1974 (7) TMI 122 - HC - Companies Law

Summary

Issues Involved:

1. Legitimacy of the refusal to transfer shares by the appellant-company.
2. Compliance with Section 108 of the Companies Act.
3. Adequacy of consideration for the transfer of shares.
4. Applicability of Section 34 of the Specific Relief Act, 1963.
5. Requirement of indemnity for the company.

Issue-wise Detailed Analysis:

1. Legitimacy of the refusal to transfer shares by the appellant-company:

The appellant contested the suit, denying the sale of shares by Ballavdas to the plaintiff and stating that the company had no liability to register the shares in the plaintiff's name or issue duplicate share certificates. The trial court held that the appellant had wrongfully and illegally refused to transfer the shares to the plaintiff, who was entitled to all arrears of dividends. The court decreed in favor of the plaintiff, stating that the company acted as a trustee for the plaintiff, the lawful owner of the shares.

2. Compliance with Section 108 of the Companies Act:

The appellant argued that the provisions of Section 108 of the Companies Act were not strictly complied with, as the share certificate was not furnished with the instrument of transfer. The company contended that registering the shares without compliance would be illegal. The respondent countered that Section 108 did not apply in this case, as the company was aware that the original share scrip was unavailable from the beginning. The court found that the appellant-company had full knowledge of the unavailability of the share scrip and acted unreasonably by insisting on its production.

3. Adequacy of consideration for the transfer of shares:

The appellant questioned the validity of the sale, suggesting that the consideration was grossly inadequate. The trial court, after considering the evidence, concluded that the plaintiff had purchased the shares for valuable consideration. The court noted that the shares were acquired with the knowledge that litigation might be necessary due to the company's stance. The appellate court agreed with the trial court's finding that the shares were acquired for valuable consideration.

4. Applicability of Section 34 of the Specific Relief Act, 1963:

The appellant argued that the suit under Section 34 of the Specific Relief Act was not maintainable since the company did not deny the plaintiff's title to the shares but only his right to have his name registered. The court rejected this argument, stating that the plaintiff had the right to have his name registered and that the company was denying this right, making the suit maintainable.

5. Requirement of indemnity for the company:

The appellant contended that the company needed indemnity from the plaintiff or Ballavdas for protection. The court held that the decree itself provided sufficient protection to the company, and no further indemnity was necessary.

Conclusion:

The appeal was dismissed with costs, and the trial court's judgment was upheld. The court found that the company acted unreasonably and illegally in refusing to transfer the shares and that the plaintiff was entitled to have his name registered as the shareholder. The court also held that the suit under Section 34 of the Specific Relief Act was maintainable and that no further indemnity was required for the company.