1987 (7) TMI 527 - HC - Companies Law

Powers of Court to rectify register of members, Meetings and proceedings - Presumptions to be drawn where minutes duly drawn and signed

Summary

Issues:
Rectification of share register under section 155 of the Companies Act, 1956 based on alleged loan advanced by petitioner to vice-chairman for conversion into shares.

Analysis:
The case involved a petition under section 155 of the Companies Act, 1956, for rectification of the share register of a company. The petitioner, an employee of the company, claimed to have advanced a loan to the vice-chairman, which he believed was to be converted into shares as per an alleged agreement. The company strongly opposed the prayer for rectification. The court examined the evidence presented, which revealed that various employees, including the petitioner, had given amounts to the vice-chairman and managing director under the agreement that it would be repaid or converted into shares. However, most employees had settled their claims with the vice-chairman, leaving the petitioner's claim outstanding.

The court considered whether the petitioner had acquired the right to be a shareholder based on the alleged loan advanced. It was noted that collections were made without proper authorization or resolution by the board of directors for conversion into shares. The court highlighted the requirement for resolutions of the board of directors for such conversions and the lack of evidence supporting the petitioner's claim to become a shareholder through the alleged loan.

The judgment discussed relevant legal principles, including the need for written applications and board resolutions for acquiring shares. It emphasized that the petitioner had not followed the necessary procedures to become a shareholder, such as making a written application or obtaining a board resolution. The court concluded that the petitioner's claim for rectification of the share register was ill-conceived and intended as a shortcut method of realization by converting the alleged loan into shares, which was not permissible under the Companies Act.

In light of the above analysis, the court dismissed the petition for rectification of the share register under section 155 of the Companies Act, 1956. No costs were awarded in the case.