1986 (7) TMI 332 - HC - Companies Law

Shares warrants and entries in register of members Powers of Court to rectify register of members

Summary

Issues Involved:
1. Maintainability of the petition under Section 155 of the Companies Act.
2. Entitlement of the petitioner to rectification of the share register.

Issue-Wise Detailed Analysis:

1. Maintainability of the Petition under Section 155 of the Companies Act:

The primary question was whether the petition filed under Section 155 of the Companies Act was maintainable. The learned company judge initially found that the arrangement between the petitioner and respondents Nos. 2 and 3 was more than a mere proposal. However, the judge ruled the petition non-maintainable for several reasons:

- Non-compliance with Section 108: The petitioner did not comply with the provisions of Section 108 of the Companies Act. No instrument of transfer was drawn up and delivered to the company, raising doubts about the court's ability to order rectification based on a mere order of transfer.
- Lack of Agreement with the Company: There was no agreement between the petitioner and the company or with any shareholder of the company. The petition did not disclose the name of any shareholder with whom the petitioner and respondents Nos. 2 and 3 negotiated and came to an agreement.
- Absence of Necessary Particulars: The petitioner did not furnish the details referred to in clauses (a) to (d) of Section 150 (1) of the Act, which are essential for the removal of shareholders' names and entering other names in their place.
- Discretion under Section 155(2): The court has discretion under Section 155(2) of the Companies Act and may not find it desirable to pronounce on the question of title at this stage since the scope of the agreement is in dispute in O. S. No. 245 of 1976.

The court referred to various rulings, including Ramakrishna Rao v. Krishna Rao (1947) 1 MLJ 75 and Mahendra Kumar Jain v. Federal Chemical Works Ltd. (1965) 35 Comp. Cas. 651, which were decided under the Indian Companies Act, 1913. The court also considered the ruling in Madras-Bangalore Transport Co. P. Ltd. v. K. A. Sebastian (1975) KLT 655, which held that where the matter can more conveniently be decided in a suit, relief under Section 155 may be refused. The court concluded that the reasoning of the Gujarat High Court in Gulabrai Kalidas Naik v. Laxmidas Lallubhai Patel of Baroda (1978) 48 Comp. Cas. 438 was preferable regarding the scope of Section 155.

2. Entitlement to Rectification of the Share Register:

The court found that the petitioner had a prima facie case for rectification of the share register. The evidence showed that the petitioner and respondents Nos. 2 and 3 had entered into agreements (exhibits A-1 and A-2) to purchase shares and jointly improve the estate. The petitioner provided necessary funds for purchasing the shares, and substantial amounts were spent from the joint funds for the Thandiyode business. The court noted that the acquisition of shares by respondents Nos. 2 and 3 was for the common benefit of all three parties, and the petitioner was entitled to one-third right in the shares.

The court ordered the following:

- Declaration of Title/Right: The appellant's title/right to one-third right in the shares acquired in the names of respondents Nos. 2 and 3 in the first respondent company was declared.
- Inclusion in Share Register: The appellant was declared entitled to have his name included in the share register of the first respondent company along with the names of respondents Nos. 2 and 3.
- Execution of Transfer Instruments: Respondents Nos. 2 and 3 were directed to execute necessary instruments of transfer of shares within one month and deliver them to the first respondent company as required under Section 108 of the Companies Act. The first respondent company was directed to rectify its share register accordingly.
- Compliance with Statutory Provisions: The appellant and respondents Nos. 1 to 3 were directed to comply with other statutory provisions, including furnishing particulars required under Section 150 and notice to the Registrar under Section 156 of the Companies Act.
- Execution in Case of Non-compliance: If the respondents failed to comply with the directions, the appellant was entitled to have the order executed through an officer appointed by the court at the cost of the respondents.

The appeal was allowed, and there was no order as to costs. The court appreciated the thorough preparation and arguments presented by counsel for both parties.