravention of regulations made there under or the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), or (iv) transfer is in contravention of any other law for the time being in force. It is submitted that therefore, the company on its own discretion cannot refuse or reject such transfer. It is submitted that as per the settled principle of law that a Company does not have any discretion in rectifying its register except to require the procedure being followed. 4.7. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that in the present case none of the grounds as stipulated in Sec. 111-A (3) are alleged against the appellant before CLB. It is submitted that there is no such contravention alleged against the appellant which warrant rejection of transfer of shares. It is submitted that there also not any injunction order passed by any court of law restricting transfer of shares. It is submitted that therefore, the respondent no.1- company ought to have given effect of transfer of shares and rectified the register. In support of his above submissions, Shri Soparkar, learned counsel for the appellant has relied upon the following decisions. 1. Luxmi Tea Company Limited Vs Pradip Kumar Sarkar, (1989) Supp2 SCC 656 (Para 6 to 9). 2. Bajaj Auto Limited Vs. Company Law Board With Bajaj Auto Holdings Vs. Company Law Board, (1998) 6 SCC 218 . 3. Jai Mahal Hotes Private Limited Vs. Raj Kumar Devraj, (2016) 1 SCC 423 (para 15 to 19) . 4. Dove Investments Private Limited vs. Gujarat Industrial Inv. Corporation Limited, (2006) 2 SCC 619 (para 12) 5. Claude-Lila Parulekar Vs. Sakal Paper Private Limited, (2005) 11 SCC 73 . 6. Western Maharashtra Development Corporation Limited Vs. Bajaj Auto Limited, (2010) 154 CompCas 593 (Para 51 to 63). 7. Mafatlal Industries Limited. 4. Dove Investments Private Limited vs. Gujarat Industrial Inv. Corporation Limited, (2006) 2 SCC 619 (para 12) 5. Claude-Lila Parulekar Vs. Sakal Paper Private Limited, (2005) 11 SCC 73 . 6. Western Maharashtra Development Corporation Limited Vs. Bajaj Auto Limited, (2010) 154 CompCas 593 (Para 51 to 63). 7. Mafatlal Industries Limited. Vs. Gujarat Gas Co. Ltd. & Ors, (1998) 1 GLH 567 (para 40 to 45). 8. Garware Marine Industries Limited, (2015) 192 CompCas 204 (para 9). 9. Bajaj Auto Limited Vs. N. K. Firodia & Another, (1970) 2 SCC 550 (Para 13, 14, 27 TO 30). 4.8. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that even the ground on which the learned CLB has rejected the appeal preferred by the appellant and has refused to direct the respondent no.1 company to register the transfer in favour of appellant are not germane and not sustainable. 4.9. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that pendency of the Civil Suit which was filed by the appellant against the respondent no.2 company for recovery of the amount cannot be a ground not to direct respondent no.1 company to register the transfer of shares which as such were given to the appellant by way of security/pledge at the time of fixed deposit of Rs. 40 crores. It is submitted that initially as such no prayer was sought with respect to the transfer of shares in favour of the appellant. It is submitted that assuming that even subsequently appellant might have submitted any application for appropriate interim order directing the respondent no.1 company to transfer the share in favour of the appellant, unless and until there is order of injunction against the appellant and in favour of respondent no.2 - Petrofils in a proceedings initiated by the respondent no.2- Petrofils and/or any restrained order is passed against the respondent no.1 company with respect to the shares in question, the respondent no.1 company cannot refuse to register the transfer of shares which were presented for transfer along with original shares certificate and the transfer form dully signed by the parties. It is submitted that the aforesaid has not been appreciated by the CLB. 4.10. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that in the company petition filed before CLB, there was no relief against respondent no. It is submitted that the aforesaid has not been appreciated by the CLB. 4.10. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that in the company petition filed before CLB, there was no relief against respondent no. 2 society. It is submitted that therefore, there was no question of obtaining any relief from the Central Government u/s. 117 of Multi State Cooperative Societies Act. It is submitted that the only relief sought by the appellant in the petition was against respondent company. It is submitted that the appellant had only sought directions against respondent company to transfer the subject shares which were lodged by appellant along with duly executed transfer deeds by invoking provisions of Sec. 11-A of the Act along with listing agreement. It is submitted that the respondent company is not governed by provisions of Sec. 117 of Multi State Cooperative Societies Act or any other provisions of the said Act and therefore, CLB erred in holding that the appellant can not get any relief even against the company without obtaining leave from Central Registrar u/s 117 of the Multi State Cooperative Societies Act. 4.11. It is further submitted by Shri S.N. Soparkar, learned advocate for the appellant that even otherwise action/conduct on the part of the respondent no.1 company even to retain the original share certificates which were presented by the appellant is not sustainable at all and same is absolutely arbitrary. It is submitted that assuming without admitting and without prejudice to the aforesaid contention, even if it is found that the company is justified for valid reasons in rejecting the transfer the shares in that case also, company has to return the original shares certificate which were presented for transfer to a person who presented it along with transfer forms for transfer of shares. It is submitted that in the present case such an act of the respondent no.1 company is absolutely mala fide and in connivance with the respondent no.2 - Petrofils and only with a view to favour respondent no.2 being subsidiary of respondent no.1 company. It is submitted that in the present case such an act of the respondent no.1 company is absolutely mala fide and in connivance with the respondent no.2 - Petrofils and only with a view to favour respondent no.2 being subsidiary of respondent no.1 company. Making above submissions and relying upon the above decisions, it is requested to quash and set aside the impugned order passed by the CLB and to direct the respondent no.1 to effect the transfer of shares and rectify the register of shares in exercise of powers under Section 111 A of the Act, as prayed for. 5. Present appeal is vehemently opposed by Shri Mihir Joshi, learned counsel for the respondent no.2 - Petrofils. Shri Joshi, learned counsel for the respondent no.2- Petrofils has supported the impugned order passed by the CLB by making following submissions; (A). Prima facie the Appellant's claim of pledge is untenable..... (i). There was no delivery of shares to the Appellant in order to constitute a valid pledge..... (ii). he alleged delivery of shares to the Appellant was done surreptitiously and un-authorisedly. It would not constitute valid delivery for the purpose of creating a pledge. .... (B). Assuming the existence of a valid pledge, the Appellant was attempting to exercise the pledge unlawfully. (i). No notice of invocation mandated by S. 176 of the Contract Act, 1872 was given..... (ii). Transfer of shares to oneself amounts to conversion/forfeiture and is impermissible in law..... (C). The alleged pledge is the subject matter of suit between the parties.... (i). The Appellant had filed proceedings seeking the transfer of the shares in question before the Civil Court before the transfer application was made. The Liquidator has disputed the Appellant's right to transfer shares in the suit..... (ii). Once the Appellant had made the pledge an issue of contention by filing a Civil Application in the Suit it could not parallel/ simultaneously also invoke the pledge...... (iii). The Company was aware of the dispute about the existence of the pledge as well as the Order of Liquidation and had sufficient cause to deny the transfer.... (D). Disputes pertaining to title are sufficient cause for rejecting transfer of shares..... (E). The determination of pledge and the priority of contributions is to be determined by the Liquidator and not by the CLB or Company Court. (D). Disputes pertaining to title are sufficient cause for rejecting transfer of shares..... (E). The determination of pledge and the priority of contributions is to be determined by the Liquidator and not by the CLB or Company Court. The present transfer would therefore circumvent the provisions of Section 117 of the MSCS Act, 2002..... (F). Submission of Claim to the Liquidator amounts to a waiver of the Appellant's right to enforce its alleged security.... (G). The Hon'ble CLB rightly held that no permission under S. 117 of the Multi-State Co-operative Societies Act, 2002 was obtained for the purpose of the present proceeding and hence it had no jurisdiction..... 5.1. Now, so far as submission on behalf of the respondent no.2- Petrofils that the appellant's claim of pledge is untenable is concerned, it is submitted that by letter dated 25th July 2005, the Appellant sought to transfer 38,04,100 shares of GIPCL held by Petrofils. This transfer was on the basis of an alleged pledge. Therefore, the issue of the Appellant's entitlement as a pledgee and the manner in which it sought to exercise those rights of transfer squarely fall for consideration. Considering the aforesaid dispute about the title of the shares in question and the Appellant's entitlement to transfer the shares, the Company had 'sufficient cause' to reject the transfer. It is submitted that it has consistently been the Liquidator's case that there existed no pledge between the parties as alleged by the Appellant. 5.2. Now, so far as submission on behalf of the respondent no.2- Petrofils that there was no delivery of shares to the Appellant in order to constitute a valid pledge is concerned, it is submitted that in November 1995-1996, Petrofils had accepted monies from the Appellant in the form of Fixed Deposit Receipts and not loans, which the Appellant could not grant. It is submitted that on 19th December 1995, Petrofils addressed a letter to its broker and agent, Jaslok Finance to hold 38,04,100 shares of GIPCL in its custody as security for the borrowing. It is submitted that whilst the Appellant has argued that this handing over of shares to Jaslok finance amounts to a pledge, this has been disputed by Petrofils since 1999 on the ground that this does not amount to custody of the pledgee at all. It is submitted that whilst the Appellant has argued that this handing over of shares to Jaslok finance amounts to a pledge, this has been disputed by Petrofils since 1999 on the ground that this does not amount to custody of the pledgee at all. 5.2.1.It is submitted that it is the Liquidator's primary contention that no shares were handed over to the Appellant or its agent. Consequently, since there was no transfer of possession of shares in the present case there exists no pledge between the parties. Petrofils has submitted that the shares were given to its agent Jaslok Finance 'as comfort'. There is no agreement in writing to evidence a pledge of such shares. 