Rohit, a member of Happy (Pvt.) Ltd. transfers his shares to Yash. Yash submitted the duly executed instrument of transfer. The Board of directors of the company at its meeting rejected the transfer arbitrarily without a

According to Section 58(1) of the Companies Act, 2013, if a private company limited by shares refused, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to any securities or interest of a member in the company, it shall within a period of 30 days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal. While refusing to register transfer of shares, it is necessary that the directors must act in a good faith and for the benefit of a company and shareholders and not for some other purpose. Power of refusal to register transfer of shares should be exercised strictly on the grounds specified in the Articles and not on the basis of any other ground. According to Section 58(3) the transferee i.e. Yash, may appeal to the Tribunal/CLB against the refusal within a period of 30 days from the date of receipt of the notice or in the case no notice has been sent by the company within a period of 60 days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company. In case, relative of Yash wants to take any action against the company, he cannot do so as in accordance with section 58(3) the right to appeal in case of refusal has been restricted to only transferee.