1939 (2) TMI 7 - HC - Companies Law

Summary

Issues Involved:
1. Rectification of the share register under Section 38 of the Indian Companies Act.
2. Discretionary powers of the court under Section 38.
3. Validity of the transfer of shares dated April 22, 1927.
4. Delay in seeking rectification.
5. Costs associated with the application.

Issue-wise Detailed Analysis:

1. Rectification of the Share Register Under Section 38 of the Indian Companies Act:
The primary issue was an application under Section 38 of the Indian Companies Act for the rectification of the share register. The court had to determine whether the document dated April 22, 1927, purporting to be a transfer of shares in the Motiram Roshan Lal Coal Company, Limited, was executed by the Hindu firm Sagar Mall Subhkaran or by one of its members on behalf of the firm. The court noted that the parties initially expressed the desire to examine witnesses but later relied on affidavit evidence. The court concluded that it should exercise its jurisdiction under Section 38 of the Act and rectify the register by placing the applicant on it as the owner of the specified shares.

2. Discretionary Powers of the Court Under Section 38:
The court addressed the argument that its powers under Section 38 are discretionary and considered whether it should refuse to exercise this discretion in favor of the applicant. The court noted that the delay in seeking rectification, while significant, was not a sufficient ground to refuse the application. The court found the explanation for the delay unsatisfactory but decided to exercise its discretion to rectify the register due to the clarity of the case and the lack of bona fide reasons from the respondents.

3. Validity of the Transfer of Shares Dated April 22, 1927:
The court examined the circumstances under which the transfer was executed. The applicant claimed the transfer was executed for Rs. 5,334, while the respondents contended it was executed under coercion or forgery. The court found the respondents' story highly improbable and contradictory. The court noted that there was no suggestion of coercion or lack of authority in the execution of the transfer deed. The court concluded that the transfer was executed voluntarily and dismissed the respondents' claims of forgery and coercion.

4. Delay in Seeking Rectification:
The court considered the delay from 1927 to 1938 in seeking rectification. The respondents argued that the delay should lead the court to refuse the application and leave the parties to a suit. The court found the explanations for the delay unconvincing but decided that the delay alone was not a sufficient reason to refuse the application. The court emphasized the clarity of the case and the lack of credible reasons from the respondents for not demanding the certificate back earlier.

5. Costs Associated with the Application:
The court discussed the discretion it had regarding costs under Section 38 of the Indian Companies Act, which differed from the English Companies Act of 1862. The court ordered the costs to be paid by both the company and the respondents to the applicant. The court disallowed the claim for damages as it was not established. The hearing fee was assessed at fifteen gold mohurs.

Conclusion:
The court ordered the rectification of the share register by placing the applicant as the owner of the specified shares. The court exercised its discretion under Section 38 of the Indian Companies Act, considering the clarity of the case and the lack of bona fide reasons from the respondents. The court also ordered the costs to be paid by the company and the respondents to the applicant. The claim for damages was disallowed.