5.2.2.It is submitted that in order to create a pledge, the pawnor must transfer possession in favour of the pawnee. It is submitted that Section 172 of the Indian Contract Act, 1872 defines pledge as a bailment of goods as security for payment of a debt. The bailor is called the pawnor and the bailee is called the pledgee. 5.2.3.It is submitted that Section 148 of the Contract Act, 1872 defines bailment to be the delivery of goods for some purpose upon a contract that they shall be returned when the purpose is accomplished or disposed off according to the directions of the purpose delivering them. Section 149 states that the delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the bailee or any person authorized to hold them on his behalf. 5.2.4.It is therefore, submitted that delivery of the goods pledged is an essential condition of pledge. It is submitted that without the transfer of possession there cannot be a pledge. It is submitted that In the present case there was no delivery of goods to the Appellant and consequentially no pledge. 5.2.5.It is submitted that delivery of the goods pledged is an essential condition of pledge. Without the transfer of possession there cannot be a pledge. In the present case there was no delivery of goods to the Appellant and consequentially no pledge. 5.2.6.In the case of Lallan Prasad v. Rahmat Ali, (1967) AIR SC 1322 the Hon'ble Supreme Court has recognised that delivery of possession of goods is necessary for a pledge. 5.2.7. Without the transfer of possession there cannot be a pledge. In the present case there was no delivery of goods to the Appellant and consequentially no pledge. 5.2.6.In the case of Lallan Prasad v. Rahmat Ali, (1967) AIR SC 1322 the Hon'ble Supreme Court has recognised that delivery of possession of goods is necessary for a pledge. 5.2.7. It is submitted that admittedly in the present case the shares in question were given to Jaslok Finance. It is undisputed that Jaslok Finance was holding shares for and on behalf of Petrofils. It is submitted that this is demonstrated by the letter dated 16th November 1996 wherein Jaslok Finance states that the shares of GIPCL are in its possession "on behalf" of Petrofils. It is submitted that furthermore, Jaslok Finance too understood that it could not transfer or give the blank share forms to the Appellant without Petrofils' consent. It is submitted that this is demonstrated by the letter dated 7th August 1999 where Jaslok Finance writes to Petrofils to provide it with a Board Resolution for giving shares as security and duly executed new transfer deeds. It is submitted that Jaslok Finance also believed that the pledge did not exist, and hence sought such additional documents. 5.3. Now, so far as the submission on behalf of the respondent no.2- Petrofils that the alleged delivery of shares to the Appellant was done surreptitiously and unauthorisedly and therefore, it would not constitute valid delivery for the purpose of creating a pledge. It is submitted that in the present case the appellant obtained the possession of the shares surreptitiously and unauthorisedly from Jaslok Finance which is evident from the letter dated 3.3.1999 addressed by Jaslok Finance to the appellant and the appellant's affidavit dated 26th September 2012. It is submitted that the letter states that they were handing over possession of 38,04,100 shares of GIPCL held in the name of Petrofils along with 5 share certificates and transfer forms duly signed. It is submitted that in the present case Petrofils has grossly disputed the authenticity of the said document and it is the case on behalf of the Petrofils that letter by the Jaslok Finance handing over the shares to the appellant is fabricated. 5.3.1. It is submitted that in the present case Petrofils has grossly disputed the authenticity of the said document and it is the case on behalf of the Petrofils that letter by the Jaslok Finance handing over the shares to the appellant is fabricated. 5.3.1. It is submitted that though the letter dated 3rd March 1999 claims handover of possession, on 20th April 1999, the Appellant asks Jaslok Finance to transfer various shares to the Appellant. It is submitted that this in itself makes it clear that the letter dated 3rd March 1999 is fabricated. It is submitted that moreover, the Appellant has not been able to explain this contradiction in the contemporaneous record at any point in time. 5.3.2.It is submitted that the very factum of delivery of the shares to the Appellant is clouded by accusations of fraud. This has been taken up by the Liquidator in numerous communications dated 31st January 2002, 9th March 2002 15th April 2002 and 11th May 2002. 5.4. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that assuming the existence of a valid pledge, the Appellant was attempting to exercise the pledge unlawfully. It is submitted that before invoking pledge, no notice of invocation mandated by S. 176 of the Contract Act, 1872 was given. It is submitted that Section 176 mandates a prior notice before invoking a pledge. It is submitted that this is a mandatory condition and cannot be done away with. It is submitted that Section 176 does not begin with any qualification such as in the absence of contract to the contrary" or "subject to contract between the parties". It is submitted that in light of the above, it is submitted that the said requirement of notice cannot be contracted out of by the parties. In support of his above submissions, Shri Joshi, learned counsel for the respondent no.2 has heavily relied upon the decision of the Division Bench of the Bombay High Court in the case of Official Assignee, Bombay v. Madholal Sindhu, (1948) 2 ILR(Bom) 1. It is submitted that in the aforesaid decision, it is held that Section 176 of the Indian Contract Act, 1872 is a mandatory provision and not subject to a contract to the contrary. It is submitted that in the aforesaid decision, it is held that Section 176 of the Indian Contract Act, 1872 is a mandatory provision and not subject to a contract to the contrary. It is further observed and held in the said decision that any term in a contract giving an unqualified power of sale to a pledgee would be inconsistent with the provisions of section 176. It is further observed and held that even though a pledgor fails to redeem, the pledgee cannot sell the goods without notice to the pledgor. A sale without notice is not a mere irregularity but is void. It is held that the notice contemplated under Section 176 was not a mere technicality. It is submitted and it is further held that the Pledgee must exercise his right of sale in a lawful manner, if there was no notice prior to the case it would not constitute a lawful sale and would be void. In support of his above submission, he has relied upon the decision of the Delhi High Court in the case of GTL Ltd. v. IFCI Ltd., (2011) 126 DRJ 394. 5.4.1.It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that in the present case the Appellant has sought to contend that the notice dated 25th April 2005 constituted sufficient notice. It is submitted that the said document was placed on record by an Affidavit of September 2012. It is a document which has seriously been disputed by the Liquidator. There exist no seal or stamp of acknowledgment on the document. Furthermore, the document was placed on record for the first time in 2012 and has not been referred to in any proceeding till the said date. In any case it is a letter by Jaslok Finance and not by the Appellant. In such a scenario it would not constitute good notice. 5.5. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that as such in the present case the transfer of shares in favour of the appellant is tantamount to transfer of shares to oneself amounts to conversion/forfeiture and is impermissible in law. It is submitted that the aw of pledge prohibits the transfer of shares to oneself. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that as such in the present case the transfer of shares in favour of the appellant is tantamount to transfer of shares to oneself amounts to conversion/forfeiture and is impermissible in law. It is submitted that the aw of pledge prohibits the transfer of shares to oneself. In support of his above submission, he has relied upon the decision of the Privy Council in the case of Neikram Dobay v. Bank of Bengal, 1891 LR 60; decision of the Hon'ble Supreme Court in the case of Balakrishna Gupta v. Swadeshi Ploytex, (1985) 2 SCC 167 as well as decision of the Delhi High Court in the case of GTL Ltd. v. IFCI Ltd., (2011) 126 DRJ 394. 5.5.1.It is submitted that in light of the aforesaid decision, the Hon'ble Supreme Court in the case of Balakrishna Gupta , the judgment of the Ld. Single Judge of the Punjab & Haryana High Court in Dhani Ram v. Frontier Bank, (1962) AIR(P&H) 321, relied on by the Appellant cannot be said to be good law. 5.6. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that even otherwise the alleged pledge is the subject matter of suit between the parties, the learned CLB has rightly not entered into such disputed question which as such is pending before the Civil Court and has rightly refused to exercise of powers under Section 111 A of the Companies Act. 5.6.1. It is submitted that the Appellant had filed proceedings seeking the transfer of the shares in question before the Civil Court before the transfer application was made. It is submitted that the Liquidator has disputed the Appellant's right to transfer shares in the suit. 5.6.2. It is submitted that between 1999 to 2005 the Appellant does nothing with regards to the alleged pledge of shares. It is submitted that on 14th October 1999 the Appellant filed Special Civil Suit No. 768 of 1999 seeking the recovery of monies due along with an injunction restraining Petrofils from creating any third charge. It is submitted that there is no mention of any alleged pledge. It is submitted that on 14th October 1999 the Appellant filed Special Civil Suit No. 768 of 1999 seeking the recovery of monies due along with an injunction restraining Petrofils from creating any third charge. It is submitted that there is no mention of any alleged pledge. It is submitted that on 14th October 1999, the Appellant also files an Application in the Suit seeking an injunction from selling, alienating or creating any further charge on their immovable property till the disposal of the Suit. 5.6.3. It is submitted that subsequently, only in July 2005 the Appellant filed an application seeking a direction to have the shares transferred in favour of the Appellant. This is the first time that the pledge is mentioned in the said proceedings. It is submitted that furthermore, it must be noted that it is the Appellant that brings the pledge within the scope of the Civil Suit and seeks it enforcement. 