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Issues Involved:
1. Rectification of the Register of Members. 2. Time Limit for Exercising Power to Refuse Registration. 3. Bona Fide Exercise of Power by the Directors. 4. Legal Provisions and Interpretation. Issue-Wise Detailed Analysis: 1. Rectification of the Register of Members: The petitioners sought rectification of the Register of Members of the respondent company by deleting the name of the deceased shareholder and substituting their names as heirs. The deceased, P.V. Mehta, held 100 shares in the respondent company. After his death, the petitioners, as legal heirs, requested the transmission of these shares. Despite obtaining the necessary heirship certificates, the respondent company refused to register the transfer, leading to the filing of this petition under Section 155 of the Companies Act. 2. Time Limit for Exercising Power to Refuse Registration: The central argument by the petitioners was that under Article 26 of the Articles of Association and Section 111(2) of the Companies Act, the directors must exercise their power to refuse registration within two months. Mr. Kamdar argued that if the power to decline registration is not exercised within this period, it is lost. He cited the case of Swaledale Cleaners Ltd., In re [1968] 1 ALL ER 1132, which held that unreasonable delay in exercising the power of veto results in the loss of that power. However, the court rejected this argument, stating that Section 111 does not provide for an automatic vesting of rights in the transferee upon the expiry of two months. The court emphasized that the section only mandates sending a notice of refusal within two months, and failure to do so results in a penalty, not the loss of the right to refuse. 3. Bona Fide Exercise of Power by the Directors: Mr. Kamdar argued that the directors' refusal to register the transfer after a long period indicated mala fide exercise of power. He relied on Bajaj Auto Ltd. v. N.K. Firodia [1971] 41 Comp Cas 1, which held that the court can test the reasons given by the directors to ensure they acted in the company's interest. The court acknowledged this principle but found that the reasons provided by the respondent company, such as ongoing disputes and the deceased's alleged prejudicial behavior, were sufficient to justify the refusal. The court noted that no specific allegations of mala fides were made in the petition, and without evidence, it could not conclude that the directors acted with ulterior motives. 4. Legal Provisions and Interpretation: The court examined Articles 26 and 34 of the Articles of Association and Section 111 of the Companies Act. Article 26 allows directors to decline registration without assigning reasons, provided they send notice within two months. Article 34 deals with the rights of heirs to be registered as shareholders upon the death of a member. Section 111 outlines the power to refuse registration and the consequences of failing to send notice of refusal. The court concluded that Section 111 does not create an absolute right for the transferee upon the expiry of two months but imposes a penalty for non-compliance. The court also referred to the case of Amraoti Electric Supply Co. v. R.S. Chandak [1954] 24 Comp Cas 465, which supported the view that the failure to send notice results in a penalty, not automatic registration. Conclusion: The petition was dismissed on the grounds that the directors' refusal to register the transfer was justified and not mala fide. The court held that the right to refuse registration is not lost upon the expiry of two months, and the petitioners did not have an absolute right to have the shares transferred in their names. The court also noted that the petitioners could pursue other legal remedies if they believed the refusal was motivated by mala fides. There was no order as to costs.
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