2007 (8) TMI 443 - HC - Companies Law

Register of Members - right to seek copy of the register of members - whether register of members include beneficial owners and whether they are deemed to be members of the concerned Company? Held that - The member of the Company is defined without any ambiguity in the Companies Act, 1956 and the intention of the Legislature shall not be given a narrow interpretation as argued by the learned counsel for the respondent. Hence, it is not open to the respondent Bank now to contend that, it will maintain a list of members, excluding the beneficial owners, whose names are found in the records of the depository. Therefore, the direction given by the Company Law Board, which is questioned by the appellant, deserves to be quashed and accordingly, the same is set aside. The respondent is bound to furnish copy of all members of the Company and not in exclusion of the beneficial owners, whose names are found in the register of depository. The Civil Miscellaneous Appeal is allowed.

Issues:
Interpretation of register of members under Companies Act, 1956 to include beneficial owners; Deemed membership of beneficial owners in the concerned Company; Compliance with sections 150, 151, 152A of the Companies Act, 1956; Validity of Company Law Board's direction excluding beneficial owners from membership list.

Analysis:

Issue 1: Interpretation of register of members under Companies Act, 1956 to include beneficial owners

The appellant challenged the Company Law Board's direction excluding beneficial owners from the membership list. The appellant contended that every beneficial owner, as per section 41(3) of the Companies Act, 1956, should be deemed a member of the concerned Company. The appellant argued that the register of members under section 150 should include beneficial owners, especially after the enactment of the Depositories Act, 1996. The respondent, however, argued that beneficial owners cannot be deemed members as per section 152A and sections 163(2) and (3) of the Companies Act, 1956.

Issue 2: Deemed membership of beneficial owners in the concerned Company

Section 41(3) of the Companies Act, 1956, clearly states that every person holding equity share capital and listed as a beneficial owner in the depository records is deemed a member of the Company. This provision broadens the definition of a member to include beneficial owners, thereby ensuring their membership status in the concerned Company. The Companies Act, post the Depositories Act, 1996, mandates the inclusion of beneficial owners in the register of members, aligning with the broader membership definition.

Issue 3: Compliance with sections 150, 151, 152A of the Companies Act, 1956

Sections 150 and 151 of the Companies Act, 1956, outline the requirements for maintaining a register of members and an index of members. Additionally, section 152A specifies that the register and index of beneficial owners maintained by a depository shall be considered as an index of members for the purposes of the Act. This provision ensures that beneficial owners are recognized as members of the Company, further emphasizing their inclusion in the membership list.

Issue 4: Validity of Company Law Board's direction excluding beneficial owners from membership list

The Company Law Board's direction excluding the list of beneficial owners from the membership list was challenged by the appellant. The appellant argued that such exclusion contradicts section 41(3) of the Companies Act, 1956, and is in violation of section 152A. The Court held that the interpretation given by the Board was unsustainable as it went against the legislative intent post the Depositories Act, 1996. The Court emphasized that the register of members must encompass beneficial owners, as mandated by the law, and quashed the Board's direction.

In conclusion, the Court allowed the Civil Miscellaneous Appeal, setting aside the Company Law Board's direction, and mandated the respondent to furnish a complete list of members, including beneficial owners, in compliance with the Companies Act, 1956.

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