5.6.4. It is submitted that this stage too the Liquidator seriously contested the application. It is submitted that on 3rd August 2005, the Liquidator submitted a detailed reply to the Application filed by Appellant, denying the existence of any alleged pledge. 5.6.5.It is submitted that only after the filing of the said application, on 25th July 2005 the Appellant addressed a letter seeking to invoke the alleged pledge. It is submitted that having sought a determination of his rights qua the pledge in the Civil Application, till such time as the rights between the parties are decided, the transfer application could not have been maintained. It is submitted that the learned CLB was therefore correct in refusing to order rectification. 5.7. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that once the Appellant had made the pledge an issue of contention by filing a Civil Application in the Suit it could not parallel/ simultaneously also invoke the pledge. 5.7.1.It is submitted that it is trite law that a pledgee has the option of either suing for the amounts due and payable under the loan and retaining the pledged goods as security or exercising the pledge and selling the bailed goods. 5.7.2.It is submitted that however, in the present case the Appellant filed a Civil Application in July 2005 bringin the issue of pledge within the adjudication of the Civil Court. 5.7.2.It is submitted that however, in the present case the Appellant filed a Civil Application in July 2005 bringin the issue of pledge within the adjudication of the Civil Court. It is submitted that once the Appellant chose bring the lis before the Civil Court he could not exercise another parallel remedy of pledge. 5.8. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that as such respondent company was aware of the dispute about the existence of the pledge as well as the Order of Liquidation and had sufficient cause to deny the transfer. 5.8.1. It is submitted that on 24th August 2005, the Liquidator addressed a letter to the Company stating that the liquidator was appointed on 14.4.2001 and statutorily took custody of all assets of the Cooperative Society by virtue of Section 90 of the MCS Act, 2002. It further stated that Jaslok was asked to return the said shares but has failed to do so. It is submitted that the letter further stated that the said shares were never pledged but merely given as comfort. Lastly, the letter brought the pendency of the Application filed by the Appellant in the Civil Suit seeking transfer of shares as well as the dispute raised by the Liquidator as to the existence of such a pledge to the notice of the Company. 5.8.2. It is submitted that on 31st August 2005, Company forwarded the said letter stating that the shares could be transferred because of a pending litigation between the parties being Special Civil Suit No. 758 of 1999. 5.9. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that the disputes pertaining to title are sufficient cause for rejecting transfer of shares. It is submitted that Section 111-A of the Companies Act, 1956 provides that a Company may not refuse the transfer of shares without sufficient cause. It is the Liquidator's case that there existed sufficient cause for the company to refuse the present transfer of shares. It is submitted that as demonstrated the Respondent disputes the existence of any alleged pledge. There has been no delivery of the shares to the Bank. In the absence of this essential ingredient no pledge can be said to exist. It is submitted that Section 172 of the Indian Contract Act, 1872. It is submitted that as demonstrated the Respondent disputes the existence of any alleged pledge. There has been no delivery of the shares to the Bank. In the absence of this essential ingredient no pledge can be said to exist. It is submitted that Section 172 of the Indian Contract Act, 1872. The shares were merely delivered to Jaslok Finance as comfort and not to the Bank. The Bank has already made a claim as an unsecured creditor. It has in no way stated to have any form of security in its claim filed before the Liquidator. Even in the Civil Suit, the Appellant has not pleaded the existence of any pledge. The first time the Appellant mentions the pledge is in an Application in the Suit in 2005 seeking a temporary injunction. 5.9.1.It is submitted that by a letter dated 12th August 2005, the Company inter alia stated that Petrofils was now under liquidation and that the assets would vest in the liquidator and consequently all claims would lie to the liquidator. Further, the letter also stated that the order of liquidation would be a bar on various acts, including the transfer of shares which are allegedly pledged before liquidation. It is submitted that further the letter also stated, that by the letter dated 19th December 1995, no transfer could take place without 15 days' notice to Petrofils and since that wasn't complied with the shares would not be transferred. It is submitted that on 31st August 2005, the Company forwarded the Liquidator's letter stating that the shares could be transferred because wherein the factum of pledge was seriously contested between the parties and there also existed a pending litigation between the parties being the Special Civil Suit No. 758 of 1999 along with Civil Application pertaining to the allegedly pledged shares. It is submitted that the aforementioned reasons amount to sufficient cause provided in Section 111A of the Companies Act, 1956. In support of his above submission, Shri Joshi, learned counsel for the respondent has heavily relied upon the decision of the Hon'ble Supreme Court that in the case of Ammonia Supplies Corpn. It is submitted that the aforementioned reasons amount to sufficient cause provided in Section 111A of the Companies Act, 1956. In support of his above submission, Shri Joshi, learned counsel for the respondent has heavily relied upon the decision of the Hon'ble Supreme Court that in the case of Ammonia Supplies Corpn. (P) Ltd. v. Modern Plastic Containers (P) Ltd., (1998) 7 SCC 105 as well as decision of the Hon'ble Supreme Court in the case of ClaudeLila Parulekar v. Sakal Papers, (2005) 11 SCC 73 as well as recent decision of the Hon'ble Supreme Court in the case of Mackintosh Burn Ltd. v. Sarkar & Chowdhury Enterprises (P) Ltd., (2018) 5 SCC 575 . 5.9.2.It is submitted that in the aforesaid decision, the Hon'ble Supreme Court has held that what constitutes sufficient cause would have to be determined in the facts and circumstances of a given case. and it would not be merely restricted to illegalities under Section 111A (3) as sought to be contended by the Appellant in the present case. 5.9.3.It is submitted that in the present case parties have disputed the factum of pledge for the past six years. It is submitted that the company was made aware of this. It is submitted that the Appellant had even filed legal proceedings before the invocation of the pledge wherein the factum of pledge was denied and was in dispute. It is submitted that in addition to the above the Company was also aware of the bar under Section 117 since Petrofils was already under liquidation. 5.10. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that as Petrofils - respondent no.2 gone into liquidation the determination of pledge and the priority of contributions is to be determined by the Liquidator and not by the CLB or Company Court. It is submitted that therefore, the present transfer would therefore circumvent the provisions of Section 117 of the MSCS Act, 2002. 5.10.1. It is submitted that under Section 117(1)(b) of the MSCS Act, 2002 no Court shall have jurisdiction in respect of any matter concerning the winding up and the dissolution of a multistate cooperative society. It is submitted that Section 90 powers of the liquidator. 5.10.1. It is submitted that under Section 117(1)(b) of the MSCS Act, 2002 no Court shall have jurisdiction in respect of any matter concerning the winding up and the dissolution of a multistate cooperative society. It is submitted that Section 90 powers of the liquidator. It is submitted that Section 90(1) states that the whole of the assets of a multi-state cooperative society in respect of which an order for winding up has been made, shall vest in the liquidator appointed under section 89 from the date on which the order takes effect and the liquidator shall have power to realise such assets by sale or otherwise. 5.10.2. It is submitted that Section 90(2)(c) provides that the liquidator shall also have power, subject to the control of the Central Registrar to investigate all claims against the multi-state cooperative society and subject to the provisions of this Act, to decide questions of priority arising between claimants. In addition to the above, Section 121 of the MCMS Act, 2002 specifically provides that the provisions of the Companies Act, 1956 shall not apply to multi-state cooperative societies. 5.10.3. It is submitted that thus, from a bare reading of Section 90(2)(c) read with Section 117, all claims must be made to the liquidator. It is submitted that after the appointment of a Liquidator, various claims were invited from the general public, in order for the Liquidator to address claims and liquidate the cooperative society. It is submitted that pursuant to the invitation of claims, on 30th January 2002, the Appellant lodged its claim with the Liquidator on the said date. 5.10.4. It is submitted that the issue of pledge as well as the claim of the Appellant against Petrofils must be determined by the Liquidator as stated hereinabove. 5.11. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that even otherwise now the appellant had already lodged the claim before the liquidator. It is submitted that therefore, submission of Claim to the Liquidator amounts to a waiver of the Appellant's right to enforce its alleged security. 5.12. It is submitted that in the present case the Company Law Board has rightly held that no permission under Section 117 of the Multi-State Co-operative Societies Act, 2002 was obtained for the purpose of the present proceeding and hence it had no jurisdiction. 5.12.1. 5.12. It is submitted that in the present case the Company Law Board has rightly held that no permission under Section 117 of the Multi-State Co-operative Societies Act, 2002 was obtained for the purpose of the present proceeding and hence it had no jurisdiction. 