1916 (9) TMI 1 - HC - Companies Law

Summary

Issues:
1. Competency of appeal under Section 38 of the Indian Companies Act (VII of 1913)
2. Entitlement of a Court-purchaser to have shares transferred by a company

Issue 1: Competency of appeal under Section 38 of the Indian Companies Act (VII of 1913)
The judgment deals with the appeal from a decision of the District Judge under Section 38 of the Indian Companies Act. The Advocate General raised a preliminary point regarding the competency of the appeal. The first contention was whether the proviso in Section 38 applies only to the third clause or to the entire section. The court held that the proviso applies generally to all clauses. The second contention was that no issue was directed to be tried, which is a condition precedent for an appeal. The court acknowledged the absence of a specific issue but allowed the appeal based on past laxity in procedure. The court emphasized the need for a clear direction for trying an issue for future cases. The judgment clarified the grounds for appeal under Section 100 of the Civil Procedure Code.

Issue 2: Entitlement of a Court-purchaser to have shares transferred by a company
The main issue in the case was whether a Court-purchaser has the right to compel the company to transfer shares. The appellant argued that being a Court-purchaser should give him a higher right than a private purchaser. The court disagreed, stating that a Court-purchaser does not have a superior right in this regard. The judgment highlighted that the company's powers and obligations remain the same, regardless of the mode of purchase. The court rejected the argument that Rule 79 of Order XXI of the Civil Procedure Code supports the appellant's claim. The judgment emphasized that the position of a Court-purchaser is not worse than that of a private purchaser under the rule. The court also dismissed the reliance on a previous case as it was fact-specific.

In conclusion, the court held that a Court-purchaser does not have an automatic right to be entered in the company's share register. The court emphasized that a Court-purchaser is subject to the same rules as a private purchaser. The judgment also noted that the discretion of the Directors in refusing a transfer should be exercised properly. The court ultimately dismissed the appeal, upholding the decision of the District Judge, and awarded costs to the respondent.