1981 (7) TMI 189 - HC - Companies Law

Powers of Court to rectify register of members, Exclusion of spot delivery contracts from sections 13,14 15 or 17

Summary

Issues:
Application under section 155 of the Companies Act, 1956 for rectification of share register and/or register of members. Allegations of fraud, collusion, and illegality in share transactions. Dispute over refusal to register shares based on Securities Contracts Regulation Act. Interpretation of spot delivery contracts. Application challenged by respondent based on alleged illegal arrangement to acquire controlling shares.

Analysis:
The petitioner sought rectification of the share register under section 155 of the Companies Act, 1956 to insert their name as the shareholder in place of the transferors. The petitioner had purchased shares from the transferors and paid the full consideration amount, as evidenced by letters and agreements. The respondent company refused to register the shares, citing Article 43, which was deemed inapplicable as the shares were fully paid up and had no lien. The refusal was considered illegal and unjustified, leading to the application for rectification.

The respondent argued against the application, alleging an illegal arrangement between the petitioner and a group of shareholders to acquire controlling shares. They contended that the petitioner created false evidence of spot delivery transactions to avoid the Securities Contracts Regulation Act. The respondent insisted on a trial to prove the alleged illegal arrangement, citing previous judgments and principles from relevant cases.

The court emphasized the need for a simple case not to be needlessly complicated by baseless allegations. It highlighted that documentary evidence of payment and transfer deeds should be relied upon, rather than raising suspicions without evidence. The court dismissed the respondent's contentions of collusion and illegality, emphasizing the legality of arranging transactions to avoid legal consequences, as established by previous court decisions.

The court rejected the respondent's arguments, considering them frivolous and against commercial morality. It concluded that the application for rectification should be granted as prayed for, with the respondent directed to pay the costs of the application.

In conclusion, the court ordered the rectification of the share register as per the petitioner's request, finding the respondent's objections unfounded and ordering them to bear the costs of the application.