5.12.1. It is submitted that Section 117(2) stipulates that while a multi-state cooperative society is being wound up, no suit or other legal proceedings relating to the business of such society shall be proceeded with or instituted against the liquidator or against the society or any member thereof, except by leave of the Central Registrar. 5.12.2. It is submitted that the express provision makes it clear that no suit or legal proceedings may be proceeded with in any court except by the leave of the Central Registrar. It is not in dispute that the Hon'ble CLB would be a Court and proceedings under Section 111A would constitute "other legal proceedings". The CLB has been held to be a Court by the Hon'ble Supreme Court in a catena of judgments and most recently in E. Bapanaiah v. K. S. Raju, (2015) 1 SCC 451 . 5.12.3. It is further submitted that furthermore, it is submitted that the recovery of monies and the exercise of a pledge pertaining to an investment of Petrofils would be included within the phrase "relating to the business of such a society". It is submitted that any commercial activity, including but not limited to borrowing, providing of any alleged security and the enforcement of such security would relate to the business of the society. Hence it is submitted that the present proceedings before the CLB were without jurisdiction. The learned CLB rightly held that since no permission was obtained in accordance with Section 117, the present proceedings were without jurisdiction. 5.13. Now, so far as reliance placed upon the decision of the Hon'ble Supreme Court in the case of Bajaj Auto as well as in the case of N.K.Firodia & Another on behalf of the appellant and submission that company cannot question ownership and title issues, it is submitted that said decision shall not be applicable to the facts of the case on hand. 5.14. 5.14. Now, so far as submission on behalf of the appellant that a transfer has already taken place when blank transfer forms and share certificates were handed over is misconceived is concerned, it is submitted by Shri Joshi, learned counsel for the respondent no.2 that such contention is misconceived. It is submitted that decision of the Hon'ble Supreme Court in the case of Vasudev Shelat relied upon by the appellant in support of above submission, shall also not be applicable to the facts of the case on hand. It is submitted that in the he aforementioned case the Hon'ble Apex Court held that a gift of shares would not be invalidated on account of the death of the donee. In the said case the share certificates and blank forms were handed over by the donee. It was held that Section 122 and 123 of the Companies Act would not apply. In the said case the registered document was signed by the donor and accepted by the done and was attested by six witnesses. The Court held that the donation of the right to get the share certificates in the name of the done became irrevocable by registration as well as delivery. 5.14.1. It is submitted that in the case of a gift, a transfer by the done becomes irrevocable. The act of recording the transfer only remains a ministerial act. However, in the case of a pledge, a right to sale can only be invoked upon the happening of a contingent event being the event of default. Even after the occurring of an event of default the pawnee must provide due notice prior to invocation and cannot transfer the properties to himself. This is evidenced by Section 176 of the Contract Act, 1872. In the present case the alleged pledge was only invoked on 25th July 2005. 5.14.2. It is submitted that the creation of a pledge by blank transfer forms does not, in any manner create any special right in the pledgee as held in Official Assignee, Bombay v. Madholal Sindhu, (1948) 2 ILR(Bom) 1 and decision of the Delhi High Court in GTL Ltd. v. IFCI Ltd., (2011) 126 DRJ 394, no such rights are created. It is submitted that in fact as per the liquidator that no blank transfer forms were even handed over to the Appellant. It is submitted that in fact as per the liquidator that no blank transfer forms were even handed over to the Appellant. So far as submission on behalf of the appellant that the transfer of shares to its name was not an invocation of the pledge but merely perfecting title is contrary to law is concerned, the same is contrary to law. It is submitted that even the contention on behalf of the appellant that the transfer does not amount to conversion since the Appellant was not going to credit the proceeds of the shares to the name of Petrofils, needs to be rejected at the very outset. It is submitted that the argument that the transfer deeds were filed and the transfer was sought was to perfect the security is not the case that is pleaded. In any case as demonstrated above a transfer to oneself by a pledgee would amount to conversion and forfeiture and is impermissible. Various judgments Neikram Dobay v. Bank of Bengal,1891 LR 60, Official Assignee, Bombay v. Madholal Sindhu, (1948) 2 ILR(Bom) 1, GTL Ltd. v. IFCI Ltd., (2011) 126 DRJ 394, Balakrishna Gupta v. Swadeshi Ploytex, (1985) 2 SCC 167 , and Lallan Prasad v. Rahmat Ali, (1967) AIR SC 1322 have all held that sale of shares by the pledgee to itself would be a void contract. The Appellant has gone a step further and sought to transfer the shares in its own name without even crediting the Respondent No. 2 with those proceeds. 5.14.3. It is submitted that this is no manner perfection of title but in fact a complete abuse of the rights of transfer. In and Lallan Prasad v. Rahmat Ali, (1967) AIR SC 1322 it has been held that "If the pawnee sells, he must appropriate the proceeds of the sale towards the pawner's debt, for, the sale proceeds are the pawner's monies to be so applied and the pawnee must pay to the pawner any surplus after satisfying the debt." In the present case, not only does Respondent No. 2 not lose the asset, depriving various creditors of a stake in the proceeds of the asset but now seeks to contend that it has not and shall not credit the proceeds of the transfer to the Respondent. This is patently illegal and without any basis in law. This is patently illegal and without any basis in law. It is submitted that furthermore in the even that the Appellant does not give the Respondent any credit, it would tantamount to losing a valuable asset as well as not receiving any set off towards the same. 5.15. It is further submitted by Shri Joshi, learned counsel for the respondent no.2 that reliance placed upon Section 108(1-C) of the Companies Act 1956 by the Appellant is also misplaced. It is submitted that Section 108(1-C) is a procedural provision relating to the period of limitation for the exercise of transfer of shares. It is submitted that it is not a substantive provision of law creating any substantive rights. It is submitted that therefore, a procedural provision such as Section 108 (1-C) cannot run contrary to the law of pledge embodied in Section 176 of the Contract Act, 1872. It is submitted that therefore, Section 108 (1-C) does not give a go by to the law of pledge but merely recognises the right of such a transfer if such directions are obtained and such consent is provided for in the deed recognising the pledge and the mode of exercising it. Making above submissions and relying upon the above decisions, it is requested to dismiss the present Appeal and confirmed the order passed by the respondent Company as well as Company Law Board. 6. Shri Shalin Mehta, learned counsel for the respondent no.1 has submitted that respondent no.1 has supported the impugned order passed by the learned CLB. To avoid repetition, he has adopted the submission made by Shri Joshi, learned counsel for the respondent no.2 - Petrofils. 6.1. It is submitted that in the present case reasons given by the respondent no.1 company vide letters dated 12.08.2005 and 31.08.2005 refusing to register the subject shares in favour of the appellant, constitutes sufficient cause under Section 111A(2) and therefore, the same does not warrant interference of this Court. 6.2. It is submitted that the words "sufficient cause" are wide enough to confer enough discretion upon the respondent no.1 to refuse transfer of the subject shares for any good cause. It is submitted that the cause does not have to be a substantial or real cause. 6.2. It is submitted that the words "sufficient cause" are wide enough to confer enough discretion upon the respondent no.1 to refuse transfer of the subject shares for any good cause. It is submitted that the cause does not have to be a substantial or real cause. It is submitted that in the present case, respondent no.1 decision to refuse transfer is objectively based on good cause because the decision is taken in consonance with Article 5(c) of the Articles of Association of respondent no.1 and further the aforesaid AOA is not under challenge by the appellant. Further, it is pertinent to point out that the respondent No.1's decision was also affirmed by CLB in the appeal preferred by the appellants. In such circumstances, the present appeal before this Court would be in the nature of a Second Appeal and jurisdiction of this Court in such Second Appeals is very limited and the Court may set aside CLB's decision only if the same is perverse or impossible in law. It is submitted that no such case of perversity or impossibility is made out by the appellant in the present appeal before this Court. 6.3. It is submitted that respondent No.1 while refusing to register transfer of shares also gave the reason of the pendency of civil suit between the appellant and the respondent No.2. It is submitted that in the aforesaid civil suit, an application was filed by the appellant to direct respondent No.1 to register and transfer shares in the name of the appellant, which is similar to the prayer sought in the present proceedings before this Court. It is submitted that decision of respondent No.1 to await the outcome of the civil suit between the parties before registering or transferring the subject shares cannot be considered to be arbitrary or whimsical decision. It is submitted that the Hon'ble Apex Court in similar situations has relegated parties to a civil suit before seeking registration and transfer of shares where there is a serious title dispute concerning the ownership of shares between the parties. 6.4. It is submitted that the Hon'ble Apex Court in similar situations has relegated parties to a civil suit before seeking registration and transfer of shares where there is a serious title dispute concerning the ownership of shares between the parties. 