1990 (10) TMI 384 - HC - Companies Law

Issues Involved:
1. Rectification of the register of members.
2. Validity of share transfers.
3. Compliance with Section 108 of the Companies Act.
4. Allegations of fraud and manipulation.
5. Jurisdiction under Section 155 of the Companies Act.
6. Equitable considerations in granting relief.

Issue-wise Detailed Analysis:

1. Rectification of the Register of Members:
The petitioners sought rectification of the register of members of the first respondent company, claiming that the 21 persons named in the petition are members of the company with their respective shareholdings. They alleged that the entries in the register were incorrect and unsupported by proper resolutions or documents.

2. Validity of Share Transfers:
The petitioners contended that the purported approval of the board for the share transfers was void as it contravened the mandatory provisions of Section 108 of the Companies Act. They asserted that the transfer forms were not executed by them, no consideration was received, and the documents and registers disclosed discrepancies in the share numbers and total shares.

3. Compliance with Section 108 of the Companies Act:
The petitioners argued that the transfer forms were not accompanied by share certificates, making the transfers invalid. The court noted that Section 108 is mandatory, and the board cannot register a transfer of shares if the share transfer forms are not placed before the board.

4. Allegations of Fraud and Manipulation:
The petitioners alleged that P.K. Alva manipulated the transfers by misusing blank transfer forms given as security for a loan. They claimed that the shareholding of various members was erroneously shown in the register, and the entries were the handiwork of respondents Nos. 3 and 4 with the connivance of P.K. Alva.

5. Jurisdiction under Section 155 of the Companies Act:
The court examined whether it should exercise its jurisdiction under Section 155, which provides for a summary procedure for rectification of the register. The court observed that the jurisdiction is discretionary and should not be exercised if complex questions of title or serious disputes are involved, which are better suited for a civil suit.

6. Equitable Considerations in Granting Relief:
The court considered the equitable principles governing the exercise of jurisdiction under Section 155. It noted that the conduct of the petitioners, who were closely connected to the second respondent (who managed the company and was involved in the transactions), was relevant. The court found that the petitioners acted as instruments of the second respondent and had received consideration for the shares.

Conclusion:
The court dismissed the petition for rectification (C.P. No. 62 of 1988) on the grounds that the petitioners failed to establish their claims and that the equitable considerations did not favor granting relief. Consequently, the related petition for winding up the company (C.P. No. 48 of 1987) was also dismissed, as the petitioners could not be treated as shareholders. The dismissal was without any order as to costs.

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