1999 (10) TMI 653 - HC - Companies Law

Issues Involved:
1. Right of the transferee to get shares registered in his name.
2. Grounds on which a public limited company can refuse to register shares.
3. Compliance with Section 292 of the Companies Act.
4. Compliance with Section 22A of the Securities Contracts (Regulation) Act.
5. Entitlement to dividends and other consequential reliefs.

Issue-wise Detailed Analysis:

1. Right of the transferee to get shares registered in his name:
The court affirmed that shares of a public limited company quoted at the stock exchange are freely transferable. The transferee is entitled to have the shares transferred in his name to exercise shareholder rights. The company cannot refuse to register shares arbitrarily or for collateral purposes but only for bona fide reasons in the interest of the company and shareholders. The petitioner-company had complied with all necessary requirements, and the respondent-company's refusal to register the shares was deemed unjustified and not bona fide.

2. Grounds on which a public limited company can refuse to register shares:
The respondent-company initially raised objections regarding discrepancies in the transfer documents, such as notarization issues, incorrect names, and incomplete information. However, these were rectified by the petitioner-company. The respondent later cited non-compliance with Section 292 of the Companies Act as a reason for refusal. The court found this ground to be an afterthought and not a valid reason for refusal. The Supreme Court's ruling in Luxmi Tea Co. Ltd. v. Pradip Kumar Sarkar was cited, emphasizing that refusal must be based on specified bona fide grounds and not arbitrary or collateral purposes.

3. Compliance with Section 292 of the Companies Act:
The court held that Section 292 pertains to the internal management of a company and does not relate to the transfer of shares. The respondent-company failed to provide specific evidence of non-compliance with Section 292 by the petitioner-company. The court noted that the respondent-company should have assumed compliance in the absence of contrary evidence. The refusal based on alleged non-compliance with Section 292 was deemed unjustified.

4. Compliance with Section 22A of the Securities Contracts (Regulation) Act:
Section 22A allows a company to refuse share transfer only on specific grounds, such as improper transfer instruments, contravention of law, prejudicial changes in the Board of Directors, or prohibition by court order. The court found no evidence that the petitioner-company violated any conditions under Section 22A. The respondent-company's refusal did not meet any of the stipulated grounds, making it unjustified.

5. Entitlement to dividends and other consequential reliefs:
The court ruled that the petitioner-company is entitled to dividends accrued on the shares from the date of purchase. The respondent-company's claim to appropriate dividends against amounts due from its former managing director was rejected as illegal. The court cited the Punjab and Haryana High Court's decision in Ambala Electric Supply Co. Ltd. v. Walaiti Lal Kohli, which supported the entitlement to dividends as incidental and consequential to the transfer of shares.

Conclusion:
The court directed the respondent-company to rectify its register of members to include the petitioner-company as the transferee of the shares. The respondent-company was also ordered to pay accrued dividends with interest at 12% per annum from the due date until repayment. The petition was allowed with costs of Rs. 10,000, and the respondent-company was instructed to file a notice of rectification with the Registrar of Companies within 30 days.

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