6.4. It is submitted that the respondent No.1's decision to refuse registration and transfer of subject sharers in the name of the appellant is also based on Article 5 (c) of the AOA which allows the Board of Directors to refuse registration of shares if the same is more than 1 % of the paid up equity share capital. It is not in dispute that the subject shares make up more than 1 % of the paid up equity share capital of the respondent No.1. Therefore, in such circumstances, the decision of refusal of registration of transfer of subject shares by the Board of Directors of respondent No.1 cannot be faulted since the same is in consonance with the AOA. The Hon'ble Apex Court in Dove Investments (P) Limited and Ors V/s Gujarat Industrial Investment Corporation & Anr., (2006) 2 SCC 619 , Shailesh Prabhudas Mehta and Ors v/s Calico Dyeing and Printing Mills Limited, (1994) 3 SCC 339 , Laxmi Tea Company Limited v/s Pradip Kumar Sarkar, (1989) Supp2 SCC 656, has held that the Board of Directors of a company can refuse registration and transfer of shares if the AOA reserves that power and that such decision would qualify as a prudent commercial decision not warranting interference by the Court. Therefore, the respondent No.1 decision refusing registration of transfer of subject shares in favour of the appellant is in consonance with the AOA as well as, as per the aforesaid case laws pertaining to the subject matter. Making above submissions and relying upon the above decisions, it is requested to dismiss the present Appeal. 7. Heard the learned counsels for the respective parties at length. Making above submissions and relying upon the above decisions, it is requested to dismiss the present Appeal. 7. Heard the learned counsels for the respective parties at length. At the outset, it is required to be noted that what is challenged in the present appeal is the impugned order passed by the learned Company Law Board in the application/appeal submitted by the appellant herein submitted under Section 111 A of the Companies Act, by which, the learned Company Law Board refused to direct the respondent no.1 company to register the transfer of 38,04,100 shares in favour of the appellant - original applicant - Mehsana District Central Cooperative Bank Limited, which shares, according to the appellant were put as a pledge/security by the respondent no.2 company at the time when appellant placed fixed deposit amounting to Rs. 40 crores with the respondent no.2- Petrofils Company (now in liquidation). 7.1. At the outset, it is required to be noted that appellant herein - original applicant approached the respondent no.1 company along with original share certificates as well as dully filled in form/forms to register the transfer of the said shares in favour of the appellant herein - original company. That vide letter dated 12.08.2005, the respective no.1 company refused to transfer the share due to the following reasons: "(1). The Shares held by any promoter of the company is covered under the Undertaking to the Term Lending Institutions to the effect that these shares will not be transferred/hypothecated/pledged etc. in favour of any person or entity and Petrofils being one of the promoter has also given such undertaking to the company and hence without prior approval of the term lending institutions the transfer cannot be affected in the favour of any party including you. (copy of undertaking of Petrofils is attached as Annexure A). (2).You may refer to the News Paper Notice published in the newspapers viz. Loksatta and Indian Express, notifying to the general Public to not to deal with the shares held by Petrofils and if any body does so the company will be in no way be responsible for any loss or damage arising out of the refusal by the company to transfer the shares in question. Loksatta and Indian Express, notifying to the general Public to not to deal with the shares held by Petrofils and if any body does so the company will be in no way be responsible for any loss or damage arising out of the refusal by the company to transfer the shares in question. A copy of the Notices dated 3rd May, 1999 published in the newspapers is enclosed herewith for your reference as Annexure B. (3).The then Chairman and Managing Director of Petrofils Shri J K Desai had written a letter (copy marked to you also) wherein it was specifically mentioned that no transfer/invocation of shares in question be contemplated without 15 days prior intimation to Petrofils and the same needs to be complied with by you before lodging these shares for transfer (copy enclosed as Annexure C). (4).You may be aware that Petrofils is now under liquidation and all the assets would vest with the Liquidator appointed for the purpose and all the claims would lie to the liquidator and the order of liquidation may operate as bar on various actions including the transfer of such shares which are pledged with you before liquidation." 7.2. At this stage, it is required to be noted that by the said communication dated 12.08.2005, the respondent no.1 company not only refused to register the transfer of the share in favour of the appellant - original applicant to even kept custody of the original share certificate lodged with it and returned only the original transfer deed along with xerox of share certificate lodged. 7.3. That thereafter, when the appellant herein - original applicant approached the learned Company Law Board under Section 111-A of the Companies Act, the learned Company Law Board by impugned order has rejected the said application/appeal under Section 111 A of the Companies Act and has refused to direct the respondent no.1 company to register the share in question in favour of the appellant herein - original applicant on the ground inter alia, that (1) that the appellant Bank has failed to prove that the impugned shares were pledged with them; (2) that the petitioner Bank had already filed suit against the company (Petrofils) and the said suit is pending; (3) that the issue regarding as to whether the impugned shares are pledged with the petitioner bank can be decided in the said suit. The relevant discussion in the order passed by the learned CLB is as such in para 10 only. 7.4. At this stage, it is required to be noted that even respondent no.2- Petrofils through his liquidator also approached the learned CLB by Company Petition No.29/111A/CLB/WR/2005, however the same also came to be rejected by the learned CLB on the ground that said application under Section 111 of the Companies Act is not maintainable. 8. Therefore, in the present appeal order passed by the learned CLB as well as respondent no.1 company refusing to register the transfer of share 38,04,100 in favour of the appellant bank and the scope and ambit of Section 111 A of the Companies Act in case of transfer of the shares are required to be considered. 8.1. In the case of N.K.Firodia and Another, the Hon'ble Supreme Court in para 14,21,22,23 and 24 as observed and held as under: 14. In the present appeals, the reasons of the Directors have to be tested from three points of view. First, whether the Directors acted in the interest of the company; secondly, whether they acted on a wrong principle; and, thirdly, whether they acted with an oblique motive or for a collateral purpose. This Court in M/s Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunihunwala & Ors(1) said that "the discretion of the Directors would be nullified if it were established that the Directors acted oppressively, capriciously or corruptly or in some other way mala fide". The decision in Harinagar Sugar Mills Ltd.(2) related to a case under the Companies Act, 1956 prior to the introduction of section 111(5A). That is why if the Directors under the Articles were not to disclose reasons it was said that the Court would presume where the Directors refused to register the transfer of shares that their power of absolute discretion was exercised bona fide unless corrupt or mala fide motives were affirmatively pleaded and proved. It would be for the aggrieved transferor to show that the refusal to register transfer was exercised mala fide and not in the interest of the company and thereby the presumption of bona fide would be displaced. 21. It would be for the aggrieved transferor to show that the refusal to register transfer was exercised mala fide and not in the interest of the company and thereby the presumption of bona fide would be displaced. 21. It follows that where the Directors have uncontrolled and absolute discretion in regard to declining registration of transfer of shares, the Court will consider if the reasons are legitimate or the Directors have acted on a wrong principle or from corrupt motive. If the Court found that the Directors gave reasons which were legitimate, the Court would not overrule that decision merely on the round that the Court would not have come to the same conclusion. Reference may be made to the decision in Balwant Transport Co. Ltd. Amraoti v. Y. H. Deshpande(3) which is a Bench decision of the Nagpur High Court. Sapate was a shareholder in the company and owned 31 shares. One of his shares was sold by public auction and was purchased by Deshpande. Deshpande applied for registration. The Article in the Nagpur case conferred absolute and uncontrolled discretion on the Directors to refuse to register transfer where in the opinion of the Directors it was not in the interest of the company to admit the proposed transferee to membership. The evidence in that case was that Deshpande was the lawyer of Sapate. Sapate was quarrelling with the company. Sapate also joined a rival concern. The Directors decision in those surrounding circumstances was found to be a legitimate exercise of the power of the Directors in the interest of the company, 22. The decision in Re. Smith & Fawcett Ltd. (1) indicates the extent to which the court upholds the exercise of absolute and uncontrolled discretion of the Directors to refuse to register any transfer of shares. In that case there were two Directors who held the shares in equal numbers. One died. The other Director refused to register the transfer of shares in the names of the executors of the deceased Director except in respect of a part of the holding and upon the condition that the balance be transferred to the surviving Director. It was found to be a justifiable act of the Director in the interest of the company. 23. In the old Bombay decision in Kaikhosro Muncherji Heera 'Maneck & Ors. It was found to be a justifiable act of the Director in the interest of the company. 23. In the old Bombay decision in Kaikhosro Muncherji Heera 'Maneck & Ors. v. The Coorla Spinning & Weaving Company & Ors(1) the Board of Directors might decline to register any transfer of shares, unless the transferees were approved by the Board. A shareholder became insolvent. His share vested in the Official Assignee. The Official Assignee sold the shares. The purchaser applied for registration. The Directors declined to approve of the transferees unless the transferees would pledge themselves not to oppose a certain change in the mode of remunerating the Agents of the company, which the Directors desired to effect, and which they believed would be very advantageous to the company. It may be mentioned here that the purchaser of the shares required the Official Assignee to register transfer in the names of the two nominees who were already the holders of shares in the company. The company, however, did not take any objection to the nominees in their personal capacity. The Directors acted on wrong principle and in abuse of power in insisting on obtaining a pledge from the transferees not to oppose change in remuneration of the Managing Agents. 