9911796707
|
Home
Issues Involved: Validity of transfer of shares in limited companies governed by the Indian Companies Act, competition between auction purchasers and private transferees, compliance with statutory requirements for share transfer, and priority of equitable versus legal title.
Issue-wise Detailed Analysis: 1. Validity of Transfer of Shares: The case concerns the validity of the transfer of shares in limited companies governed by the Indian Companies Act. The shares in question were owned by an individual who executed a deed of transfer in favor of a creditor. However, the transferee was not registered as a shareholder due to objections regarding the form of the transfer and prohibitory orders received by the companies. The shares were subsequently attached and sold in execution of decrees against the transferor, leading to a competition between the auction purchasers and the transferee under the deed of assignment. 2. Compliance with Civil Procedure Code: The judgment emphasizes the importance of compliance with the Civil Procedure Code regarding the attachment and sale of shares held by judgment debtors in companies. Order 21 Rule 46, Rule 76, Rule 79, and Rule 80 of the Code prescribe the procedures for attachment, sale, and transfer of shares. The court found that the auction purchasers complied with these provisions, and the only remaining formality was the actual transfer of shares in the companies' books. 3. Discretion of Directors in Share Transfer: The judgment discusses the discretion of directors to transfer shares in the names of auction purchasers. It was argued that directors have no discretion in court sales, but the court agreed with the view that directors retain discretion to recognize or not recognize purchasers in execution of decrees, as per the Companies Act and the Articles of Association. 4. Validity of Private Transfer: The court held that the document of transfer under Ex. L did not conform with the provisions of the Companies Act or the Articles of Association. The Act and Articles require the instrument of transfer to be executed by both the transferor and transferee. The court emphasized that compliance with the prescribed mode of transfer is necessary to confer title against third parties. The court cited several cases to support the principle that a transfer not complying with statutory requirements does not confer a valid title. 5. Priority of Equitable vs. Legal Title: The court addressed the competition between the auction purchasers and the private transferee. The court held that the private transferee's equitable title does not prevail over the auction purchaser's title, which complied with statutory requirements. The court cited several precedents to support the principle that priority of title prevails unless the second claimant has acquired the full status of a shareholder before the company received notice of the first claimant's title. 6. Steps Required for Court Purchasers: The judgment clarified that for court purchasers, once the sale is confirmed and the provisions of the Act are complied with, no further steps are required by the court. The prohibitory order issued under Rule 79(3) of Order 21 C.P.C. prohibits the company from making any transfer of the shares to anyone except the purchaser. The court held that the court purchaser had taken all necessary steps and was entitled to priority over the private transferee. 7. Conclusion and Orders: The court concluded that the court purchaser had priority over the private transferee, who held only an equitable contract. The court allowed Second Appeals Nos. 1719 and 1773 of 1919 with costs throughout and dismissed Second Appeal No. 1626 of 1919 with costs of the second defendant throughout. Separate Judgment: M.D. Devadoss, J. agreed with the judgment delivered by C.V. Kumaraswami Sastri.
|
