1991 (1) TMI 348 - HC - Companies Law

Shares warrants and entries in register of members, Transfer of Shares Power to refuse registration and appeal against refusal, Powers of Court to rectify register of members

Summary

Issues:
Application under section 155 of the Companies Act to rectify the register of members due to refusal by the company to enter names of petitioners as members or shareholders.

Analysis:
The case involved a dispute where the respondent-company refused to register the petitioners, who were the executors of a deceased member, as members of the company based on the company's articles. The petitioners argued that as legal representatives, they were entitled to be registered as members. The court examined relevant provisions of the Companies Act, specifically sections 108, 109, 110, and 111, which deal with transfer and transmission of shares. It was established that the right to shares devolves on the legal representative by operation of law, but registration is necessary for them to become members.

The court delved into the distinction between "transfer" and "transmission" of shares, emphasizing that transmission refers to the devolution of title by operation of law, as in the case of legal representatives. The articles of the company were scrutinized, particularly Article 7, which outlined conditions for share transfers. It was noted that the articles did not provide for refusal of transmission of shares by operation of law. Therefore, the executors were entitled to have their names registered as members, and the company's refusal was deemed unlawful.

Regarding the maintainability of the application under section 155 of the Companies Act, the court rejected the respondent's argument that the section did not cover cases of refusal to register. It clarified that "default" in the section encompassed improper or illegal refusals, and hence, the petition for rectification of the register was justified. Consequently, the court allowed the petition, directing the respondent-company to rectify the register of members accordingly, without awarding costs to either party.