24. A Bench decision of the Allahabad High Court in The Muir Mills Company Ltd. of Cawnpore v. T. H. Condon & Anr. (3) related to the absolute power of the Directors to refuse registration' of transfer of shares on personal objections to the transferee. The' Muir Mills in that case disallowed the transfers on the ground that the transferees were subordinates of McRobert, the Managing Director of Cawnpore Mills. There was personal animosity between Johnson, the Managing Director of the Muir Mills and McRobert. The Directors of the Muir Mills came to a conclusion that McRobert should not add to his voting power and 'harass the management'. It was found to be abuse of fiduciary discretionary power of the Directors when they wanted to safeguard the. Directors personal interest against McRobert. 8.2. In the case of Ammonia Supplies Corporation (P) Ltd in para 28 to 31, the Hon'ble Supreme Court has observed and held as under: "28. Question for scrutiny before us is the peripheral field within which court could exercise its jurisdiction for rectification. Directors personal interest against McRobert. 8.2. In the case of Ammonia Supplies Corporation (P) Ltd in para 28 to 31, the Hon'ble Supreme Court has observed and held as under: "28. Question for scrutiny before us is the peripheral field within which court could exercise its jurisdiction for rectification. As aforesaid the very word "rectification" connotes something what ought to have been done but by error not done and what ought not to have been done was done requiring correction. Rectification in other words, is the failure on the part of the company to comply with the directions under the Act. To show this error the burden is on the applicant, and to this extent any matter or dispute between persons raised in such Court it may generally decide any matter which is necessary or expedient to decide in connection with the rectification. 29. Both under the 1913 Act and 1960 Act a procedure is prescribed for admitting a person as member by purchase or transfer of shares of that company. With reference to 1913 Act under Section 29, a certificate of shares or stock shall be prima facie evidence of the title of the number of the shares or stock therein. Section 30 defines "member" to be one who agrees to become a member of a company and whose name is entered in its register. Section 31 is to keep register of its members. Section 34 deals with transfer of shares and application for the registration of the transfer of shares is to be made either by the transferor or the transferee. Where such application is made by the transferor for registration of his share a registered notice is to be sent to the transferee. Section 34 (3) restricts to register a transfer share until the instrument of transfer duly stamped and executed by the transferor and transferee has been delivered to the company. Thus before the name of any transferee is registered these procedure has to be shown to have been followed, which is an obligation of any such applicant under the Act. This shows an application is to be made either by the transferor or transferee for registering the name of the transferee as members or share holders of the company by placing before the company duly stamped and signed document both by the transferor and transferee. This shows an application is to be made either by the transferor or transferee for registering the name of the transferee as members or share holders of the company by placing before the company duly stamped and signed document both by the transferor and transferee. Similarly is the position under Section 155 of Indian Companies Act, 1960 before power is exercised for rectification essential ingredients are to exist. Section 100 gives mandate to a company not to register transfer of shares, unless proper instrument of transfer duly stamped and executed by or on behalf of the transferee has been delivered to the company along with certificates relating to the shares. 30. All the above indicates the limitation and the peripheral jurisdiction with which court has to act. In spite of its exclusiveness it cannot take within its lap outside this scope of rectification. This is indicated even by Sec. 155 itself: "Section 155 : Power of Court to rectify register of members (1) If - (a) the name of any person - (i) is without sufficient cause, entered in the register of members of a company, or (ii) after having been entered in the register, is without sufficient cause, omitted therefrom; or (b)default is made, or unnecessary delay takes place, in entering on 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 apply to the Court for rectification of the register. 31. Sub-section (1) (a) of Section 155 refers to a case where the name of any person without sufficient cause entered or omitted in the register of members of a company. The work 'sufficient cause' is to be tested in relation to the Act and the Rules. Without sufficient cause entered or omitted to be entered means done or omitted to do in contradiction of the Act and the Rules or what ought to have been done under the Act and the Rules but not done. Reading of this sub-clause spells out the limitation under which the court has to exercise its jurisdiction. It cannot be doubted in spite of exclusiveness to decide all matter pertaining to the rectification it has to act within the said four corners and adjudication of such matter cannot be doubted to be summary in nature. Reading of this sub-clause spells out the limitation under which the court has to exercise its jurisdiction. It cannot be doubted in spite of exclusiveness to decide all matter pertaining to the rectification it has to act within the said four corners and adjudication of such matter cannot be doubted to be summary in nature. So, whenever a question is raised court has to adjudicate on the facts and circumstance of each case. If it truly is rectification all matter raised in that connection should be decided by the court under Sec. 155 and if it finds adjudication of any matter not falling under it, it may direct a party to get his right adjudicated by civil court. Unless jurisdiction is expressly or implicitly barred under a statute, for violation or redress of any such right civil court would have jurisdiction. There is nothing under the Companies Act expressly barring the jurisdiction of the civil court, but the jurisdiction of the 'court' as defined under the Act exercising its powers under various sections where it has been invested. with exclusive jurisdiction, the jurisdiction of the civil court is impliedly barred. We have already held above the jurisdiction of the 'court' under Sec. 155, to the extent it has exclusive, the jurisdiction of civil court is impliedly barred. For what is not covered as aforesaid the civil court would have jurisdiction. Similarly we find even under Sec. 446(1) its words itself indicate jurisdiction of civil court is not excluded. This sub section states, '........... no suit or legal proceedings shall be commenced ......... or proceeded with ....... except by leave of the court'. The words 'except by leave of the court' itself indicate on leave being given the civil court would have jurisdiction to adjudicate one's right. Of course discretion to exercise such power is with the 'court'. Similarly under Sec. 446(2) 'court' is vested with powers to entertain or dispose of any suit or proceedings by or against the company. Once this discretion is exercised to have it decided by it, it by virtue of language therein excludes the jurisdiction of the civil court. So we conclude the principle of law as decided by the High Court that jurisdiction of Court under Section 155 is summary in nature cannot be faulted. Once this discretion is exercised to have it decided by it, it by virtue of language therein excludes the jurisdiction of the civil court. So we conclude the principle of law as decided by the High Court that jurisdiction of Court under Section 155 is summary in nature cannot be faulted. Reverting to the second limb of submission by learned counsel for the appellant that court should Not have directed for seeking permission to file suit only because a party for dispute sake states that the dispute raised is complicated question of facts including fraud to be adjudicated. The Court should have examined itself to see whether even prima facie what is said is complicated question or not. Even dispute of fraud, if by bare perusal of the document or what is apparent on the face of it on comparison of any disputed signature with that of the admitted signature the Court is able to conclude no fraud, then it should proceed to decide the matter and not reject it only because fraud is stated. Further on the other hand learned counsel for the respondent totally denies any share having been purchased by the appellant-company or any amount paid to it. No transfer of any such share was ever approved by the Board of Director. It is urged the money even if advanced to Sri V.K. Bhargava by the appellant company if at all was a private transaction between the two to which respondent-company has no concern. So we find there is total denial by the respondent. We have gone through the judgment of the High Court. It has rightly held the law pertaining to the jurisdiction of 'court' under Sec. 155 and even referred to some of the documents of the appellant but concluded since they are disputed and said to be forged hence directed for seeding leave if advised for suit. We feel it would have been appropriate if the court would have seen for itself whether these documents are disputed and any document is alleged to be forged whether it said to be so jurisdiction of the civil court. So we conclude the principle of law as decided by the High Court that jurisdiction of Court under Section 155 is summary in nature cannot be faulted. So we conclude the principle of law as decided by the High Court that jurisdiction of Court under Section 155 is summary in nature cannot be faulted. reverting to the second limb of submission by learned counsel for the appellant that court should not have directed for seeking permission to file suit only because a party for dispute sake states that the dispute raised is complicated question of facts including fraud to be adjudicated. The court should have examined itself to see whether even prime facie what is said is complicated question or not. Even dispute of fraud, if by bare perusal of the document or what is apparent on the face of it on comparison of any disputed signature with that of the admitted signature the Court is able to conclude no fraud, then it should proceed to decide the matter and not reject it only because fraud is stated. Further on the other hand learned counsel for the respondent totally denies any share having been purchased by the appellant-company or any amount paid to it. No transfer of any such share was ever approved by the Board of Director. It is urged the money even if advanced to Sri V.K.Bhargava by the appellant company, if at all was a private transaction between the two to which respondent-company has no concern. So we find there is total denial by the respondent." 8.3. In the case of Bajaj Auto Limited Vs. Company Law Board, (1998) 6 SCC 218 , in para 14, the Hon'ble Supreme Court has observed and held as under: 14. As we see it the power of the Board of Directors to refuse registration of transfer of shares must be in the interest of the company and the general body of share holders. No doubt in the year, 1983, Section 82 of the Companies Act provided that the shares or other interest of any member in the company shall be movable property, transferable in the manner provided by the Articles of the Company. Article 52 sought to give absolute and uncontrolled discretion to the Board of Directors to decline to register or acknowledge any transfer of shares. Even then as already held in Bajaj Tempo Limited case , the Board has to act bona fide, and not arbitrarily and for the benefit of the company as a whole. Article 52 sought to give absolute and uncontrolled discretion to the Board of Directors to decline to register or acknowledge any transfer of shares. Even then as already held in Bajaj Tempo Limited case , the Board has to act bona fide, and not arbitrarily and for the benefit of the company as a whole. In the case of a public limited company which is listed with Stock Exchange, an important right of share holder is to be able to sell his shares at a favourable price. It is seldom in the interest of the general-body of share-holders that transfer of shares be refused because that will have an adverse impact on the market price of the shares. Free transferability of shares will not artificially deprive its market price. This does not mean that if there is a good reason then the Board has no power to refuse to register the transfer of shares. This Court while examining the action of the Board of Directors is not expected to exercise original appellate jurisdiction and sit in appeal on question of fact. The judicial review while hearing in appeal from the decision of the Company Law Board would be limited to see whether there was a bona fide exercise of power by the Board of Directors while refusing to register the transfer of shares". 8.4. In the case of Luxmi Tea Company Limited, in para 5 to 7 and 15, the Hon'ble Supreme Court has observed and held as under: 5. Having heard learned counsel for the parties we are of the opinion that unless there is any impediment in the transfer of a share of a public limited company, such as the appellant, a shareholder has the right to transfer his share. Correspondingly, in the absence of any impediment in this behalf the transferee of a share, in order to enable him to exercise the rights of a shares holder as against the Company and third parties, which is not possible until the transfer is registered in the company's register, is entitled to have a rectification of the share register of the company by inserting his name therein as a registered share- holder of the share transferred to him. To have such rectification carried out is the right of the transferee and can be defeated by the company or its Directors only in pursuance of some power vested in them in this behalf. Such power has to be specified and provided for. It may even be residuary but in that case too it should be provided for and traceable either in the Act or the Articles of Association. Even if the power of refusal is so specified and provided for the registration of a transferred share cannot be re- fused arbitrarily or for any collateral purpose, and can be refused only for a bona fide reason in the interest of the company and the general interest of the shares holders. If neither a specific nor residuary power of refusal has been so provided, such power cannot be exercised on the basis of the so-called undeclared inherent power to refuse registration on the ground that the 87 company or its Directors take the view that in the interest of the company and the general interest of the shareholders, registration of the transfer of shares should be refused. Indeed making a provision in the Act or the Articles of Association etc. conferring power of refusal would become futile if existence of an inherent power such as claimed by the company in the instant case is assumed, for the simple reason that the amplitude of the so-called undeclared inherent power would itself take care of every refusal to register the transfer of share. Assumption of such a power would result in leaving the matter of transfer of share and its registration at the mercy and sweet will of the company or its Directors, as the case may be. In the absence of any valid and compelling reason it is difficult to comprehend such a proposition. 6. Even the submission based on the words "or otherwise" in subsection (2) of Section 111 of the Act and in Article 42 of the Articles of Association to the effect that these words recognize the existence of an inherent power to refuse registration of the transfer of the share does not commend itself to us. The words "or otherwise" were inserted in sub-section (2) of Section 111 of the Act in 1960 and it is this subsection so amended which is applicable to the facts of the instant case. The words "or otherwise" were inserted in sub-section (2) of Section 111 of the Act in 1960 and it is this subsection so amended which is applicable to the facts of the instant case. Sub-section (2) of Section 111 does not confer any right but only casts a duty to give notice of refusal to register the transfer of a share and provides for punishment in case of default in doing so. Giving of notice is necessary, inter alia, to facilitate the exercise of the right of appeal conferred by sub-section (3) and (4) of Section 111. To introduce a concept of either conferment or recognition of a right to refuse registration of the transfer of a share in subsection (2) militates against and runs counter to the very texture and purpose of this sub-section. Such an interpretation would have the effect of imputing to the legislature an intention of making an effort to fix a square peg in a round hole, when the purpose, if it was to confer or recognize any inherent power to refuse registration of the transfer of a share, could plainly be achieved by inserting the words "or otherwise" after the words "under its articles" and before the words "to refuse to register" in sub-section (1) of Section 111 which is the sub-section relevant for such purpose. 7. The words "or otherwise" take colour from the context in which they are used. In our opinion, the words "under its articles" in subsection (2) of Section 111 of the 'Act have been used in the same sense as is expressed in legal terminology by the familiar words "conferred by law". Consequently, if the opening part of sub-section (2) is read as "If a Company refuses, whether in pursuance of any power conferred by 88 law or otherwise" it would be incongruous to suggest that the legislature in using the words "or otherwise" intended to give recognition to a power to refuse registration of the transfer of a share even otherwise than in accordance with law. This would be tantamount to putting a premium on taking the law into one's own hands. The legislature cannot be imputed with any such intention. This would be tantamount to putting a premium on taking the law into one's own hands. The legislature cannot be imputed with any such intention. For these reasons, we are of the view that in the context in which the words "or otherwise" have been used in sub-section (2) of Section 111, they only purport to cast a duty or impose an obligation of giving notice of refusal to register the transfer of a share irrespective of the fact whether such refusal is under the Articles of Association of the Company or de hors the Articles, which would include even a case where such refusal has been made arbitrarily or for any collateral purpose. A fortiori, this would be the interpretation of even Article 42 of the Articles of Association of the Company inasmuch as on its plain language which, except for the provision for punishment, is in pari materia with sub-section (2) of Section 111 of the Act, the purpose of this Article is the same as of the said sub-section (2). Even the marginal note of Article 42 lends support to this interpretation. 15. The third submission made by learned counsel for the appellant that the application under section 155 of the Act was not maintainable as the transferors had not been made parties therein, may now be considered. A similar submission had been made before the Division Bench of the High Court also and was repelled by holding that the transferor is not a necessary party to an application under section 155 of the Act unless the transfer was disputed by him. It was pointed out that even though in the instant case the transferors had been served with notice and in any event had knowledge of the proceedings for registration of transfer of shares they had not disputed the transfer of the shares. We do not find any infirmity in the order of the High Court on this point. 8.5. In the recent decision in the case of Mackintosh Burn Ltd , the Hon'ble Supreme Court has while not accepting the submission, and the view of the Company Law Board that refusal to register the transfer of shares can be permitted only if the transfer is otherwise illegal or impermissible under any law and has further observed and held that refusal can be on the ground of violation of law or any other sufficient cause. It is further observed that conflict of interest in a given situation can also be a cause. It is further submitted that whether the same is sufficient in the facts and circumstances of a given case for refusal of registration, is for the Company Law Board to decide right to appeal. 8.6. On considering the aforesaid decision of the Hon'ble Supreme Court, principle of law which is imparting is that there is no absolute right in favour of Directors of the Company not to register the transfer of shares; that the Director must act bonafidely and in the interest of company; the Director can refuse the register of transfer of shares if for the valid reasons, the Board of Directors are of the opinion that such transfer shall not be in the company interest; that the proceedings before the CLB are summary in nature; that the CLB can refuse to register the transfer on any sufficient cause. 8.7. Applying the law laid down by the Hon'ble Supreme Court in the aforesaid decisions, now decision of the respondent no.1 company and the impugned decision of the CLB in an application under Section 111 A of the Companies Act required to be considered. 9. Considering the reasons given by the Company as well Company Law Board, it appears and it is not the case on behalf of the respondent no.1 Company that if the shares are transferred in the name of appellant, it will be against the interest of the respondent no.1 company. 9.1. Considering the stand taken by the respondent no.1 and the respondent no.2 now, it appears that the impugned reasons not to transfer the share in favour of the appellant are that the respondent no.2 Petrofils has gone in liquidation and that now there is a serious dispute with respect to whether the shares in question were pledged and put as security or not and that now the suit filed by the appellant herein is pending before the competent Court. 9.2. It is the case on behalf of the appellant that Section 111-A of the Companies Act specifically provides that shares of the company are freely transferable, until and unless the Company is able to demonstrate "sufficient cause" to refuse such a transfer. 9.2. It is the case on behalf of the appellant that Section 111-A of the Companies Act specifically provides that shares of the company are freely transferable, until and unless the Company is able to demonstrate "sufficient cause" to refuse such a transfer. According to the learned counsel for appellant phrase "sufficient cause" has to be read in conjecture with sub- section (3) of Sec 111-A of the Act and that would include only the grounds as referred to in sub section (3). The aforesaid has no substance. Considering the provisions of Section 111-A of the Act both the Sections 111-A(2) and 111 A(3) are different and distinct remedy and proceedings. Section 111 A(2) shall be applicable in a case where Company refuse to transfer the shares in the name of transferee and it confers right upon such transferee to approach the CLB. Section 111-A(3) confers powers upon the Tribunal/CLB to direct any depository company to rectify its register or records (after the shares are transferred in the name of transferee) if it is found that the transfer of shares or debentures is in contravention of any of the eventualities and/or ground mentioned in the Section 111-A (3) of the Act. 9.3. Thus, considering Section 111-A(2) of the Act vis-a-vis the principle of law laid down by the Hon'ble Supreme Court in the aforesaid decisions the shares of company are fully transferable, until and unless company is able to demonstrate sufficient cause to refuse such a transfer. Sufficient cause is not defined and therefore, has to be read in light of the decision of the Hon'ble Supreme Court referred to herein above. As observed herein above, on the basis of objection raised by the transferor, the same can be said to be "sufficient cause" not to transfer such freely transfer shares. 9.4. In the present case, it is required to be noted that initially when the company refused to transfer the share in the name of appellant transferee in fact no objection at all were there by the respondent Petrofils. The respondent Petrofils lodged the objection only after the decision of the company not to transfer the shares in favour of the appellant transferee. The respondent Petrofils lodged the objection only after the decision of the company not to transfer the shares in favour of the appellant transferee. It is also required to be noted that even thereafter also the respondent no.1 did not refuse to register/transfer of share in the name of appellant on the ground that there are serious dispute with respect to title/pledge. The CLB in the impugned order rejected the appeal/application submitted by the appellant under Section 111-A(2) of the Act on the ground that the suit filed by the plaintiff is pending and there are serious dispute with respect to pledge and therefore, as such CLB gone beyond the reasons even given by the respondent no.1 company. 9.5. Even otherwise, it is required to be noted that suit filed by the appellant was for recovery of the amount of Rs. 40 crores, which were put by way of fixed deposit with the Petrofils. In the said suit, belatedly the appellant submitted an application for interim relief/direction directing the respondent no.1 company to transfer the share in question in favour of appellant. It is required to be noted that same is substantive relief sought. It is also required to be noted that respondent no.2- Petrofils and/or liquidator (now) has not initiated any proceedings against the appellant disputing that the shares were not pledged and as were not given by way of security at the time of taking deposit of Rs. 40 crores. Therefore, the reasons stated by the CLB that the suit is pending is not tenable at law and even on facts also. 10. Now, so far as submission on behalf of the learned counsel for the respective parties on 176 of the Contract Act and the decision relied upon by the learned counsel for the respective parties referred herein above are concerned, on considering Section 176 of the Contract Act and the stage which the appellant approached the respondent no.1 company for transfer of shares in question along with transfer deed duly acknowledge and signed by the respondent no.2- Petrofils, we are of the opinion that at this stage, it cannot be said that the appellant bank has invoked the pledge. At the time when the pledge is invoked and shares are to be sold to recover the amount secured, the stage at Section 176 of the Contract Act will come. At the time when the pledge is invoked and shares are to be sold to recover the amount secured, the stage at Section 176 of the Contract Act will come. It is required to be noted that as such prior to approaching the respondent no.1 company to transfer the share in favour of the appellant along with transfer deed duly acknowledged and signed by the Petrofils, prior notice was given by the appellant. 10.1. At this stage, it is required to be noted and it is not in dispute that the respondent no.2- Petrofils had taken a deposit of Rs. 40 crores from the appellant bank which is a cooperative bank dealing with public money. It is also not in dispute that at that time the shares in question along with duly acknowledged/signed, the transfer deeds were given to Jashlok Finance who acted as a broker. It is not in dispute that the transfer deeds/forms are in fact signed by the Petrofils. 10.2. Even it is not the case on behalf of the respondent no.2- Petrofils that the transfers which were not duly acknowledged and/or signed by them. It also emerges that Jashlok Finance who were in custody of the shares certificate along with transfer deed acknowledge and signed were in possession of the Jashlok Finance from the date on which the fixed deposits were taken by the respondent- Petrofils. It is also emerges and come on record that Jashlok Finance handed over the shares certificate along with duly acknowledged the transfer deeds to the appellant. Considering the aforesaid transfer and the impugned decision of the CLB rejecting the application submitted by the appellant, cannot be said to be "sufficient ground" not to transfer freely transferable share in favour of appellant. 11. Now, so far as submission that respondent no.2- Petrofils has gone into liquidation and therefore, in view of the bar under Section 117 of the Multi State Cooperative Societies Act is concerned, at the outset, it is required to be noted that in the Company Petition before the CLB there was no relief against the respondent no.2 society. It is also required to be noted that even the appellant is also Cooperative Bank and the amount which was invested with the Petrofils was a public money to the extent of Rs. 40 crores and now it will be approximately Rs. 100 crores. It is also required to be noted that even the appellant is also Cooperative Bank and the amount which was invested with the Petrofils was a public money to the extent of Rs. 40 crores and now it will be approximately Rs. 100 crores. They put the said amount in the fixed deposit with the respondent no.2 Petrofils against the aforesaid five shares certificates in respect of 38,40,100 equity share of respondent no.1 company which as such can be said to be put as a security otherwise they would not have even put the fixed deposit on such much amount. 11.1. In view of the above and for the reasons stated above, impugned order made by the learned Company Law Board dated 26.5.2006 on Company Petition No. 37 of 2005 refusing to direct the respondent no.1 company to register the transfer of shares in the name of appellant cannot be said to be sustained and same deserves to be quashed and set aside. 12. Even the conduct/action on the part of the respondent no.1 in retaining the original share certificate with it also deserves serious consideration. Learned counsel for the respondent no.1 is not in a position to point out under which provision of law and how the company can retain the original share certificate assuming that company is justified in refusing to register the transfer of shares. Assuming that company in a given case is justified on "sufficient ground" not to transfer the shares, which were presented along with transfer deed duly signed, in that case also, the company cannot retain the original share certificate presented and same are required to be returned/sent to the persons who submitted the application for transfer of shares. In the present case, the original transfer deeds are returned to the appellant, however the respondent company has returned the original share certificate which is absolutely arbitrary, illegal and mala fide, which cannot be sustained. 13. In view of the above and for the reasons stated above, present appeal is allowed. In the present case, the original transfer deeds are returned to the appellant, however the respondent company has returned the original share certificate which is absolutely arbitrary, illegal and mala fide, which cannot be sustained. 13. In view of the above and for the reasons stated above, present appeal is allowed. The impugned order made by the learned Company Law Board dated 26.5.2006 on Company Petition No. 37 of 2005 is hereby quashed and set aside and consequently respondent no.1 is hereby directed to transfer the shares in question in favour of the appellant company on again submitting the transfer deeds duly acknowledged and signed by the respondent no.2 - Petrofils, which retained by the respondent no.1 company earlier. Present appeal is allowed to the aforesaid extent. No costs.